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Weak dollar inflicts pain on Europe's small, artisanal manufacturers

Weak dollar inflicts pain on Europe's small, artisanal manufacturers

Hugh Quinn has sold hand-cut Irish lead crystal to U.S. customers for 35 years. That job is harder than ever, he says _ because the ever-weakening dollar has shattered his ability to sell to Americans.
Times are tough for Quinn's Galway Irish Crystal Ltd. in western Ireland and for many other smaller, family-owned or artisanal firms across Europe that traditionally target Americans as their No. 1 buyers. These niche manufacturers are often too small to go to currency markets to engage in the complex, risky hedging that protects larger companies from currency shifts.
Quinn, along with many other Europeans, never thought he would see the euro reach US$1.50 _ up from US$1.18 when it was introduced in 1999, and from 82 cents at its lowest in 2000. But it did just that this week. On Friday, the euro hit a new record above US$1.52.
Smaller and mid-sized businesses making all kinds of things coveted and consumed by Americans _ cuckoo clocks from Germany, wine from Italy and France, less glamorous handiwork such as precision machines _ are being forced to cope with a currency shift that shrinks revenues from dollar sales. Meanwhile, their costs are in expensive euros.
Irish crystal offers a glittering example. Five years ago, both Galway and its much bigger Irish competitor, Waterford, relied on Americans for about half of their sales. Both companies have been hammered by the dollar's decline _ but Waterford has maintained its U.S. sales volumes by slashing Irish production and shifting out of the euro zone to cheaper Eastern Europe and Brazil.
That's no option for Galway Crystal, whose work force has been cut nearly in half in the past five years to 80. Americans today account for just 20 percent, and that figure keeps falling with the dollar.
"And it will probably continue to decline until the dollar resurrects itself," Quinn said.
He said the company began retreating from the U.S. market two years ago, after the dollar reached US$1.40 to the euro _ and each piece of crystal began selling for a loss. That forced a price hike that only hurt sales.
"We spent a good few years telling ourselves: This is not about profit, it's about defending our market share. So we kept our prices firm in U.S. dollars as best we could and just about broke even. We just kept hoping for a turnaround," Quinn said.
"But when you reach the stage where you're actually losing money, you have to take a fresh, hard look at it: When is it going to to come back? How long can I sustain this?"
Economists say all euro-denominated exporters have reason to be worried, but tourism-oriented producers of luxury goods are hurting the most.
"They can get into trouble if they have their eggs in one basket, particularly these days if it's an American basket. They have to broaden their horizons," said Alan McQuaid, chief economist of Bloxham Stockbrokers in Dublin.
Galway Crystal has survived so far by shifting its production lines in tune with European tastes, which favor simpler and lighter designs of glassware. This also means less labor-intensive pattern cutting.
There's no such escape route for Germany's makers of cuckoo clocks in the Black Forest, who count Americans among their best customers.
Ingolf Haas, his wife, father and three employees run Rombach & Haas Schwarzwalduhrenmanufaktur, or Black Forest Clock Manufacturers. They craft more than 100 designs of wooden clocks, most of which feature the little bird peeking out its door and chirping on the hour.
Traditionally, more than half of Haas' customers are Americans, whether tourists or on-line shoppers.
"Making cuckoo clocks has never been a very lucrative business, but now this drama with the weak dollar is really giving us trouble," said Haas, 45. "I think we've suffered at least a 10 percent drop in profit since the dollar's latest decline started a few months ago."
Haas said he's been looking into selling his products in new markets, particularly Asia and Russia.
"However, that's not so easy either, since we don't have an additional few hundred thousand euros that we could invest in advertising," he said.
Lately, Haas has broadened his range of clocks, which sell from euro80 (US$120) to euro4,000 (US$6,000) for a 1.5-meter-tall (5-foot-tall) model. Customers who pay extra can design their own clocks over the Web.
"I hope the Americans will take advantage of this offer," he said. "Like it or not, they are our main customers and most of the cuckoo clocks end up on living room walls in the U.S."
Roberto Anselmi, a producer of premium white wines based in the northern Italian town of Monteforte near Verona, said his U.S. sales have fallen by about 20 percent, or 50,000 bottles, over the past year. He has had to raised prices up to 20 percent on U.S. store shelves.
As a result, Canada has eclipsed the United States as Anselmi's largest export market.
"We can't recoup this market," Anselmi said. "In the United States there is a lot of competition from domestic wines, and consumers are also looking for wines that are more competitively priced from other regions of the world that have lower costs."
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Associated Press writers Colleen Barry in Milan and Kirsten Grieshaber in Berlin contributed to this report.
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On the Net:
Rombach & Hass cuckoo clocks:
http://www.black-forest-clock.de


Updated : 2021-08-04 17:59 GMT+08:00