U.S. Firms Urged to Get Europe Foothold : Businessmen at Irvine Conference Warned of Trade Barriers After Economic Unification

While the business potential of the Pacific Rim continues to dominate the planning of many expansion-minded West Coast manufacturers, the huge and growing European market may be slipping away, speakers at an electronics industry conference in Irvine warned Thursday.

The message, delivered by a host of European and American business executives to an audience of about 75, was simple: The 12 nations of the European Community are racing to form a single market, free from internal trade barriers, by 1992. And American companies that have not established a foothold in Europe by then may be frozen out.

For companies that are in Europe or that get there quickly, the opportunities are limitless, especially in the electronics industries, according to panelists at the forum, which was sponsored by the American Electronics Assn.

But American manufacturers first must shed ideas like “export” and “foreign competition” and realize that the United States is no longer the center of the world economy, said Roger Johnson, chairman and chief executive of Western Digital.

U.S. manufacturers, retailers, distributors and service suppliers instead must learn to operate as players in a world economy, said Johnson, whose Irvine electronics and computer parts firm will get about half of its estimated $1.1 billion in sales from foreign markets in its current fiscal year.

Johnson and others speaking at the daylong event--one of seven being conducted around the country this month by the AEA and the Industrial Development Board of Northern Ireland--said that American companies looking to establish themselves in Europe can no longer do so by setting up sales offices or retaining local representatives.

“Small in Europe has not, to date, been beautiful,” said Harry Sello, former operations manager of a Fairchild-Olivetti joint venture in Italy and head of his own business consulting firm. “You have to be much more involved . . . through wholly-owned subsidiaries and strong business alliances” with European companies.

For the American electronics industry, the European marketplace can be especially rewarding because so many American firms already have a strong presence there, Sello said.

Additionally, he said, the electronics market in Europe is expected to grow from $129 billion in sales in 1986 to $166 billion in sales in 1991.

That growth has enabled relative newcomers to prosper, said Denny Paul, vice president of international operations for Businessland.

The Northern California business computer sales firm established its European operation just 1 year ago and already has posted $70 million in sales and expects that figure to hit $100 million by the end of the year, said Paul.

At Datachecker, a manufacturer and marketer of point-of-sale equipment, sales from six European subsidiaries and 35 exclusive distributors “have posted 25% compound annual growth in the past few years, while our market here in the U.S. has been fairly flat,” said Bert King, vice president of international sales for the National Semiconductor Corp. subsidiary.

But to partake of that growth, U.S. firms must move quickly, warned Arthur Mancini, senior vice president for international sales and service at MAI/Basic Four in Tustin.

Mancini, whose company expects 56% of its more than $500 million in sales this year to come from foreign markets--mainly in Europe--said that the European economic community “is moving much better than expected toward unification” and that the window of opportunity may not remain much beyond 1992.

The European economic unification movement began a decade ago and has solidified in the so-called Single Europe Act, in which the 12 European Community nations are attempting to resolve differences in law, tariffs, financing, personnel rules and other matters to break down internal trade barriers.

Many business experts predict that the elimination of these internal barriers will result in the erection of barriers to companies from outside the 12 nations and creation of a so-called Fortress Europe.

Underscoring that concern, Sello said that Jacques Delors, president of the European Community Commission, recently said in an interview with a major news magazine that “ ‘we are not building a single market in order to turn it over to foreigners.’ ”