Glenkinchie: No other option for Air France and KLM!

Deal will create world’s third-largest airline company.

EDINBURGH. - According to Professor Glenkinchie of the Edinburgh School of Economics the increased concentration movement within European business is a direct consequence of the EU Single Market programme. He said this in reaction to the merger of Air France and KLM, a deal that will create the world’s third-largest airline company and could mark the beginning of true cross-border consolidation in Europe’s airline industry. For many people it is still not very clear how this will be realised. It could be done by creating a holding company, but that’s not the only way. Though KLM and Air France shareholders still must approve the tie-up, KLM chairman van Wijk said the deal is on the track for approval by spring.

The airline industry has no other option according to Glenkinchie: “Acquisition, being it horizontal, vertical or even conglomerate, is of vital importance for these companies. Although companies can have various motives for cooperation, in this case there would have been no future for them if they had stayed independent. However, they could have chosen a different option to cooperate than a merger. Lufthansa, UAL Corp and Air Canada, for example, have opted for quite a different way to cooperate. Also in the automotive industry several ways of collaboration are being used, one example being Nissan and Renault. By the way, some of my colleagues emphasize that the Air France-KLM (or is it KLM-Air France?) alliance is more a take-over than a merger.”

Glenkinchie’s colleague Professor Macallan of the Speyside University of Aberdeen stressed that not all acquisitions were welcomed by the companies involved. A clear example of such a hostile take-over was Sanofi’s bid for Aventis SA recently.

Source: Edinburgh business journal, May 19^th, 2006

Task 9: To eat or to be eaten

“Why do I own shares of Volkswagen AG? That’s simple: I like driving Volkswagens because I fell in love with that little Beetle, my first car in the seventies. My first kisses with my beloved wife, Judith, took place in that vehicle!” That was my answer to Hannali, working as a financial guru and first advisor of Ferdinand Piech. We had lunch in a wood-panelled cafeteria in Wolfsburg, at Volkswagen AG’s headquarters. Hannali has ironclad job protection and earns more than €60,000 a year, even though she’s in the job only 4 years, 7.5 hour days each week. “I know people say we are expensive and inflexible”, she protested, “but they are missing the point. We really make good cars”.

I have a job in the financial sector, monitoring the interests of shareholders, visiting the Wolfsburg empire. My personal investment in Volkswagen shares is driven more by emotion than economic sense. But to monitor portfolios of clients is another story.

“You make good cars, I agree on that but my clients don’t care, they want a proper return on their investment. What about making good profits? And Hannali, you know as well as I do that the answer hardly mattered to VW. VW worried more about you and the other 100,000 German workers than about your shareholder value! So what if the company’s profit margins were half of those of smaller European rivals and if my colleague fund managers call it communist?”

“Well I can’t deny the poor profits of course but in the end we will survive. I don’t think that this so-called Anglo-Saxon model beats the stakeholder model in the corporate governance battle. I still don’t see the benefit of the liberalisation of financial markets. It will lead to hostile takeovers and loss of work for thousands of people. The only consolation is the fact that these European institutes can swallow labour forces from those companies that fire personnel at the cost of all those European taxpayers! But you know….. I found something to prevent this…….I already convinced my boss Mr. Piech”.

“You really think it will work, don’t you? Don’t be too sure, in the end it’s not so bad to allow a takeover, it will probably increase my shareholder value in VW shares. Those Mc Kinsey boys will know how to value Volkswagen and advise a competitor to buy Volkswagen. Political support of inefficient production will be history in the near future. Cash is king and shareholder value counts, that’s the slogan of those Mc Kinsey boys and……. my clients”.

On my way home in my green Beetle, the same colour as my first one, I visited Strasbourg, and enjoyed a perfect French dinner with ………..Judith.

(Please read article on the next page “Volkswagen Weighs Selling Part of Audi to Prevent a Takeover”, Wall Street Journal 25-05-2001, as well)

3.1

Task 10: Free movement of people

After the end of the last war the reconstruction of Europe had absolute priority.

