DUSSELDORF, GERMANY — Machinery executives at K'98 said the common euro currency will streamline cross-border trade among its 11 partner countries, wiping out Europe's final trade obstacle.
Those fuzzy shifts in monetary values will disappear on New Year's Day.
``Security of the exchange rates is a very big help to us,'' Helmut Hackner of Krauss-Maffei Kunststofftechnik GmbH said in praise of the common-currency concept. ``It will save time and money, and also it's much easier to compare the prices between the euro countries,'' he said.
Hackner coordinates order processing at the Munich, Germany, machinery supplier.
``Our general policy for the euro is that we are prepared to handle all business in whichever way is best for the customer. We can handle it in deutsche marks. We can handle it in lire. We can handle it in euros,'' Hackner said while overseeing a special euro exhibit at Krauss-Maffei's K show booth.
Praise for the common currency by European machinery company leaders at K'98 was unanimous. The euro will reduce costs by eliminating the need for currency hedging, in which a bank — for a fee — guarantees an exchange rate over time. But they disagreed on the key questions of common European pricing.
Steered by the new European Central Bank, a transitional period will begin Jan. 1, with banks and business deals offering the euro as an option. By 2002, the new euro coins and bills will become the sole legal tender. No more marks, francs, guilders and the like to sort through while touring Europe.
But the euro is much more than a travelers' convenience. Membership in the euro club requires a country to keep inflation under tight control and limit budget deficits to not more than 3 percent of gross national product.
It hasn't been easy. Two years ago, when the rules were first floated, only tiny Luxembourg passed. Last year, Italy imposed a European tax to reduce its deficit. Still, the forced fiscal discipline aims to iron out the differences between countries as diverse as solid as Germany and as unpredictable as Italy, where governments — and lira devaluations — come and go.
Helmut Eschwey, top executive at Germany's Battenfeld GmbH, said the euro is changing the very definition of Europe. Those changes began in 1989 when the Berlin Wall fell; opened trading borders replaced armed guards.
The euro ``will bring Europe closer together,'' Eschwey said. ``Of course, it also means giving up some of the autonomy of the different countries on social policy. More decisions will be made on a European basis, instead of an individual-country basis.''
VDMA, Germany's Machinery and Plant Manufacturers Association, wishes the euro could start today. VDMA's Bernd Knorr said German manufacturers love their stable mark, but they know it opens them up to devaluation-driven price cuts from rivals in Italy.
``This will no longer be possible in the future, because we have one currency. The euro will be stable. I'm very optimistic that this will become a reality. Then we have two hard currencies: the U.S. dollar on the one side, the euro on the other side. This makes business life easier,'' said Knorr, executive director of VDMA's Plastics and Rubber Machinery Division in Frankfurt, Germany.
Xavier Perna Bertr n, manager of Spanish Construcciones Margarit SL, agreed. ``Now, we don't control the currencies. We control our machines and our costs,'' Bertr n said. ``After the euro it is impossible for one country to devalue and increase its sales. It will be necessary to make the products with more quality and lower price to be competitive.''
Even though the euro won't be officially implemented until Jan. 1, it already has stabilized the lira against the mark since mid-1997, said Mario Maggiani, marketing manager of the Italian rubber and plastics machinery makers' association, Assocomaplast.
The new balance already has helped German injection press maker Demag Ergotech GmbH. ``We've stopped hedging with countries such as Italy and France 11/2 years ago,'' he said.
Some machinery companies still use hedging, sometimes called forward pricing, to cushion currency swings. For example, say a Spanish molder orders a Demag press for 100,000 marks. Demag ``sells'' the contract to a bank. The bank, which charges a fee for the service, guarantees that the day the future payoff gets made in pesetas, it will equal 100,000 marks.
On Jan. 1, machinery companies say good-bye to that practice.
If all countries stand on the same monetary footing, won't suppliers publish the same prices for injection molding machines sold in Portugal, Germany, or Finland? In Dusseldorf, machinery executives disagreed on the answer.
Customers already are asking about common pricing, but Wolfgang von Schroter, executive managing director of German injection press maker Demag Ergotech GmbH in Schwaig, said his firm plans to use different prices for each country despite the euro. Varying costs are the main reason. For example, molders in some countries don't like to pay extra for service, so Demag folds that into the selling price.
Von Schroter also serves as president of Euromap, a trade association representing European plastics and rubber machinery suppliers.
But Leonarda Cesario, commercial director at Italian blow molding machine maker Technipack Engineering Italia SpA (Techne), thinks suppliers will adopt pan-European pricing. ``We support euro because we will not be running any risk with fluctuations in currencies,'' he said.
Despite all the planning, many questions remain. Some U.S. machinery companies say the euro will be a nonfactor for them. They say the only advantage is to European suppliers who sell to European customers.
``We sell in dollars. The euro will only stabilize the current European currencies against themselves,'' said Frank Nissel, president and chief executive officer of sheet extrusion machine maker Welex Inc. of Blue Bell, Pa.
``It helps the European companies because it gives them stability. But it doesn't change our value here, or our costs,'' he said.
Asian machinery suppliers, which now favor U.S. dollars for European sales, could switch to euros. ``We are encouraging all Taiwanese firms to adopt to this new system. The government is also trying to educate business,'' said Foster Lin, market development manager for capital goods at CETRA, the China External Trade Development Council,
The full impact of monetary union won't be known for years. Some economists fear that, with no more gambling on currencies, companies will cross borders more easily to get better prices. That could lead to job losses in countries like Germany, with high wages and social benefits.
Manfred Kersten, managing director of HPM Corp.'s injection press factory in Schwerin, Germany, thinks it could happen. ``The euro makes it real easy. If you are buying now in Italy, or Spain or France, you are buying in euro and you're invoicing in euro. It makes it all much more transparent.''
Krauss-Maffei's Hackner thinks machinery makers will look hard at new component suppliers, checking price and quality. ``During the next two or three years, I think it will take place,'' he said.
But at K, held Oct. 22-29, most German machinery officials disagreed with that view. German companies already have dabbled in low-wage eastern countries like Poland and the Czech Republic, but pulled back because of poor quality, said Knorr, of the VDMA trade group. Outsourcing, he said, ``is not a big problem.''