Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from Hamzah Mazari – Credit Suisse.
Hamzah Mazari – Credit Suisse
Just a couple questions, could you comment on your European business and the charge taken there? Is that just a slowdown in the economy that's going to persist for awhile in your projections or are there any structural issues confronting you in that business, just wanted to get some thoughts on what's changed there since last quarter?
Dennis J. Letham
Yes, just to kind of reiterate something we've said I think many times in the past, one of our challenges in Europe is we have a cost structure that spans 22 countries. We effectively have an enterprise tabling sales presence in all of those countries. Our electrical, wiring, cable business is much more limited and only covers a small subset of that, as does our OEM supply business. One of the strategic initiatives we've had is to expand both the wire and cable and OEM supply businesses so that we get better leveraging of that country level infrastructure cost.
What's happened over the course of really probably about the last three quarters has been the continued decline in overall volumes in Europe, means that we're getting even less leverage out of that cost structure.
And as we have continued to watch broad-based economic forecasts for Europe for the next couple of years be reined in on a number of different sources, that in turn causes us to reassess what we believe we'll be able to do in the next couple of years.
And when you roll that together and you come up with the required discounted cash flow models under the accounting rules, compare that to the invested value in the business, you end up with the net result of the $100 million goodwill write-off in the quarter. So our strategies I think are still the right strategies we need to drive sales growth on all three fronts. We need to get better leveraging of that cost structure and but in the short run we've kind of got one arm tied behind our back in terms of what the macroeconomic conditions are like.
Robert Eck
Yes, if I can just pick up on Dennis's comment. Don't read the goodwill write-off as a lack of commitment on our part to Europe as a market we want to be focused on. We think it has great potential for us. Our penetration as we've said many times in continental Europe across all three end markets is low, and so as we look at it strategically we think it's a place we should be, we think it's place with future potential for us. But again if you look at the economic forecasts that are coming out it's kind of hard to get your brain around an aggressive growth number in the near term that has a lot of impact on the cash flow model Dennis described.
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