West Europe's drive to copy Japan's success in videotape recorders
In an elaborate game of musical chairs, the West European electronics industry is reorganizing to meet the challenge from Japan and the US before it is too late.Skip to next paragraph
Subscribe Today to the Monitor
Key players in the game are France's state-owned Thomson-Brandt firm, the French goverment, and West Germany's federal cartel office - enforcer of tough anti-trust legislation which threatens to thwart the whole maneuver.
The moves accelerated last week when the cartel office rejected Thomson's bid to take a 75 percent stake in Grundig, West Germany's biggest consumer electronics company, and the French firm immediately announced it had bought a controlling interest in Telefunken, the smaller consumer electronics subsidiary of the ailing West German giant AEG-Telefunken.
At stake is a bid, strongly backed by France's Socialist government for political reasons, to produce a videotape recorder with ''European'' technology which could compete with the highly-successful Japanese products which have flooded the European market. The move is taking place under the benevolent eye of the European commission, which persuaded Japan earlier this year to agree to voluntary restraint of its videotape recorder exports to Europe to give the European industry a breathing space.
In return, European producers such as Grundig and the Dutch giant Philips agreed to drop anti-dumping suits they were planning against their Japanese competitors.
The accord was reluctantly accepted by the Japanese government in the hope of heading off tougher protectionist measures by European governments. France had already set up a vast bureaucratic hurdle by ordering that all imports of videotape recorders be processed by a small customs office in the central town of Poitiers - the equivalent of trying to force a rope through the eye of a needle.
President Francois Mitterrand has outlined his socialist view of a future European market ''reconquered and protected'' from the Japanese and Americans. He believes Japan and the United States have taken such a lead in research and development that only a state-assisted European effort has any hope of catching up. Paris has made clear that Thomson, whose losses are picked up by the government, is its chosen instrument in this strategy.
The French moves are being watched with suspicion and misgivings from the other side of the Rhine. West German Economics Minister Count Otto Lambsdorff, a champion of private enterprise and free trade, was deeply uneasy about the self-restraint accord with Japan and insisted on stating his objections for the record at a stormy European Community industry ministers' meeting last month.
Government sources say Bonn was relieved that the cartel office vetoed the Thomson-Grundig linkup. The decision might otherwise have landed on Count Lambsdorff's desk and led to a political showdown with Paris. The planned merger was strongly opposed by West German industrialists, bothered by state interference, and also rejected by West German trade unions seeking to preserve the 30,000 jobs at Grundig.
But unlike the French, the West German government appears to have no vision of a future European electronics industry. Bonn responded indifferently to the idea of a ''German solution'' for Grundig, still 75 per cent owned by its founder, Max Grundig, which would have involved the electrical giant Siemens - West Germany's biggest employer - and the smaller Bosch company.
The cartel office blocked Thomson's bid for Grundig largely because it would have given the new conglomerate a dominating position on the West German color television market. It has also blocked a bid for control of Grundig from Philips , which at present holds about 25 percent of the shares.
So the game of musical chairs continues with plenty of losers but little sign of a winner - except, possibly, the Japanese.
Thomson did its best to trumpet its takeover of Telefunken as a triumph for the French vision of a European electronics industry. Its director of communications, Jean-Daniel Pigasse, told reporters: ''We have a European solution and we are relatively satisfied.''
AEG's chief executive, Heinz Duerr, was also pleased with the outcome. The sale of the loss-making Telefunken television and radio subsidiary for an undisclosed price was a key part of AEG's successful move to reach a settlement with its creditors after being forced to call in a receiver last summer. Mr. Duerr says AEG will break even this year and his slimmed-down corporation, divested of its unprofitable household goods enterprises, will be back in the black next year.
But industry sources say the Thomson-Telefunken linkup, which is almost sure to be approved by the cartel office this month, is no guarantee of a viable European answer to the Japanese challenge.
Indeed the deal, ironically, has a distinctly Japanese flavor. For Thomson also acquired Telefunken's 33 percent holding in a videotape recorder assembly plant in West Berlin based entirely on technology from Japan's Victor Company.
So, while the French press ahead with attempts to launch a ''European'' videotape recorder, they will be joint owners of a European plant producing 200, 000 ''Japanese'' recorders a year.