At a recent lunch given by Siemens, Bernd Euler, finance director, described why the company intends to adopt the Euro as its house currency and why UK companies should be on their guard.
Siemens is a global company but around 65% of its sales come from Europe and it regards Europe, not Germany, as its home market. Last year DM3.5 billion were spent with UK suppliers.
These are reasons that Siemens is embracing the Euro. Euler says, ‘We believe it will accelerate the integration of European markets and improve economic conditions throughout Europe.’
The company knows there are some downsides to the Euro: price transparency will make it easy for customers to spot price discrepancies across national boundaries, and the Internet will let them see prices around Europe at touch of a button.
But the benefits are reduced transaction costs and shorter transaction times. Savings also come from better cash pooling and cash management in EMU countries. Siemens expects to save DM30 million a year.
A single currency will simplify calculating, planning and internal reporting for the multi-national, simplify internal comparisons and transfers and streamline administration.
Euler says, ‘As the majority of our business is undertaken in Europe, the tendency is to seek to match the currency of income and expenditure and therefore reduce currency risks. If companies within the EMU are offered two identical deals from suppliers, one quoted in pounds sterling or dollars the other quoted in Euros, the Euro supplier has a competitor advantage because it offers an extra benefit to the customer.’
This is an important message for all UK companies. Whether the UK is in the EMU or not, if UK companies are not prepared to quote in Euros they will lose business as it will be easier for companies dealing in Euros to deal with other companies who are doing the same.