Swiss Manager's View Of Europe's Prospects
AS head of the Swiss National Bank from 1974 to 1984, Fritz Leutwiler was often sought out by the press as a relatively open source of information about the goings-on among the world's secretive central bankers and finance ministers. Now he's co-chairman of Asea Brown Boveri Ltd. (ABB), a $25 billion company with 217,000 employees in 140 countries, headquartered in Zurich. Dr. Leutwiler retains that frankness which makes him, in a journalist's eyes, ``good copy.''
His company, the result of a 1988 merger between Asea Group of Sweden and BBC Brown Boveri of Switzerland, ranks high in world markets for almost anything to do with electrical power - generation, transmission, etc. - and several other markets.
As board co-chairman, Leutwiler says he has more time to think long-term than executives managing ABB's daily operations. Here's something of what he said in a recent interview.
On Europe: The European Community ``must be reconsidered'' in light of the new freedom in Eastern Europe. Like many Swiss, Leutwiler would prefer a looser federation politically than would Jacques Delors, president of the European Community Commission. Leutwiler wants a federation to embrace such ``middle-European'' nations as Poland, Czechoslovakia, Hungary, and Romania.
On Switzerland: This mountainous nation is unlikely to give up its ``extremely dear'' political institutions to join the European Community, particularly since it is doing so well economically. ``We would lose a lot,'' he says. Switzerland has no unemployment to speak of, no recession, and a high income level.
On the Uruguay Round: Starting final negotiations Monday in Brussels, these trade talks by 105 nations ``could be a failure - at least not what was expected by politicians and economists,'' says Leutwiler. He wonders if the European Community, as a result, would become more protectionist and too inward-looking. ``I do not exclude some kind of trade war,'' he says.
On Eastern Europe: ``We make too optimistic assumptions in the West about the attitudes in the East. They haven't voted for a market economy. They wanted more personal freedom, a better living standard. We have to teach these people what competitiveness is, what the market economy is, that they have to work.''
ABB already has established 75-percent owned joint ventures in Poland, taking over state enterprises that together employ 10,000. ``They gave us practically all we wanted,'' he says. ABB also controls a joint venture in Hungary with about 1,000 employees. It has been negotiating in Czechoslovakia (in competition with other Western firms) for the famous Skoda Works.
``These are long and delicate negotiations,'' says Leutwiler. ``They are difficult due to the ideological confusion still remaining in Czechoslovakia.'' The Czechs are still ``dreaming of a third way'' between capitalism and socialism. But Leutwiler says the Skoda Works is overstaffed, that his company would need only one-half to one-third of its employees. ``The Czechs are still fighting for job guarantees,'' he says.
Leutwiler finds the big advantage for Western investors in Eastern Europe is the low pay of trained workers. The wage in Poland and Hungary is about $2 an hour, compared to $8 to $9 an hour for a comparable worker in Western Europe and $10 in the US. So, for example, his company can make quality components or generators in Poland, add electronic parts that are Western made, and offer a ``highly competitive'' product.
In general, he says, West European companies are trying to ``show the flag'' in Eastern Europe by making investments there, but with ``as little money as possible.'' One bottleneck for ABB is finding executives willing to live in such East European cities as Warsaw with their lack of amenities. ``It is boring,'' he says.
Leutwiler sees East Europe as ``an opportunity,'' not as the ``market of the future.'' If ABB gets 5 percent of its revenues from the region in a decade, ``it will be a lot,'' he says. One sizable chunk of business for ABB could be equipment for cleaning up the environment, paid for by Germany in what was East Germany, and by the World Bank or the International Bank for European Reconstruction and Development in other East European nations. Another business prospect is the construction of power plants in Hungary or Czechoslovakia that would transmit enough electricity to the West to pay for them.
