| BUSINESSWEEK ONLINE : OCTOBER 25, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
Commentary: How the Net Can Bust Europe's Car Cartel (int'l edition) Is Volkswagen at it again? The European Union's cartel police are investigating whether VW has been strong-arming dealers to prop up prices. VW has been here before. Only a year ago, regulators hit Europe's largest carmaker with a record $109 million penalty for the same offense. Since then, Peugeot, Renault, DaimlerChrysler, and General Motors' Opel have come under scrutiny for possible price-fixing complaints. You have to wonder how far European producers will go to maintain their margins. But if the authorities want an end to price-fixing at the dealerships, there's an easier way: Let the Net rule. Online car sales are just making their appearance in Europe. Some carmakers are pushing hard to postpone the day when Europeans log on, comparison-shop, and go pick up the keys. So regulators should keep up the pressure and hasten the Internet's development. Then, Europe can reap the benefits: a big drop in car prices and a fairer deal for consumers. Turning the Net into a car lot will encourage its growth in other retail markets as well. EURO IMPACT. The EU has long exempted carmakers from competition rules. Unlike makers of furniture or appliances, they are allowed to divide up markets among exclusive dealers, each with its turf. With no competition, car prices can vary by 30% or more from country to country. The average price of a VW Golf is more than $2,000 higher in Germany than in Denmark, according to the EU. That's allowed, but dealers are supposed to sell to anyone who walks in. Thus VW's fine, which it is challenging in court, came after cartel authorities concluded the company tried to prevent lower-priced Italian dealers from selling cars to Austrian and German customers. VW can blame the euro for some of its headaches. The single currency makes comparison-shopping easier and eliminates foreign exchange risks. And the euro will magnify the Internet's impact. Buyers from Helsinki to Naples will click to find deals payable in euros. ''European auto makers will have to adjust their prices,'' says Jan Kantowsky, a co-manager of Pixelpark, a Berlin concern that provides e-commerce services to major European companies. ''It will be a huge challenge.'' So far, it's not a challenge most carmakers relish. They're lobbying the EU to extend their exemptions. And they are defensive toward Internet sales. In June, VW solemnly warned dealers in Britain they might be breaking the law if they cooperated with online sellers. Partly because of such resistance, Net sales in Europe are a fraction of what they are in the U.S. Autobytel.co.uk, the British franchise of autobytel.com of the U.S., says it has moved only about 1,000 new cars since launching in April. Germany's Fair Car, in which Bertelsmann has a stake, deals exclusively in used cars. According to EU regulations, European carmakers' privileges don't expire until 2002. But the EU's aggressive enforcement of competition law is already loosening the auto makers' grip on dealers. Even more important, the carmakers are on notice that more change is coming. If they don't start embracing Net sales soon, they risk falling behind competitors. Says Peter Seppelfricke, an auto analyst at M.M. Warburg & Co. in Hamburg: ''The traditional motor trade will soon be a thing of the past.'' FORD-MICROSOFT PLAN. Car companies would be better off catching the wave rather than trying to duck it. Even as prices drop, they should create more effective dealer networks that also work with online services. Some are already innovating. GM, for example, has launched an online unit called e-GM to coordinate its e-commerce activities worldwide. ''The Internet forces dealers to become more efficient,'' says Mark T. Hogan, who heads e-GM. ''The dealers who don't figure that out are in trouble.'' Ford Motor Co.'s CarPoint, a joint venture with Microsoft Corp., is also on the cutting edge. The online service is designed to benefit suppliers as well as dealers and customers. As buyers click on Net pages to configure their cars, suppliers will monitor the process, know instantly what features are in demand, and adjust their production accordingly. Producers could save billions by slashing inventories of parts and materials. ''I think e-commerce will radically change the way we optimize our business,'' says Nicholas V. Scheele, president of Ford of Europe Inc. ''Selling over the Internet is just the tip of the iceberg.'' It's time other European carmakers understood this and prepared for customers who browse by mouse. By Jack Ewing _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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