The Young Lions of Europe

MUCH as they may criticize American food, manners or politics, Europeans have long held a grudging respect for U.S. management methods. So European companies tend to send their brightest executives to U.S. business schools; they are eager to hire Europeans who have worked for American firms. What they covet is a share of the American success that is so much in evidence. In Western Europe, U.S. corporations have built a direct investment stake with a market value of an estimated $75 billion--and ambitious Europeans are determined to beat back "the American challenge."

Today, from Iberia to Scandinavia, a group of aggressive, dynamic businessmen are doing just that. Multinational in their attitudes, multilingual and young--at least by Continental standards--they are quietly changing the style and stepping up the pace of European business. In executive offices where well-bred formality and old school ties were once the rule, there is now less hierarchical authoritarianism and more promotion based on merit alone. Family connections may still be important, but class lines are melting. Indeed, many a European is beginning to act more like the European conception of a hard-driving American executive than most American businessmen themselves. Yet in their personal tastes and habits, most European managers remain recognizably products of their individual national cultures.

Sensitive to their social responsibilities, many European business leaders are also working overtime on problems of housing, pollution, transport and boredom on the production line. They are eager to try fresh ideas and methods. Some of them even argue that Europe offers unique opportunities for the application of U.S. sales and management techniques--like franchising and discounting, decentralization of decision making and heavy use of marketing research --simply because those tactics have not yet been exploited much in Europe.

Almost to a man, the managers who are coming to the forefront in Europe have a common objective: they are reaching out for new markets, particularly in the European Economic Community. Though most European economies are troubled by higher inflation than the U.S., they are recovering from a recent slowdown in growth, and the potential for expansion is great. After last year's currency revaluations some Continental businessmen are considerably more interested in direct investment in the U.S. because their money can now buy more. In addition, Europe is catching up to the U.S. in use of sophisticated technology. A decade ago, for example, the U.S. had 7,500 general purpose computers and Western Europe had only 1,359, most of them American-made. The score today: the U.S., 54,000; Europe, 32,000, a full third of them made by European firms using their own technology. The "brain drain" appears to have been plugged, and there have even been signs of a reversal. Unemployment among U.S. engineering specialists in the past few years has prompted many to scout for jobs abroad.

Typical of Europe's rising chief executives are the eight men reported on below, all of them in their 30s or 40s. They are not the only young or middle-aged business leaders in Europe, and they are not necessarily as powerful as some older industrialists and bankers who have been on top longer. But partly because they have many more years ahead, they and men like them will be firmly in command of Europe's privately owned commerce and industry by the end of the decade.

Future-Shock Trooper

At 37, Pehr Gustaf Gyllenhammar is president and chief executive of Sweden's Volvo, the automobile, aircraft and heavy-equipment manufacturer that is the largest industrial combine in Scandinavia (revenues last year: $1.2 billion). He is also the author of a book about future economic and social problems, Toward the Turn of the Century, Somehow. "My main job is structuring a corporate philosophy that will take us into the next century," he says.

Lately, Gyllenhammar has been concentrating on ways to help his workers enjoy their jobs. Since becoming chief executive 16 months ago, he has overseen $30 million in improvements in Volvo plants--adding saunas, Ping Pong and coffee-break rooms, swimming pools and libraries. He is investing another $50 million in two plants scheduled for completion in 1974, in which "work teams" of 20 will replace much of the assembly lines. Instead of each worker performing a single, repetitive operation, he or she will work as part of a group that will be responsible for assembling large components and subassemblies, like brake systems. On some teams, each member will change his job every day--for example, alternating between the assembly line, quality control stations and office paper work. U.S. automakers say that Gyllenhammar's innovations are not suited for Detroit's high-volume production, but in next year's contract negotiations the United Auto Workers are expected to ask for an employee voice in determining hours, plant layout, assembly-line speed and other production details. In addition, Gyllenhammar has put two workers on Volvo's twelve-man board of directors and replaced most individual offices in the company's Goeteborg headquarters with open work areas to encourage contact among executives and white-collar employees.

Just as striking as Gyllenhammar's private industrial revolution are his views about the automobile: "I don't think it would be a bad thing to ban the private car in big cities. Cars are killing the city and strangling small towns and villages. Car manufacturers should work with government authorities to find transportation facilities that can take over for the car. And car manufacturers should concentrate on cleaning up the piston engine."

