This was sent to asps today. Thought people here would be interested..It also gives
another picture then those who support globalization...
bob
The battle for Mannesmann: the background to Germany's first hostile
take-over
By Peter Schwarz
25 November 1999
World Socialist Web-Site http://wsws.org
The attempt by the British mobile telephone company Vodafone AirTouch to
take over the Düsseldorf-based Mannesmann concern against the wishes of the
company executive has provoked a big reaction in Germany.
Leading SPD politicians, including German Chancellor Schröder and the
Minister President of the state of North Rhine Westphalia, Wolfgang Clement,
spoke against the hostile take-over. Schröder stated that he was "very
disturbed" by the methods employed by Vodafone. With identifiable German
nationalist undertones, Clement declared that Mannesmann should not become
the "filial of a London company".
Similar statements came from politicians on the opposition bank. For the
liberal Free Democratic Party (FDP), Wolfgang Gerhardt warned against a
"dangerous concentration of power" at the expense of the consumer and
competitiveness. Jürgen Rüttgers, Clements CDU rival in forthcoming state
elections in North Rhine Westphalia, stated that it could not be tolerated
that "a company is broken up and thousands of jobs destroyed merely to
ensure short-term profits for international investors".
Even Hans Peter Stihl, the president of the German Chamber for Trade and
Industry, demanded a law to prevent "thoroughly fit, competitively
successful enterprises from being misappropriated with parts of the company
being disposed of to those who offer most".
Employees of Mannesmann demonstrated against the take-over on Monday. On
Tuesday over 1,000 union representatives from the concern in Düsseldorf met
to discuss further action. Klaus Zwickel, the chairman of the IG Metall
trade union who personally sits on the executive of Mannesmann, angrily
declared, "European business culture, characterised by joint consultation
[with the unions], must not be destroyed by hostile take-overs."
In Britain the German protests were seen as an expression of "nationalism,
populism and plain intimidation", according to the Times. On the fringes of
a meeting in Florence, British Prime Minister Tony Blair reportedly called
upon his German colleague Schröder to tone down his comments.
In fact, the public statements of anger on the part of politicians and trade
unionists contain a substantial dose of hypocrisy. The battle over
Mannesmann is not a struggle over "European business culture" and certainly
not about the defence of jobs. It is purely and simply a conflict over which
company will play the leading role in the European telephone market.
While Vodafone's attack on Mannesmannn is the biggest take-over battle in
industrial history, it is nevertheless part of a development which has been
actively supported and promoted by the very same politicians who are now
protesting so loudly. In this respect the behaviour of Vodafone in Germany
is no different from that of German companies abroad.
The deregulation of spheres of the economy, which up until now fell strictly
under either state control or constituted a state monopoly-such as
telecommunications, energy supply, etc.-has resulted in a veritable boom in
international take-overs and mergers. Since 1992 the volume of world-wide
mergers has increased almost six-fold. Alone in the third quarter of this
year the sum involved in company mergers amounted to $780 billion, nearly 50
percent more than at the beginning of the year.
In light of these figures the 242 billion DM ($129 billion) offered by
Vodafone for Mannesmann is a gigantic sum, but by no means out of the
ordinary. Last year the American telecommunications company MCI Worldcom
swallowed its competitor Sprint for nearly the same sum-$127 billion. The
offer by Vodafone is purely in the form of share compensation for
shareholders, no cash is on offer.
Because of its enormous rate of growth, telecommunications are regarded as a
particularly attractive option for take-overs. New technology-such as the
Internet and mobile telephones-have developed out of nothing into industries
with profits in the billions, and there appears to be no end in sight. In
this case the old adage seems especially applicable: size means power. The
bigger the company the greater the cost advantages.
Vodafone head Chris Gent, former chairman of the British Young
Conservatives, is striving to dominate the market in mobile communications.
In January, Vodafone bought AirTouch, the biggest mobile telephone supplier
in the United States, for $65 billion. This meant that the new company
possessed over 30 million customers in 23 countries. Following a successful
take-over of Mannesmann this figure will rise to 42 million customers. This,
according to chairman Gent, would be "a unique chance for Europe to take
over the leading role world-wide in a high technology branch of industry".
Mannesmann head Klaus Esser is pursuing the same aim, albeit with a
different strategy. That is why the nationalist undertones of politicians
and trade unionists are an embarrassment for him. "At the moment national
pathos is no help to us," he told the Spiegel magazine. "This does not
correspond to the strategy of Mannesmann. We are building a pan-European
company with the focus on European customers and markets-and we are battling
at present for the trust of international investors."
