Battered by currency swings, European firms unpick global production model

A dramatic fall in the euro has created an opportunity for European manufacturers to enjoy cheap production costs at the bases from which they can supply world markets. Last month it announced plans to build a $500 million plant in the United States, looking past the dollar's current strength to build in a longer-term protection. "We're eliminating short-term currency fluctuations, which are never good for long-term commitment to customers in different regions, and we're creating a natural hedge," explained Volvo Chief Executive Hakan Samuelsson. "Natural hedges" occur when a business's structure protects it from exchange rate volatility, such as when suppliers, factories and customers operate in the same currency.

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