Clearly Gyllenhammar is no run-of-the-line auto magnate. He came to Volvo without any experience in manufacturing of any kind. He studied at both the University of Lund and London University, spent five months in 1960 with a law firm in Manhattan, then joined a small Swedish insurance company. He later followed his father as managing director of Skandia, Sweden's largest insurer. He is married to the daughter of the former Volvo chief executive, but no one in the company doubts that Gyllenhammar would have made it to the top without his family ties. Generally acknowledged as the country's brightest young business leader, he works a twelve-to 14-hour day and spends half his time traveling to some of the more than 100 countries where Volvo does business. Says Gyllenhammar: "If you put me in a suburb and gave me a six-hour day, I'd have a heart attack."

Company Capturer

Jim Slater was known to few outside British financial circles until Bobby Fischer threatened to boycott his world championship chess match with Boris Spassky. Slater put up the $125,000 in additional prize money that helped bring Fischer to the table. The 43-year-old investment banker has a passion for chess; he keeps a board in his London office and, until recently, had a correspondence match in progress at all times.

Slater says that chess has taught him much about winning in business. He built a fortune by becoming a master of the corporate takeover, analyzing companies' strengths and weaknesses, then moving to capture them by means of quick, surprising purchases of stock. Though his Slater, Walker Securities Ltd. was founded only eight years ago, his takeover tactics have made it one of the largest investment-banking firms in Europe. It owns major or controlling interests in 200 companies and, Slater insists, "half of them do not even know about it." Slater, Walker has assets of some $800 million; last year it earned $23 million. Slater himself has a personal net worth estimated at $20 million.

Lately he has been streamlining his approach. Now he typically buys a minority interest in a company, then acts as its banker and financial adviser in helping it expand. He collects fees from the company for his services and, usually within a year or two, sells out his appreciated holdings for a profit. When a reporter noted that all this sounds as easy as winning in a game of Monopoly, Slater replied, "Well, it is--it is."

Slater started as an accountant with Leyland Motors. In 1964 he bought a real estate company and, together with a partner, Peter Walker, renamed it Slater, Walker Securities. They sold its shares to the public and started acquiring companies. (Walker quit the firm two years ago to become Britain's Minister for the Environment.) Today Jim Slater is looking into takeovers of firms in most Common Market countries. His stake in Canadian industry is worth $50 million. He regards Canada as a test area for his planned move into takeovers in the U.S.

A Man of Much Taste

James Goldsmith, 39, is a true multinational man. Born in Paris of a British father and a French mother, he speaks both languages fluently, divides his time between homes in England and France, and holds passports of both nations. Goldsmith's $1.4 billion-a-year Cavenham Foods empire--Europe's third largest food processor after Unilever and Nestle--also straddles the English Channel.

He started cooking up his empire of edibles in 1965, when he catered to both the sweet tooth and the weight-consciousness of Britons by forming Cavenham Foods as a diversified maker of candy and diet products. Following the recipes of Jim Slater and other British takeover specialists, Goldsmith began buying troubled foodmakers and selling off their undervalued surplus assets. He surprised British financiers by buying Bovril, maker of Britain's best-known beef extract, for $50 million in June 1971. Since then the price of Cavenham shares has tripled.

Goldsmith claims to have learned the art of management from the mistakes of U.S. multinationals. "Americans tended to look at Europe as a single market, but that is an oversimplification," he says. "When it comes to food, every market has totally different tastes." He tells French cheesemakers to forget about trying to sell their Camembert and Pont-l'Eveque in Britain, and learn how to make the Cheddars and Stiltons favored by British palates. Goldsmith also avoids what he sees as the pitfall of American-style conglomeration by keeping the bulk of his expansion in the food business. Lately he has been adding to his already large interests in banks, insurance companies and property-development firms, but the newcomers will be used to help provide cash for the acquisition of more Common Market food companies. There should be plenty of reserves; earnings from Goldsmith's varied interests this year are expected to be about $50 million.

Jean of All Trades

Jean Saint-Geours, 47, is professor of political economy at the Institut d'Etudes Politiques de Paris, where he lectures from his own 500-page textbook. He is the author of four novels and a nonfiction book, Long Live the Consumer Society. He is an avid cross-country runner, swimmer and tennis player, and a former member of the national championship rugby team. He speaks fluent English, Spanish, German and Italian, and reads Latin.

He also finds time to be a banker. As managing director of Credit Lyonnais, the eighth largest bank in the world (assets: $15.7 billion), Saint-Geours is a proponent of the European movement toward multinational banking consortiums. The bank's two-year-old union with Germany's Commerzbank and Italy's Banco di Roma to form the CCB group is one of at least seven major liaisons; their main purpose is to provide big, convenient pools of capital in different currencies to help international firms expand. The CCB group commands assets of nearly $31 billion.

