1. Read the text below to prove the following: "The car may be German, but its innards are nearly all from eastern Europe". Driving east

JEAN-MARTIN FOLZ, boss of PSA Peugeot Citroën until this month, caused a stir in the late 1990s when he suggested that the Toyota factory being completed in northern France at that time would be the last car-assembly line to be built in western Europe. BMW subsequently proved him wrong by opening another assembly line in Leipzig, but Mr Folz was not far out. He himself has recently been opening plants in Slovakia and the Czech Republic and sounding the death-knell for a factory in Britain that closed its doors last month.

Peugeot is not alone in heading east in search of skilled workers at lower wages. Poland has Fiat, Opel and Volkswagen; Hungary has Audi; Romania and Slovenia have Renault; Slovakia has Volkswagen as well as Peugeot; and the Czechs have enticed Toyota into a joint venture with Peugeot.

Once you consider car parts as well as assembly lines, the rush east becomes a stampede. Peugeot's parts manufacturing arm, Faurecia, has factories in five eastern European countries as well as one in Turkey. Volkswagen adds Ukraine to give it a total of five countries. Bosch, the Stuttgart company that is Europe's leading parts-maker and one of the world's top five, has factories in ten eastern countries.

But is the rush being overdone? A study by Ernst & Young, a firm of consultants, concludes that central and eastern Europe will have a market of around 4.5m cars within five years. That sounds a lot, but it is less than a third of the 16m in western Europe. The new investment in car-assembly plants will give the eastern region a capacity of over 5.5m by 2011, making it a net exporter of vehicles. This will add to the existing overcapacity in the European car industry, currently estimated at approaching 20%.

The pain is going to be felt mostly in those parts of western Europe where up to now cars have been produced relatively cheaply: Spain and Portugal. Already Renault has slashed output at its large Valladolid plant in northern Spain, It does not take a satellite navigation system to see where the European car industry is going.

Feb 8th 2007 From The Economist print edition

2. Basing on the article above, answer the question: Where is the European car industry going? Provide arguments to justify your point of view.

3. Using the above text as an example, make a survey of the following European industries: food, luxury goods, aeronautics, steel, agriculture, services, textile and clothing, etc.

Prepare a presentation of your survey; discuss the conclusions in class.

Case Study 2

1. Read the following article and then explain its title. The tortuous tale of Telecom Italia

DURING the recent controversy over the future of Telecom Italia a joke was doing the rounds in Rome. How do you tell the difference between the Chigi Palace (the prime minister's office) and an investment bank? Answer: in the bank they all speak English.

The contorted tale of TI, which culminated in the resignation of its chairman, Marco Tronchetti Provera, in September, holds two lessons about doing business in Italy. First, once the government gets involved in a deal, things get murky and confusing. Second, powerful business figures seem to be able to control companies with only a tiny amount of their own money at risk.

In 2001, as chairman of Pirelli, a tyre company, Mr Tronchetti Provera borrowed a lot of money to take control of TI, in which the Italian government has a golden share. Since then TI's shares have halved in price and Pirelli's have fallen by half. Last September Mr Tronchetti Provera announced that he was going to split off TI's mobile-phone arm. This was widely seen as a prelude to the sale of the mobile business to reduce the company's huge debts. But such a sale, most probably to a foreign buyer, would have been unacceptable to the left-wing parties in the ruling coalition, especially as two of Italy's three mobile operators were already foreign-owned.

Mr Tronchetti Provera claimed that he had told Romano Prodi, Italy's prime minister, about his plans. Mr Prodi said he had had no advance warning. The prime minister's office published its minutes of two meetings between Mr Prodi and Mr Tronchetti Provera in which there was no mention of splitting TI (although the minutes contained details of Mr Tronchetti Provera's plans for broadband TV for TI of which the market had not previously been aware).

For his part, Mr Tronchetti Provera leaked a confidential paper that he had received from Mr Prodi's closest economic adviser. The paper floated the idea of selling TI's fixed-line network to a state-owned bank and also strongly suggested that Mr Prodi's office knew about Mr Tronchetti Provera's plans. Clearly one or the other of the two men was not telling the whole truth. Mr Tronchetti Provera resigned, having persuaded Guido Rossi, a veteran Italian business lawyer and the chairman of TI at the time of its privatisation, to return to the helm. This was seen as a move to stop the government from considering renationalisation. If so, it seems to have worked.

As for Mr Tronchetti Provera himself, he and his family still control Pirelli through a chain of nested stakes that give him 25.4% of the voting rights—even though he holds less than 8% of Pirelli's equity. Even after his disastrous diversification into TI, friendships and pacts with other shareholders keep him in his job. That's Italy.

Feb 8th 2007 From The Economist print edition

2. Using the information you gained from the article above, identify the national peculiarities of doing business in Italy (see two lessons about doing business in Italy).

3. Find examples to illustrate the peculiarities of doing business in other European countries, such as France, Germany, Spain, Scandinavian countries, etc.

Compare the results of your research.

Case Study 3

1. a) Read the following article and then explain what the author implies by "shareholder activism";

b) say if there is any difference between shareholder activism in America and in France.

Business in France