European financial crisis felt across the Atlantic

The European Union's economic woes are reverberating on this side of the Atlantic, where multinational companies are keeping a close eye on the crisis and adjusting their communications spend and messaging.

The European Union's economic woes are reverberating on this side of the Atlantic, where multinational companies are keeping a close eye on the crisis and adjusting their communications spend and messaging.

“It is a new crisis and one we have to figure out how to message around,” explains David Reuter, VP of corporate communications at Nissan Americas. “You can't stick your head in the sand and focus solely on your market. You have to be prepared in the US to answer questions when a market as large as Europe is struggling.”

Nissan Americas has modified its messaging to investors, including its global sales and market share projections and its communications with the financial and business press. It is explaining that while one market may be struggling, developing countries may be helping to make up the difference.

“We have to help media, investors, and other constituencies understand the balance we have in terms of our operations globally,” Reuter says. “While one market may not be pulling its weight, we need to help them understand markets like Brazil and Mexico are [helping to compensate].”

Automotive is not the only sector hard hit by the crisis in Europe. US-based companies such as Apple, General Motors, and McDonald's have all attributed disappointing performances in their most recent sales quarters to weak consumer spending in Europe.

The European Union's economy, which includes 27 countries, reportedly shrank 0.2% in the second quarter of this year, compared with the first quarter. Its first-quarter growth was flat. Many European countries, which are among the leading importers of US goods, are also dealing with high debt levels and record unemployment.

MSLGroup CEO Olivier Fleurot says a recession, defined as two consecutive quarters of negative growth, could further slow the economic recovery in the US.

“Europe is a huge market for the US, Asia - everywhere,” he says. “A recession would affect everyone.”

Fleurot doesn't think multinationals will necessarily reduce their PR spend in the US as a result of a possible double-dip recession in Europe. But he suspects they will change how they spend that money.

“What we will see less of, I think, is product-launch PR,” he says. “Where I see opportunity for PR agencies is in helping companies manage their reputations and helping them to be more transparent with investors and financial markets.”

Fleurot contends that is especially the case for the US-based financial services sector, “which has truly become a global industry.” 

“For this industry, in particular, I don't think it matters if a recession starts here or there,” he explains, pointing to the Libor interest rate scandal to illustrate how intertwined the banking industry in the US is with Europe.

In July, London-based Barclays made a $450 million settlement with US and UK authorities for trying to manipulate the London interback offered rate, or Libor. Several US-based financial institutions, including JPMorgan Chase & Co. and Citigroup, are under investigation for similar allegations.

Ken Makovsky, president of Makovsky + Company, thinks the European economy is also one reason why companies remain conservative with their communications budgets. Many clients seem more cautious than they were a year ago based on prospective budgets for next year.

“Clients have not been spending for a number of reasons, and I think that is a combination of the Euro situation, uncertainty around the Affordable Care Act, the current state of US economy, as well as the fact we're in an election year,” he says. “The Euro dimension is just one part of it.”

However, some agency leaders are less worried about what is happening in Europe and the impact it will have on their US business.

“I don't see what is going on in Europe bleeding into what we're doing here and affecting US work,” says Rob Flaherty, president and CEO of Ketchum. The firm's operation in Europe, Ketchum Pleon, has seen strong growth in northern Europe, particularly Germany and the Netherlands, as well as in the UK. Yet countries like Spain and Italy are not faring as well, Flaherty explains.

“I think what we're looking at is just a slow recovery,” he says.

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