Saint-Geours is one of the many French executives who have built a reputation in the government bureaucracy and then "parachuted" to a lofty position in business. He served with the French mission to the United Nations in Manhattan, later became the government's director of economic forecasts and had a hand in shaping France's monetary policy. Four years ago he moved to Credit Lyonnais. Because the bank is really controlled by the government, the shift was much like a promotion within the government economic hierarchy.

Unlike some older French bankers, Saint-Geours argues that "it is possible to mix social legislation with the big business of the Common Market." He adds that, "the part that business can play is in fair and socially sensitive hiring policies. Companies must not merely select candidates on the basis of training or aptitude, but must keep a strong eye out for sex, race, socioeconomic standing and need." Saint-Geours's statements have raised some eyebrows in the stuffy world of French banking. "The system is basically an old-boy net," he says, "and it overlooks dozens of qualified men who drop out because they do not feel involved in what they are doing." Saint-Geours himself has been helped along by the old-boy net, yet he would heartily applaud its demise. Says he: "There is no one at my level in the conservative business of banking who is further to the left than I."

Apostle of Togetherness

From his base in Frankfurt, Juergen Ponto has done even more than Saint-Geours to advance the cause of togetherness in banking. Ponto's Dresdner Bank is Germany's second largest (after Deutsche Bank) with $13 billion in assets. It has joined seven other international banks to form Societe Financiere Europeenne (SFE), the world's largest such group, whose partners have assets of $130 billion. Last year Dresdner Bank also linked with three European banks in the Associated Banks of Europe Corp. (ABECOR). Members' assets total $30 billion. With Ponto's help, ABECOR and three other banks are pooling the training of junior executives. The seven banks hold joint seminars and will soon open a training center near Frankfurt.

Ponto spent his early childhood in Ecuador and Chile, where his German father ran an export-import business. After the war he studied at Goettingen, Hamburg, Zurich, Cambridge and the University of Washington, where he did half a year of graduate work in international law. He joined Dresdner Bank in 1950 "out of curiosity about figures," and by 1969 made it to chief executive.

Ponto feels strongly about European economic integration: "It is simply too rational to fail." He is less optimistic about the development of East-West trade: "The question of true mutual exchange of goods must be judged much more skeptically. The Soviet Union can supply the West with raw materials, but most of the other Eastern European nations lack that capability." Last year he had a long talk at the Kremlin with Premier Alexei Kosygin, and the session apparently went well. Dresdner last week announced that it had applied for Soviet permission to open an office in Moscow and become the first Western bank represented there.

Computer Competer

Heinz Nixdorf, 47, has built Germany's most successful computer manufacturing company. The firm, Nixdorf-Computer, of which he is founder, sole owner and chief executive, has been competing head to head with IBM, Machines Bull (now Honeywell), Philips, Burroughs and Univac. Nixdorfs firm is the only European-based company that has consistently earned a profit from computers throughout the past two decades. Lately, the directors of one major manufacturer decided that he must be doing something right: AEG-Telefunken last December placed its computer interests in a fifty-fifty partnership with Nixdorf; the two companies have formed a joint subsidiary to develop and produce large computers.

While Nixdorf was still a physics student at the University of Frankfurt in 1952, it struck him that most companies at that time could not afford the hulking computers being sold in Europe. He was convinced that he could build a small machine for only $8,000. So Nixdorf hopped on his motorbike and set out across the countryside to find a customer. Executives of a Ruhr Valley utility company were interested in what the brash fellow offered. After he finally built the machine, orders began coming in so fast that Nixdorf quit school and opened his own shop. Now he sells to 24 countries. Nixdorf-Computer sales last year were $99 million.

Nixdorf spends one-third of his time traveling, including three trips a year to the U.S. He works ten-hour days; on weekends he pores over technical books and periodicals, plays tennis and sails his 23-ft. boat, occasionally in international regattas. "Whatever I do is achievement oriented," Nixdorf says. "I want to compete."

