Cash Management

For Many Companies, Euro Still a Concept

Will the coming of a single currency be the continent's Y2K?
Alix StuartNovember 19, 2001

With local currencies slated to disappear in Europe in the first quarter of 2002, harbingers of business disruption are surfacing. The European Commission reports that less than 5 percent of all companies in the eurozone — except Luxembourg and Belgium, which have higher compliance — have fully switched over to the new currency as of Q3, and it frets that the rest won’t make the January 1 deadline.

Industry analysts share the gloomy prediction. Fewer than 40 percent of small businesses in the European Union, and only 65 percent of midsize businesses, will be prepared to trade an account automatically in the euro currency by the deadline, estimates Simon Pollard, vice president of European Research at AMR Research Inc.’s London office.

However, most large companies are far from panicking. “This is not the Millennium Bug,” says Helmut Vethake, spokesman for General Motors-Fiat Worldwide Purchasing Group, which handles more than 2,000 eurozone suppliers. “Perhaps my coins won’t work in the vending machines, but at least in the business world, we don’t see any problems.”

Gillette Corp., meanwhile, has already hammered out euro-denominated price lists, purchase orders, and contracts with its 10,000-plus European suppliers, and it expects that they will meet the deadline. “In cases where they need assistance, we’re providing it,” says spokesman Steve Brayton.

Suppliers to the eurozone also say they are up to speed. “We turned everything over last June, the beginning of our fiscal year,” says Christian Storch, CFO of Standex International. The Salem, N.H.-based miniconglomerate has about $60 million worth of sales in Europe, where it supplies components to big-name appliance makers and automakers, such as General Motors.

Storch is now turning his attention to the broader implications of the conversion, such as how price transparency in eurozone countries will affect the $30 million in sales Standex currently makes in the United Kingdom, which is not switching to the euro. Allegiance to the pound “makes it difficult in general for U.K. companies to be competitive,” he notes, “so we’re watching closely to see how multinationals react: Will they reinvest or simply pull out?”

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