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The main reason why the internationalization thrust of the late 980s and early 990s failed was the recession in Europe and Japan that hit the new subsidiaries’ sales in 99. The corporate executives, focused mainly on Cleveland, paid little attention to the problem. They thought the modified versions of the incentive system would help most plants abroad achieve rapid productivity growth similar to Cleveland’s and did not adjust to the local situation. The new plants in Europe were dragging the whole corporation down. The reasons for the issues faced by the company were: the focus on the quality of the acquisition target’s manufacturing facilities, and the high cost of fragmented production. Many plants competed with each other. In addition to this, Lincoln’s corporate headquarters contained no managers with substantial international experience. As a result Willis, who became CEO after Irrgang died in 986, retained the existing managers of most of the acquired companies to take advantage of their local knowledge but directed to implement Lincoln’s incentive and manufacturing systems. He sent out US managers who knew the system in Cleveland to help them. However, beyond this corporate headquarters largely left the new subsidiaries to manage on their own. Moreover, most of Lincoln’s acquisitions were unionized, and each relationship between management and labor historically had been less cordial than at Lincoln. Many of the European managers and workers were philosophically opposed to piecework pay and seemed to value vacation time more highly than extra income from bonuses. Regulations presented additional obstacles: in Brazil, any bonus paid for 2 consecutive years became a legal entitlement and in Germany piecew

ork was illegal.
Tony Massaro, hired in April 993, was a former worldwide group president at Westinghouse Electric, as a consultant. Later in August, he became the director of international operations. In cooperation with Jay Elliott Massaro quickly identified several causes of the poor financial performance on the European market such as several European companies having small market shares and weak sales organizations, high cost of fragmented production, overcapacity, and competition between plants. Massaro and Elliot had to restructure international operations to achieve profitability. Some subsidiaries had to be closed, the remaining ones had to go through the rationalization of the product lines and improvement of the sales force. In March 996, Massaro became President and CEO of the Lincoln Electric company he looked to expand the company’s presence abroad. In 995 Lincoln began extending its sales and distribution network in Latin America and Asia, the next step was to build manufacturing capacity in these markets. He created a new for the company’s international operations and named a president for each of five regions: North America (including the USA and Canada), Europe, Russia/Africa/Middle East, Latin America, and Asia (including Australia). Massaro was more flexible than his predecessors about the workers abroad compensation system. He realized that the incentive system was an essential part source of the success in the USA, but was not sure that it was reasonable everywhere. He gave his team of international managers a chance to employ only some of the elements of the system that they judged suitable for their countries. Thus, Tony Massaro’s leadership turned out to be more productive for the company.