Old World businesses look to New World model

The Economy

September 01, 1997|By Jay Hancock

SURE, you're feeling swell about America's economy. You're creating shareholder value at your company, working 70 hours a week to cover for your laid-off colleagues, efficiently outsourcing your parental duties to a baby sitter and helping to drive the lTC gross domestic product through its seventh year of seamless growth. Who wouldn't be proud?

Don't get smug. The foreigners are gaining on us.

Britain's newest magazine, Bounceback, is dedicated to the downsized. Layoffs, restructurings, right-sizings and outsourcings have become so common across the Atlantic that U.K. publisher Ultima thinks there's a quid to be made in it.

The British, who have euphemisms for everything, minted a euphemism for getting fired long before personnel consultants made it a growth industry here. We're not sacking you, mate. You've just been made redundant, what?

"Redundancy is here to stay, and for that reason, so is Bounceback," editor Stewart Anderson wrote in the magazine's premier issue. Article subjects include writing a resume, investing a buyout check and the "celebrity redundantee" of the month.

Redundancy is newly in vogue across Europe, as employers try to trim costs.

Renault wants to close a Belgian plant employing 3,000. German steelmaker Krupp cut 14,000 jobs in the last year. Krupp's partial merger with rival Thyssen, announced last week, will wipe out more jobs. British Telecom is getting ready to ax 5,000 positions. Daimler Benz, Veba and Deutsche Telekom all have new bosses who one analyst recently called "the Jack Welches of Germany."

"Neutron Jack" Welch is famous at General Electric for vaporizing jobs while preserving capital assets and pumping up stock values.

The fact that he's a role model in the Old World is no accident. Europe's labor rationalization is a direct response to American downsizing and American competition, just as American restructuring during the last decade was goaded by Japan.

Bound by relatively generous wages, fat benefits, padded payrolls, straitjacket regulations and expensive taxes, European firms are now the world's high-cost producers.

In Mediterranean countries, merchants still close up to take afternoon siestas. In Germany, workers get six weeks of vacation annually on average. Strict zoning laws protect Main Street shops across the continent and virtually prohibit any kind of hyperefficient Wal-Mart- or Home Depot-style operation. Thirty-five-hour workweeks are common.

German factories require 5.2 worker-hours to produce each ton of steel -- almost half again as much labor as the 3.5 hours per ton needed at Bethlehem Steel's Sparrows Point mill. No wonder the U.S. steel business has gained market share. No wonder America's economy is the marvel of the globe.

This country is enjoying the economic benefits that always accrue early to the innovative, the aggressive, the efficient and, perhaps, the ruthless. U.S. exports soared again in June, this time despite the handicap of a stronger dollar.

Having pumped up our output-per-worker ratios in products from stock trading to railroad wheel bearings, we're clearly and triumphantly at a competitive advantage.

But what cultural and emotional price have we paid to get it? What price will Europe pay to catch up? And once Europe does, what will the United States do for an encore?

Pub Date: 9/01/97

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