Germany Inc.

A Plus

According to the current German Bundesbank balance of payments statistics, German enterprises have, over the past year, invested 63.5 billion Euros abroad. Direct investments went, above all, to the USA, to Great Britain and to the countries of Eastern and Southeastern Europe as well as to Russia. Judging by their direct investments abroad, German enterprises, hold third-place on the world scale (behind the USA and Great Britain). The balance sheet shows a plus of 29,1 billion Euros for German direct investments because foreign enterprises have been able to place less than half of their capital in Germany. At the same time, many German enterprises are reinvesting the profits made abroad. According to the Bundesbank's analysis, this portends an excellent profit situation for foreign based German subsidiaries. The Bundesbank assumes, that the investment of capital abroad is primarily aimed at tapping new markets. Above all, credit institutes, mechanical engineering, textiles and clothing businesses as well as the chemical industry have extended their presence abroad. The strength of Germany's international standing is also shown by the export balance sheet. Last year, German enterprises exported commodities at a value of 894 billion Euros, nearly 14 percent more than the preceding year.[1]

Top

A study compiled by the Institute for Economic Research (ifo), commissioned by the Ministry of Economics, provides further information concerning the standing of German industry. The comparative analysis shows that German enterprises rank higher in criteria of competitive capacity than their European competitors.[2] Germany is among the worlds most prominent research and development locations and disposes of a highly developed industrial and intellectual infrastructure, for example in vehicle and mechanical engineering and in the chemical industry. German hegemony over the largest industrial enterprises is indisputable. France follows at a distant second place. Also among global scale enterprises, Germany ranks third, following the USA and Japan but still ahead of South Korea and France.

Actively Shaping

Contrary to the widespread public impression that foreign companies and investors are taking over, or at least gaining control of, German enterprises, particularly the major companies, the economic researchers at ifo conclude that on the international level "there are no indications that German large enterprises are in an inferior position". On the contrary. Since 2002, the number of German takeovers abroad surpasses the number of foreign takeovers in Germany. This is particularly true for sectors comprising the nucleus of German industry: automobile, chemical, energy technology, mechanical engineering and metal processing industries. Ifo deduces that German worldwide economic expansion is proceeding satisfactorily: "German industrial enterprises are successfully participating in the globalization and actively helping to shape the resulting consolidation process. Only the situation of the financial investors is rated as less than satisfactory by the research institute. In this domain there is nothing even close to a symmetry between German and foreign takeovers, since private equity companies and hedge funds emanate mainly from Anglo-Saxon nations.

Risky

The study urges that measures of national defense be taken. In the past, the ownership structures of German stock companies were influenced by a meshwork of intersecting holdings, whose nucleus was usually a German finance institution. This enormously reduced the possibility of a takeover by foreign investors. What had been known as the "Germany Inc." network of companies has, over the past few years, thinned out. Today large companies frequently register more than 80 percent of their shares being held by diverse shareholders and therefore are no longer in a position to ward off a inimical takeover. The economic researchers consider it risky that the proportion of foreign shareholders in German companies has risen from approx. 8 percent in 1995 to nearly 17 percent in 2004.

Bluntness

The (majority state financed) ifo Institute therefore demands that the federal government "actively moderates or intervenes" as soon as state supported foreign enterprises attempt to take over German firms. Government intervention is also necessary should German attempts at foreign acquisitions be prevented or if the German side is, generally, confronted with adverse prevailing circumstances. The German government reacted immediately, having Joachim Wuermeling, State Secretary in the Ministry of Economics, declare: "government policy is duty bound (...) to take countermeasures when other states or foreign firms violate the rules. This policy will, in all bluntness, be pursued also in the future."[3]

Germany Struggles

The German economy sees a need for action in the procurement of cut-rate raw materials. The prices are much too high, it was said at the "raw materials summit" in Berlin, concluding a planning phase covering several years.[4] The enterprises' guaranteed supply is after all an "existential concern" of the German location. Jürgen Thumann, President of the Federation of German Industries (BDI), demanded that politics and economics enhance their close, strategic cooperation.[5] Economics Minister, Michael Glos, agrees. An "inter-ministerial committee 'Safeguarding Raw Materials'" will be formed with the participation of economic associations and enterprises, to solve, quickly and without bureaucracy, the problems of "safeguarding a sustained supply of raw materials" for the raw material processing industries.[6] This cooperation amounts to official supply guarantees for private resource businesses and is an indication of the growing competition between western industrial nations. Access to metal resources such as copper, zinc, nickel and wolfram have been the cause of major international conflicts. The chancellor insists that German enterprises must be more strongly engaged. The economic press commented: "Germany, in the struggle for raw materials."[7]

Please read also Energie für Deutschland (I), Economic Hegemony, Business meets diplomats, Superstar, Kraftvolle Impulse and Grauzonen.

[1] Unternehmen investieren wieder mehr im Ausland; Frankfurter Allgemeine Zeitung 27.03.2007
[2] Michael Reinhard und Hans Schedl: "Positionierung der europäischen und deutschen Industrie im globalen Konsolidierungsprozess, insbesondere die Rolle der Systemanbieter". Zusammenfassung, Gutachten des ifo Instituts für Wirtschaftsforschung, München 2006; www.cesifo-group.de
[3] Wuermeling zur Studie "Positionierung der europäischen und deutschen Industrie im globalen Konsolidierungsprozess, insbesondere die Rolle der Systemanbieter"; www.bmwi.de 05.03.2007
[4] Industrie fordert sichere Versorgung mit Rohstoffen; Spiegel online 20.03.2007
[5] see also Rohstoffkongress and Krieg um Rohstoffe
[6] BMWi und BDI erarbeiten Rohstoffstrategie für Deutschland; www.bmwi.de 20.03.2007
[7] Deutschland kämpft um Rohstoffe; Handelsblatt 21.03.2007. See also Hunger