This year Mannesmann bought up the third biggest British mobile phone
supplier, Orange, and-as Esser declared with a degree of satisfaction in his
Spiegel interview-thereby "disrupted Vodafone's extensive plans to acquire
market leadership in Europe." From the standpoint of Vodafone it is now
logical that the company go on the offensive against Mannesmann.
In his campaign against the take-over Esser is banking on being able to
offer the shareholders better prospects for growth and profits: "There is
only one conclusion for the Mannesmann shareholders: give the company a
little time and it will assume an unconquerable leading place in Europe."
Originally Mannesmann was a concern concentrating on steel production and
was known above all for its seamless tubing. Today just 12,000 of the
company's total workforce of 116,000 is employed in the production of steel
tubing, and this branch makes barely any profit. Employment in the
telecommunications branch is just a little higher, at 14,000, but
telecommunications accounts for a quarter of the company's turnover and 70
percent of company profits. The rest of the workforce, around 45,000, is
employed in machine and auto production.
Should the take-over succeed Vodafone intends to get rid of the subsidiary
branches and use the resulting proceeds to recover some of the buy-out
expenditures. There can be no doubt that the process would result in the
loss of thousands of jobs.
But Mannesmann chief Esser has the same plan to retain the lucrative
telecommunications segment and sell the rest. The company's executive
committee has already given approval for such a division of the concern. As
part of the plan to rebuff the Vodafone bid, this plan is now to be
prioritised and concluded by the middle of next year. "The small turbo
mechanism of splitting the company," Esser revealed in his Spiegel
interview, will "bring a substantial increase in the value of the
enterprise."
Contrary to Vodafone, which seeks to concentrate on mobile telephones, Esser
favours an integrated strategy for telecommunications. Together with mobiles
he wants to develop operations in traditional cable communication, as well
as Internet and broadband communication, in the long term integrating the
different components. Because it is reckoned that the market for mobile
phones will soon reach its limit, Esser promises greater possibilities of
growth in the long term with his strategy.
In the struggle against Vodafone Esser can rely on the full support of the
IG Metall trade union. The union is acting to divert the justified concerns
of employees over the threat to jobs into a campaign in favour of the German
board of directors. Following a meeting in Frankfurt, the chairman of the
company's shop stewards committee, Jürgen Ladberg, and the chairman of IG
Metall, Klaus Zwickel, praised Esser's company plan and called upon the
executive to "quickly develop the changes in structure that are already
under way".
In other words, the union favours an accelerated division of the company,
although this would undoubtedly lead to the closure of profitable parts of
the concern. In fact, Zwickel's stand comes as no big surprise-as deputy
chairman of the Mannesmann executive board he has for years supported the
destruction of steel jobs by the company.
Objections on the part of politicians to the Vodafone take-over bid are
equally deceitful.
On the one hand, what emerges is the fear that foreign concerns will
increase their influence in the German economy. While in the past German
companies were especially active in the purchase of foreign firms, the
reverse has not applied. German banks, with their intricate mesh of company
shares and executive mandates, have also ensured that the parent company in
Germany retained overall control of the enterprise, even when the majority
of shares were in foreign hands (as is the case with Mannesmann). In
addition, German corporate law gives small shareholders proportionally
extensive rights-thus making take-overs by foreign companies especially
difficult. Should Vodafone be successful it would be the first hostile
take-over of a German company.
On the other hand, the SPD-Green government fears it could lose any
remaining creditability in the wake of the billion-dollar poker game
involved in the take-over. The government has always maintained that
adaptation to the economic demands of globalisation were compatible with
social fairness; this was the significance of its own slogan "Initiative and
Fairness".
The electorate, however, has experienced quite the opposite. The brutal
battle for Mannesmann-together with the bankruptcy of the Phillip-Holzmann
Building company-serves to deliver a further blow to illusions in a
capitalism compatible with collaboration between diverse social interests.
In Germany this worker-management co-operation has been termed "Rhine
consensus politics". Now the Spiegel magazine comments: "Rhine consensus
politics has collided with the brutal mores of the US market economy."
In the meantime there are indications that a deal is being worked out which
would allow everybody to save face: a voluntary merger, a so-called merger
of equals, instead of a hostile take-over. Mannesmann and Vodafone would
then unite their operations in a joint, newly founded company. According to
a report in the Süddeutschen Zeitung, Mannesmann head Esser and Vodafone
chief Gent are prepared to consider this option. For the company employees,
however, the result would remain the same.
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