Big challenges
BERLIN/PARIS (Own report) - The top companies of the German economy have built up a liquidity reserve of more than 100 billion euros and now prepare new takeover offensives in competing nation states after strengthening their own basis of capital resources. This is the result of a study of German company analysts recently published. The profits have mainly been made in the export business and verify the lasting German dominance in the European Union that goes at the expense of other national economies. An additional study forecasts that the German industrial locations will win considerable competitiveness in the next five years while at the same time the European neighbours - especially Great Britain and Italy - will have to suffer heavy losses. The German self-assessments terminate years of lamentation according to which the national basic conditions hinder the upswing of the production and reduce viable profit margins. Such announcements have been taken at face value not only in Paris, but also in London, and provide tactic signals, given the numbers now available.
Report on cash balance
The survey published in the conservative business paper "Handelsblatt" comes to the conclusion that the big companies listed in Germany are creating a "growing liquidity wave". In the business year 2004 alone, the cash balance of all industrial, commercial and service businesses has increased by about 10 billion to 100 billion euros. The companies have considerable leeway to make good through high pension provisions for employees' company pensions. In the meantime the corresponding amounts have accumulated to a sum of roughly 110 billion euros. Moreover, the cash balance of the big companies continues improving in the present year due to the continuously good business situation.
Change
The number of mergers and takeovers is usually high in the fourth quarter of the year as the persons concerned want to seal their transfers of ownership before the end of the year. That is why increasing German expansionist activities are expected in the remaining months of this year. The "Frankfurter Allgemeine Zeitung" assumes that the bulging funds will put up the "investment pressure" and forecasts a noticeable upswing of mergers and takeovers on the German market - "above all in the form of cross-border transactions". (As there were rather German companies that appeared as buyers the share of foreign buyers in Germany increased continuously). Now the authors of the economic paper hope for a "change to come". The reason is an announced takeover of the American firm Reebok by the German Adidas AG.
Orientation
Further orientation marks are set by the tour group TUI that strives for the entry into the "premier league" (by means of a buyout worth billions in container shipping) just as "Deutsche Post" puts all its eggs in one basket and makes use of its liquid assets for the planned advancement to the world's top position in the logistics trade.
Approach
The fact that other big businesses are still adopting a wait-and-see policy and handling their "strategic strengths" rather hesitantly is being criticized by the German economic analysts. Instead of investing the funds into expansion and growth, many firms bought back their own shares or financed the exclusion worth billions of their pension provisions. Just with the six enterprises Siemens, Eon, VW, Telekom, Daimler-Chrysler and EADS 60bn euros thus lie dead in cash; at Lufthansa and SAP the cash balance reached about 70 per cent of the capital resources by now. The German banks, too, have to put up with criticism because they do not go up resolutely enough to US financial institutions when advisers are sought during mergers and takeovers: after the first nine months of this year the Deutsche Bank alone is ranking among the top ten of the German financial institutions.
Attractive
European Economic and Monetary Union (EMU) and the introduction of the euro have already had a considerable effect in favour of the German economy that could increase its competitive strength. With that, Berlin has further extended its economic dominance in Europe at the expense of other states and this trend will continue. In another German economic magazine it says that the industrial location Germany is more and more attractive for companies. The comparison of national competitive strengths published there comes to the conclusion that investors assess the German development as being exceptionally positive. As an industrial location, Germany comes out on top in Western Europe in the good graces of international managers. Other countries of the EU, however, lose considerable attractiveness, especially Great Britain and Italy.
Even more courageous
Because of the development of the unit labour costs, which are decreasing in Germany while they are rising elsewhere in Europe, the German industrial locations will gain considerably competitiveness in the next five years. By 2010, according to the study, Germany will rise to the "top league" of the European Union. The future government is - independent of the fact who is going to form it - requested to encourage this by all possible means. "But the new government has to be even more courageous than the former one because we face new challenges", explains Ackermann, the boss of the Deutsche Bank.
[1] Deutschlands Konzerne sind gut bei Kasse, Handelsblatt 26.09.2005
[2] Wieder im Spiel; in: Unternehmensbeteiligungen, Verlagsbeilage zur Frankfurter Allgemeinen Zeitung 27.09.2005
[3] Vom Jäger zum Gejagten; in: Unternehmensbeteiligungen, Verlagsbeilage zur Frankfurter Allgemeinen Zeitung 27.09.2005
[4] Adidas setzt zum Angriff auf Weltmarktführer Nike an, dpa 03.08.2005
[5] s. dazu Starke Stellung
[6] s. dazu Vorsorge und Top Ten sowie Bedeutende Größe
[7] Deutschlands Konzerne sind gut bei Kasse, Handelsblatt 26.09.2005 [8] Ausländische Banken dominieren Geschäft mit deutschen Fusionen, Handelsblatt 26.09.2005
[9] see also The winner is: Germany and The strongest Bank and the decline of the Euro
[10] Deutschland kriegt die Kurve, Manager Magazin 28.09.2005
[11] Interview mit Josef Ackermann. "Mit allen Mitteln wieder Wachstum ermöglichen", WirtschaftsWoche 39/2005