Exporters view euro nervously

Traders wonder if Europe will shun American products

Still others are unsure

Many expect euro to cut exchange costs, simplify pricing

International trade

January 10, 1999|By William Patalon III | William Patalon III,SUN STAFF

It was mid-1997 and First Maryland Bancorp's Joe O'Sullivan was phoning corporate clients to see if they had an interest in a seminar on the proposed European Monetary Union, slated to go from plan to reality Jan. 1, 1999.

In making his inquiries, O'Sullivan, managing director of the banks' foreign exchange business, referred to the union by its acronym, EMU, pronouncing it -- like everyone else -- as "ee-moo."

"One of my first phone calls was to a young man who wanted to know why we were making a presentation on the alternative white meat," O'Sullivan recalled, laughing.

Back then, the client might be excused for confusing the nickname with emu, the big, flightless bird of Australia. But no longer. The European Monetary Union's new currency, the euro, made a strong debut last week.

And that has business leaders in Maryland and the rest of the country wondering whether the new currency -- and the cohesive market it's designed to create -- represent an opportunity or a threat to American firms.

While the euro's birth garnered lots of attention, the transition is largely transparent for the typical U.S. consumer or investor.

Although it's a bookkeeping mechanism for international fund managers, the euro will not appear on brokerage statements, said George Murnaghan, executive vice president of Rowe Price-Fleming International Inc., the international investment arm of Baltimore's T. Rowe Price Associates Inc.

But for U.S. international traders it's probably too early to say how things will play out in "Euroland" -- the 11 European countries that have adopted the euro as their currency.

But theories abound.

"I think it's a very important thing. I don't think of it as a negative thing," said Stuart Esler, European sales and marketing manager for Millennium Inorganic Chemicals, a subsidiary of Millennium Chemicals Inc. that operates a plant at Hawkins Point. "I see it as a positive move."

The local plant makes blends of titanium oxide, used as a whitener in paints, plastics, paper and cosmetic products, such as toothpaste. The local Millennium Chemicals plant exports to Europe and other countries and the company also has plants overseas.

Esler believes the euro will create business opportunities for U.S. exporters for several reasons.

First, the single currency will make it less likely that prices for the same product will vary from country to country. Such uniformity could spur spending, since customers won't hold back as they try to ferret out the best deal.

Second, the business of U.S. companies will be streamlined, since they will only have to worry about a single exchange rate: the dollar vs. the euro. That also will mean "banks won't be taking quite as much of our money for each transaction," said Esler.

However, since euro countries should find doing business among themselves easier, it's also possible that "the Europeans will look inward," preferring to buy what they need within their own market, Esler said.

Such an inward move is scary to some U.S. economic experts, since the EMU truly is a big bird: 380 million strong, compared with 270 million people in the United States.

Most of Maryland's exporters -- which tend to be small- to mid-sized companies -- insist on doing business in dollars, said George D. Mickalonis, managing director of the Baltimore's World Trade Center Institute Inc., which works with more than 200 regional companies that do business abroad. That means the new euro shouldn't have much of a short-term impact.

European customers are willing to pay a premium for U.S. goods since they're perceived to be of higher quality, Mickalonis said.

At least for now, many Maryland companies will likely see no change at all. McCormick & Co. Inc., the spice-maker in Sparks, declined to be interviewed for this article because it's in a Securities and Exchange Commission-mandated "quiet period" before its fourth-quarter and year-end earnings are announced Thursday.

But analyst Judith DeHoff, who covers the company for Legg Mason Wood Walker Inc., said the euro won't have a big impact on the firm. Less than one-quarter of its sales come from Europe.

"That's just my gut reaction," she said. "The jury's still out on most industries, but logic doesn't dictate that it should" make a difference.

Loral Orion Inc., the satellite services company with a major facility in Hanover, Germany, had to change its billing software, but "other than that, we're sitting tight," said Lisa Koppel, public relations manager for the Rockville company.

Black & Decker Corp. did not respond to requests for comment. However, Prudential Securities Inc. analyst Nicholas P. Heymann, who said B&D gets 34 percent of its sales from Europe, said the Towson company could be a beneficiary of the euro.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.