So there was a desperate need for workers to realise this. In West Germany the pace of reconstruction went so fast that historians now write about “das Wirtschaftswunder”.

This war was the last very convincing evidence that wars have a devastating effect on national economies. Bridges were gone, roads were battered, the whole infrastructure was destroyed and the people lived in a rhythm of surviving day in day out. Solidarity between human beings reached its pinnacle and prevented further losses.

Soon after the war, Mr Churchill, famous for the V-sign, held a speech in Zurich and made a plea for “a United States of Europe”. The plan was launched and very soon afterwards Mr Schuman came with his version of a unified Europe. War had to be made impossible, because we just could not afford it anymore. We should not forget that France was in the front line of both World Wars. So the plan for a Community was made, according to which labour too could the border and go to another country. Remember that labour was much more needed than tourism in those days. People simply could not afford to go on holiday!

People had a bike; cars were a rare sight! Farmers made use of real horsepower instead of tractor and machines.

In the 1960s labour, especially in Western Europe, became scarce, so labour was imported from Italy and Spain and later also from Morocco and Turkey.

Today the traces of these huge movements have left traces in our modern society, but that is not the topic of this task. The authorities in these years were glad because they had solved a problem on the short term, hardly realising they were creating a new problem.

On the Common Market, officially started by “the six” in 1957, labour was not the key issue which it is now. There was a desperate need for labour, but the labour shortage was initially solved on a local level, which led to an almost 100 % employment rate. If you wanted to work (in fact everyone did, because no work, no money!), there were ample opportunities, provided you possessed the necessary skills. The rest left and immigrated to Canada, Australia etc...

Strangely enough, the framers of the founding treaties did not spend much time on details, so a “worker” was not defined in the treaty, which led to all kinds of cases. Even au-pairs reached the Court of Justice in Luxemburg and caused trailblazing rulings.

It was not clear either what a worker’s rights were, apart from his main duties, of course: they had to work, and not moan. These days some workers are moaning, e.g. Polish workers like working in Holland, but they detest the Dutch bread, for Polish bread is of much better quality, they claim. Questions about minimum wage or about being united with their families were solved much later. Today labour conditions still cause problems in factories and working areas. Think of the smoking problem.

In due course the same questions came up for different categories, such as sportsmen/ women and students. There will be hardly any football fan in the country who has never heard of the Bosman case, though not many know the consequences. The case was embarrassing for the local and European football authorities, because they thought they were right, which was later corrected by the ECJ.

One would expect that the enlargement plans would be embraced wholeheartedly, because enlarging the union belonged to the original plan. However, this is not the case. When the enlargement of 2004 came into effect, most members had taken their precautions well in advance to prevent a large flow of workers from crossing their borders. They were called “transition periods” and were taken in the interest of the local economy. Suddenly the word “solidarity” was not that important anymore. “That is not in our interest”, were commonly heard phrases. National interests prevail, which is not new, but a danger which is always lurking at any time and on every issue.

The Poles were seen as a threat to the local economies almost everywhere (fortunately not by all the members) and so when Poland became a member of the EU only the UK and Ireland let them in and in all the other countries they were not welcome at all, despite their full membership. However, since 1st May 2007 the Polish workers have been allowed to enter the Dutch labour market and guess what has happened? The Dutch economy is thriving and unemployment has never been so low for the last 15 years.

The question remains: will it lead to a better Poland, because there is a growing discontent what is to be done there.

We, in the West, may not forget that rebuilding Europe (or Germany - West and East - since the fall of the wall) will take much longer than a couple of years. Hopefully, the mistakes which were made in the West and have cost a lot of time and money can be avoided. That money had better be spent by people and not by governments.

Task 11: Competition policy II

Will be submitted later.

Task 12: United States of Europe?

