Eurozone crisis burdening U.S. businesses

June 8, 2012 at 3:00 AM
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NEW YORK, June 8 (UPI) -- Companies from Ford Motor Co. to Staples Inc. say their businesses are being weighed down by the growing eurozone crisis, which is hurting the U.S. recovery.

"It's a really, really tough environment," Ford President and Chief Executive Officer Alan Mulally said in April after the Dearborn, Mich., automaker posted a smaller quarterly profit.

He compared the European auto business today to U.S. auto conditions in 2008 and 2009, just before the auto bailout.

Ford was the only one of the Big Three automakers to avoid government-sponsored bankruptcy.

"We're not just seeing this on the new-vehicle side," Mulally said, "but we're seeing consumers who are coming in for service -- they're not coming in as much and they're not spending as much."

Staples has sold fewer supplies in Europe this year, particularly computers, and laid off hundreds of overseas employees, said the Framingham, Mass., office-supply chain, which operates more than 2,000 stores in 26 countries.

"We expect trends in Europe to remain challenging," company President Michael Miles said last month.

"We'll remain, and continue to be, consolidating business units, centralizing functions and reducing layers in complexity with an eye toward lower costs and better execution," The Washington Post quoted him as saying.

Goodyear Tire & Rubber Co. of Akron, Ohio, said owners of consumer and commercial vehicles in Europe were buying fewer tires, so dealers were also buying fewer tires.

With Europe's volatile economy, "we will continue to plan our business cautiously and do so with discipline, focusing on intense cost control and prioritizing cash and earnings," Chairman, President and CEO Richard Kramer said in a conference call.

The 3M Co. conglomerate of Maplewood, Minn., which operates in more than 60 countries, reported European sales fell 6 percent this spring "due to economic softness and ongoing austerity measures in many countries," Chief Financial Officer David Meline said in an April 24 conference call.

Upscale retailers including Abercrombie & Fitch Co., Neiman Marcus and Ralph Lauren Corp. reported Europeans were spending less than previously in their home countries and as U.S. tourists.

"The ongoing overhang of economic uncertainties in Europe ... [is] weighing on the customer's mind," Ralph Lauren President Roger Farah said in a May 22 conference call to discuss his company's earnings.

Jeweler Tiffany & Co. said fewer European tourists are shopping at its flagship Fifth Avenue store, the Post said.

Europeans are even skimping on chewing gum, Kraft Foods Inc. said.

"Unfortunately, this will likely continue, until the European economic environment recovers in key gum markets," said CEO Irene Rosenfeld, whose suburban Chicago confectionery, food and beverage conglomerate makes Dentyne and Trident gum, among other products.

Europe is suffering a financial crisis, fueled by dwindling investor confidence in the sovereign debts of countries including Greece, Portugal, Spain and Italy and a teetering banking sector.

"The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions," Federal Reserve Chairman Ben Bernanke told Congress Thursday.

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