European Debt Crisis during 2011

Introduction

The ongoing European debt crisis has been recorded as the worst to have hit the continent ever since the euro was adopted as a common currency more than 12 years ago. The devastating aftermath has already seen such countries as Greece, Portugal as well as Ireland being put on financial life support (Negus 121). Financial experts have predicted that the eurozone will slump into recession by the time the first quarter of 2012 ends given the trends that have been observed since the end of 2011. More than half a dozen other countries, including Italy and Spain, are in dire state and there have been internal political grumblings from some of the worst hit states over their continued use of the Euro. Europe’s biggest economies, Germany and France, have not experienced the financial crunch being witnessed in the neighbouring countries but have been hesitant to offer support. Large multinational corporations that straddle across international boarders and with presence in Europe have not been spared either. This report discusses the role played by multinational corporations in the crisis as well as the effects

Diageo

The British drinks company has been forced to cut its operation costs particularly in the troubled Southern Europe region following the biting of the financial crisis. The company is the owner and manufacturer of brand names Smirnoff and Guinness alcoholic drinks. Diageo, like many other businesses in Europe has endured difficult times economically owing to the inflation occasioned by the debt crisis. Already, up to 400 jobs have been axed in the distiller’s firms based in Greece, Spain, Ireland and Portugal. This initiative is poised to save funds to the tune of ₤80m within a period of two years.

The extent of financial harm suffered by Diageo is so intense that the firm has been forced to lay off its management team in Western Europe. This action has affected operations in Britain as well and has been sighted as inevitable as the company is restrategizing and focusing on markets in other emerging continents like Africa, Asia and Latin America.

General Motors

The car manufacturer announced that it would not be able to record profits on its European business for the year 2011 following the harsh debt crisis being experienced. The announcement by GM, an American global company, sparked fears and speculations among workers employed at its plant in Vauxhall, Ellesmere Port as well as Luton of imminent job losses.

GM Europe, the official Opel and Chevrolet vendor recorded huge losses to the tune of $580m which is equivalent to ₤360m in the initial nine months of 2011. The

Vauxhall plant had at the time recorded a drop of 5% on its annual sales yet Europe provides the hugest market for its finished cars, selling up to 90% of all the cars it manufactures on a yearly basis.

Vodafone

Vodafone is probably the biggest loser among mobile telecom firms that were operating in Greece at the time the financial crisis in the country worsened. The British company has been forced to write off up to ₤450m against its ventures in Greece. Vodafone operations in Spain tumbled by 9% in the first six months of 2011 while its Italian subsidiary recorded a drop of 2.3% in its total revenues during the same period of time.

As a precautionary measure, the company had set to reduce its workforce in the hardest hit regions. During the 2010-2011 financial year the company took impairment charge worth ₤6bn as a cushion against operations in Southern Europe which were on a steady decline. Efforts by the company in Spain have been minimized to price reviews in a bid to win back its former customers (Howden 1).

Dixons

The retailer company with origin in Britain has suffered immense losses since the beginning of the Europe-wide deterioration in spending by customers. This has forced the company to write down up to ₤220m worth of its overseas businesses. Dixons’ sales in Greece were suspected to have dropped by 50%.

Unilever

In mid 2011, the manufacturer of foods and household equipments warned of flat to low profit margins, citing tough conditions in Europe.