May 2005, French and Dutch voters shocked the European Union by clearly rejecting the new Constitution. Although a lot of people feared that the EU would be adrift without any clear idea what direction, if any, it would go in, others were less pessimistic: The EU could go on like before.

The Constitution was replaced by the Treaty of Lisbon, which was finally, after a first “no” by Irish voters, accepted.

Besides solving the organisational and legitimacy problems the EU is facing, the Constitution/Treaty of Lisbon should have pointed the direction in which the EU should develop: whether to grow wider or to grow deeper (though some insist that it inevitably should be both wider and deeper). Already four years ago, in Berlin, German foreign minister Fisher, in his now famous “von Humboldt speech”, pleaded for a movements towards a more federal Europe. Euro sceptics immediately accused him of trying to create a European super state and referred to the, in their view, neglected principle of subsidiarity. Remarkably, the constitution intended to strengthen this principle. Other people state that the EU already has gone too far, and that it should repatriate some of its powers instead of expanding them.

The borders of the EU are the subject of discussion too. Bulgaria and Romania were the last countries to join, but what about Turkey? On October 3^rd, negotiations between the EU and Turkey started. But even if the Turks meet the Copenhagen criteria and are able to adopt the acquis, a lot of people will question their “European content”.

Appendix: A Statement on Plagiarism

Using someone else's ideas or phrasing and representing those ideas or phrasing as our own, either on purpose or through carelessness, is a serious offence known as plagiarism. "Ideas or phrasing" includes written or spoken material, of course — from whole papers and paragraphs to sentences, and, indeed, phrases — but it also includes statistics, lab results, art work, etc. "Someone else" can mean a professional source, such as a published writer or critic in a book, magazine, encyclopaedia, or journal; an electronic resource such as material we discover on the World Wide Web; another student at our school or anywhere else; a paper-writing "service" (online or otherwise) which offers to sell written papers for a fee. Ignorance, naivety or sloppiness is no excuse.

Using Quotes:

If you really like how someone has said something and feel you absolutely must use a sentence or two exactly as it is written put the section you are using between quotation marks and footnote it. A quotation must match the source word for word and you must give credit to the person who actually wrote it!

“Direct quotations must reproduce exactly not only the wording but the spelling, capitalization, and internal punctuation of the original” (Author’s name, page #).

If a quotation runs to more than four lines in your paper, set it off from your text by beginning a new line, indenting one inch (or ten spaces if you are using a typewriter) from the left margin, and typing it double spaced, without adding quotation marks. A colon generally introduces a quotation displayed this way, though sometimes the context may require a different mark of punctuation or none at all. (Author’s name, page #)

Description of Paraphrasing:

Paraphrasing is your own version of useful information and ideas that someone else has written - presented in a new way. Paraphrasing is not rearranging or replacing a few words. Paraphrasing is a valuable skill because it is better than continually quoting information from a book or other source. The steps that you have to go through to successfully paraphrase help you to make sure that you completely understand what the original information means. You should, at the end of the idea, list the source of the idea that you have just paraphrased.

An example of a citation of a source after Paraphrasing:

Legally, plagiarism has been defined as the act of appropriating the literary composition of another, or parts or passages of his/her writings, or language of the same, and passing them off as the product of one's own mind (Author’s name, page #) (Rourke, pg 483).

Using Ideas:

When you use ideas that you have fully or partially gleaned from an identifiable source, or set of sources, you must properly acknowledge the origin of these ideas. You must also give credit to another author whose work has helped you in the organization or development of your thinking. Failure to give credit for an idea is plagiarism. The sources or set of sources should be cited sufficiently to give the reader an indication of the extent of your indebtedness. In addition, key phrases and concepts that are not in general use, or are being used in a special sense, should be placed in quotation marks and cited when they are first employed. These should also be cited the same as paraphrasing.

Examples for constructing a bibliography:

Дата добавления: 2015-11-16