The Clockwork Swiss

Pierre Waltz, 40-year-old chief executive of the $142-million-a-year Societe Suisse pour l'Industrie Horlogere (SSIH) has made pulses tick faster throughout the Swiss watch industry. In the two years since he took over at SSIH, which makes Omega, Tissot and other watches, he has fired hundreds of workers to cut costs, merged with the country's major producer of inexpensive watches to meet increasing competition from the U.S. and Japan, bought out one U.S. firm (Hamilton) and entered into a joint venture with another (Optel, a liquid-crystal maker). "Some people call me the ugly American of Swiss industry," he says. "But you can't run a business on the basis of national glory."

Waltz started out working for Fabriques de Tabac Reunies, a cigarette manufacturer that was owned by his mother's family. The firm was taken over in 1962 by Philip Morris. Waltz stayed on as an executive for seven years, then quit because of "serious disagreements" with his bosses. He had hoped to take a long skiing vacation, but the directors of SSIH, figuring that Waltz was just the decisive executive to meet the Japanese and U.S. competition, lured him off the Alpine slopes.

Waltz figured that he could use his Philip Morris experience to advantage. "Traditionally," he says, "watchmaking has been a family business in Switzerland, and companies were beginning to lose ground to modern foreign enterprises. I had seen internationalization at work in the tobacco business, and I wanted to try the same thing in the production and marketing of watches."

Waltz has pushed SSIH even further into such growing markets as the U.S. Now he is talking about diversifying. Omega has developed a three-beam laser welding system that it may market, and is looking into the possibility of assembling its timepieces in Latin America and other areas where labor costs are low.

World Hotelier

Francisco ("Paco") Melia, 32, is the grand young man of Spain's biggest industry: tourism. His company has 18 hotels in Spain, and eight others are in the advanced planning stage or under construction there. Not content to let his chain's gains fall mainly in Spain, Paco is going international. Ground has been broken or bought for 15 more hotels in cities from Acapulco to Baghdad.

Tourism runs in Francisco's family. His father, Don Jose Melia Sinisterra, now semiretired at 61, founded the family's travel conglomerate in 1947. Today it includes Francisco's hotels as well as a couple of family businesses: a thriving real estate company and one of the world's five largest travel agencies, Melia Viajes. Paco Melia has been running the hotels, keystone of the family fortune, since he was 23. He scouts his own sites, arranges his own financing and promotes promising employees rapidly. "We are combining the American business approach with European service," he says. "We are fighting to avoid that impersonal atmosphere that comes with big hotels. So far I think we have succeeded."

The Melia chain pioneered the "apartotel" concept in Spain. Because the country has only a limited capital market, the Melias put together groups of individual investors to finance new construction. Instead of shares in the venture, each investor got a suite of rooms that he either held for his own use or had the Melias rent out for him. At present, three Melia hotels operate on this principle. On each of its facilities, Melia Hotels takes 15% of net profit in return for its management efforts.

Francisco Melia's international expansion program dwarfs the entire family's present holdings. The Egyptian government has chosen Melia to take over management of the Semiramis and Shepheards, two famed Cairo hotels that have seen better days. Melia has also acquired land in Paris and London. His company is building hotels in Mexico, Venezuela, Puerto Rico and other parts of the Caribbean. "The Latin American market is a natural for us," says Paco, who hopes one day to build in Eastern Europe and Israel. "Tourism is a business for the future. Today we are just halfway there."

Why does Europe seem so well endowed with fresh business talent? European society is clearly loosening up, allowing bright young men to make it on their talents, instead of on their class origins. More important, World War II decimated the age group now in its 50s, so more men in their 30s and 40s have been drawn into leadership positions. There has also been a gentle cultural drift toward more respect for youth. Says Nils Gustav Grotenfelt, 49-year-old chairman of the Finnish Paper Mills Association: "We are going back to the 17th and 18th centuries. Most of the world's great leaders then were under 40. We have decided that the greater experience of age does not necessarily outweigh the greater daring of youth."

Perhaps the main reason is that good managers are a function of their competition. If the competition is slothful, as it was in some parts of Europe for many years after World War II, management becomes moss-backed. If competition is brisk, management turns innovative. The big entry of U.S. companies into European markets has done much to galvanize home-grown managers into meeting "the American challenge." And the decline of tariffs within the Common Market has made European producers start thinking about the competition immediately beyond their borders.

That competition will become even sharper in the decade ahead. The Common Market is expected to be expanded from six nations to ten on Jan. 1. And Continental businessmen are watching with concern the emergence of a "Japanese challenge," as names like Toyota, Sony and Hitachi rise across Europe. Everywhere the conviction is growing that companies with conservative, nationalistic managements will be left behind in Europe's competitive leap forward--and that firms with impatient, internationally minded young executives will command the future.

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