Cross-Border Mergers Bind Europe While Treaties Stall ACCELERATING UNITY

Article excerpt

EUROPE'S big automobile manufacturers are demonstrating that cross-frontier company mergers rather than political treaties may offer the best route to long-term European integration.

Economic analysts see the planned link-up between France's giant Renault company and Sweden's Volvo - creating Europe's second-largest, and the world's sixth-largest, vehiclemaker - as a landmark development in the unifying process.

Mergers and alliances between companies, analysts say, are likely to accelerate as the European Community's "single market," created at the beginning of 1993, develops, and businesses battling the effects of recession stand up to external competition, particularly from Japan.

Hopes that increased industrial cooperation will boost European integration have begun to rise at a time when the political goals of the Maastricht Treaty appear to be in jeopardy and the EC's exchange-rate mechanism is under severe strain.

John Major, Britain's prime minister, has often argued that Europe's manufacturers and traders are in a good position to offer a lead in the pursuit of unity.

The Renault-Volvo marriage, announced Sept. 6, follows a three-year courtship between the two companies. It will produce a corporation that edges Italy's Fiat motor company for sixth place in world carmaking rankings and offers stiff competition to Japan's Nissan (currently fifth) and Germany's fourth-ranking Volkswagen.

Douglas McWilliams, director of the London-based Centre for Economic and Business Research, calls the Renault-Volvo merger "an instructive example of how industrial corporations sometimes are more able than governments to identify and pursue common interests and operate across political frontiers."

Mr. McWilliams says the merger, to take effect Jan. 1, 1994, should be compared to that of Royal Dutch and Shell oil companies. "I foresee that where full-scale mergers are not possible, cross-border company alliances will become much more common as the significance of the EC's single market comes to be better appreciated," McWilliams says.

He adds: "In the case of the European motor industry, extra stimulus is being provided by the certainty of vigorous Japanese competition in the years ahead."

IN 2000, under an agreement between the EC and Japan, existing limits on imports of Japanese vehicles will disappear, turning Europe into what Kumar Bhattacharyya, a manufacturing systems analyst at Warwick University, predicts will become "a battleground" for vehicle sales. …