PARIS — At Yves Saint Laurent, the storied French design house that manufactures exclusively in Europe, the plunging value of the U.S. dollar has Chief Executive Valerie Hermann thinking about the number of pockets on a skirt and the price of embroidery on a dress.
Hermann is adamant that YSL include in its ready-to-wear offerings cocktail dresses that cost no more than 1,900 euros. "It's a crucial limit," she said.
For The Record
Los Angeles Times Tuesday, November 20, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 37 words Type of Material: Correction
Weak dollar: In Saturday's Section A, a graph accompanying a story about the declining value of the dollar indicated that it was worth 0.49 of a British pound, but the data point was incorrectly placed at 0.475.
Six months ago, that was the equivalent of $2,565. Today, she'd have to sell the same garment for $215 more to make the same profit. But Hermann can't because she is reluctant to pass on the increase to the consumer.
So if Hermann can eliminate a pocket on a garment without sacrificing the integrity of its design, she will.
"I have never been as careful as I am now to look at the entry-level price of a product," she said. "Because I know that currently in the U.S. the market is driven by that, and, to a greater extent, by this currency problem."
The euro's rise and dollar's slide are squeezing European exporters' profits or multiplying their losses, prompting layoffs and plant closings. Companies are not only curbing production of goods headed to U.S. buyers but also rethinking the way they do business.
The euro recently passed the record $1.47 mark, gaining 11.5% since the beginning of the year against the greenback. It closed Friday at $1.46; a dollar bought 0.68 euro.
Most emblematic of the problem has been the impact of the euro-dollar relationship on the aeronautics industry -- and particularly on France's Airbus, whose main rival is U.S.-based Boeing.
With a falling dollar making Boeing's products cheaper outside the U.S. and Airbus' more expensive, Louis Gallois, chief executive of Airbus' parent EADS, recently described the sinking U.S. currency as a "sword of Damocles" hanging over the company's future. He vowed to cut an additional 1 billion euros in operating costs by 2010 or 2011.
This would mean more layoffs at a company that is already purging 10,000 jobs, a decision made when one euro equaled $1.35. "We must react," Gallois told a French radio station last week.
This week, speaking at the Dubai Air Show, Airbus chief Tom Enders further spelled out the problem: "As you know, if the dollar decreases by 10 cents, we are challenged to save another 1 billion euros. Therefore, Airbus is currently undergoing a fundamental turnaround of the company. In a nutshell: A 'new' Airbus is underway."
