THE AMERICAN economy is slipping into recession and it is putting Europe at serious risk.
Things are already starting to look grim here. Car sales in western Europe fell 8.7 percent in February.
A European research group recently forecast a decline in global car sales this year and next. European auto company shares - which have done reasonably well under the circumstances -plummeted on the news.
Still, recessions eventually come to an end. Unfortunately, the misguided strategies that they can give rise to sometimes don't.
In the last recession auto companies learned discipline. They became leaner and began hoarding cash. They also got tough with suppliers. Some adopted brutal tactics learned from former General Motors and Volkswagen purchasing boss Inaki Lopez.
Not all of this was good news. Some say the Lopez squeeze on suppliers hurt quality at both GM and
VW. One of Bernd Pischetsrieder's jobs as VW's new quality czar is to solve such problems.
But the worst idea that came out of the last slump was the decision to go global at any cost. Hit hard at home, car groups sought shelter from future downturns by spreading out geographically. They rushed into emerging markets on the theory that mature markets cycle up and down, while new ones only go up.
Even worse, they centralized far-flung empires in to create one-stop global management.
Neither idea worked. Emerging markets are more volatile than mature ones. And being global just means carmakers have nowhere to hide.
There is one economy in the world today. Everything is connected. North America, Europe and Asia can't be quarantined. Groups like DaimlerChrysler/Mitsubishi get hit in three places around the world, not just one.
Meanwhile, the new global management structures caused companies to lose customer focus.
Ford 2000 was the most prominent global strategy, though General Motors also organized for world conquest. GM gave tremendous power to International Operations boss Lou Hughes in Zurich and enough rope to hang himself.
Some silly acquisitions grew out of the recession. The first and worst was BMW's purchase of Rover in 1994. The deal was supposed to extend BMW's product coverage, but it was really about making BMW less Bavarian and more international.
The mid-1990s were years of sheer expansionism, of setting up plants and partnerships in faraway places. Yet most global forays either failed miserably or greatly disappointed. Sales of Fiat's Project 178 world car - the Palio family - are about half of what Fiat hoped for by now. The Palio's markets collapsed soon after the strategy unfolded.
Executives from Mercedes-Benz and Chrysler, Corp. criss-crossed Asia in the mid-1990s. Today, they have little or nothing to show for all those air miles.
GM's international focus led to a couple of moderately interesting manufacturing joint ventures in Asia and eastern Europe. Meanwhile, GM lost touch in Germany - a mistake from which it has not fully recovered.
Ford of Europe was dismantled in the name of Ford 2000 - doing more damage in about 18 months of neglect than the company may be able to undo in five years.
Ford fell asleep in Europe.
'The Twingo was a wake-up call for us,' said Jac Nasser in 1996 when he introduced the Ka.
Since then Ford has had a number of wake-up calls in Europe: the Renault Scenic, the Opel/Vauxhall Zafira and the common-rail diesel engine, to name but three.
Decision-makers were in Dearborn - thinking globally, not locally.
PSA/Peugeot-Citroen and Renault came out of the last recession with a different focus. They couldn't afford to go global, so they went local - and listened more closely to their customers. They picked up the market share that Ford and GM lost in Europe.
Who knows what management mantra will emerge from another serious downturn. But this time let's all be wary.
E-mail Richard Johnson at [email protected]