BERLIN—German efficiency has taken a hit this year as many of the country’s most recognizable corporate names wrestle with a slowing local economy, questionable business decisions and trouble shifting to a digital world.
Those setbacks add to a worrisome mix that includes Bayer AG ’s legal trouble with its acquisition of Monsanto, the maker of weedkiller Roundup, and the challenge to German auto makers from a depressed global car market and continued fallout from the diesel-emissions scandal. Meanwhile, German blue chips—from software makerSAP SE to industrial giant Thyssenkrupp AG TKAMY 0.77% —have announced tens of thousands of job cuts combined this year.
Roughly one in three large public companies in Germany’s DAX index have reported profit warnings, job cuts or restructurings, or are dealing with formidable legal disputes or investigations from authorities. Firms based here are slipping from the ranks of the world’s most-valuable companies, leading consulting firm Ernst & Young to conclude this month that “German companies are losing their importance.”
While specific challenges loom large for some companies, broad trends are also working against them. Analysts cite the effects of global trade disputes on Germany’s export-oriented economy, the increased pressure to digitize and a degree of complacency after years of robust growth.
“There is a crisis at the moment. The German economy was so good for such a long time, people thought we’d go on and go on and go on,” said Markus Schön, managing director of DVAM Asset Management in Detmold, Germany.
The nation’s economy grew just 0.7% in the 12 months through March, far behind others in the eurozone, and Berlin earlier this year slashed its growth forecast for 2019 gross domestic product to 0.5% from 1.8%. “German companies were not prepared for this situation,” Mr. Schön said.
German auto makers, in particular, have been blindsided. The collapse in demand for diesel vehicles because of emissions curbs and a global slowdown in car sales have hit them at a time when they are spending heavily on electric and autonomous vehicle development.
BMW as well as Mercedes-Benz maker Daimler have lowered their financial guidance this year, while Volkswagen AG announced it would cut 7,000 jobs. In turn, the difficulties of large car makers have filtered down through a network of smaller suppliers and service providers in the country.
Carsten Spohr, CEO of Lufthansa. In a recent effort to reassure investors, he reasserted the company’s commitment to being dependable and efficient. ‘In the end, we’re boring. We’re German.’ Photo: Henning Kaiser/Zuma Press
Volkswagen was at the center of an emissions-cheating scandal that surfaced in 2015, and it is still feeling the effects. In March, the U.S. Securities and Exchange Commission sued the auto maker and former Chief Executive Martin Winterkorn, alleging they defrauded U.S. investors. And a month later, German prosecutors indicted Mr. Winterkorn and four others, accusing them of fraud.
Volkswagen called the SEC complaint “legally and factually flawed” and said it would contest the charges. A lawyer for Mr. Winterkorn declined to comment at the time of the charges and didn’t respond to a request for comment Friday.
Other German companies say their problems are closer to home. Last month, days after Deutsche Lufthansa AG said aggressive competition from European low-cost carriers hurt its profit, Chief Executive Carsten Spohr acknowledged that the airline had made missteps navigating the local short-haul market, including efforts to capitalize on the 2017 bankruptcy of rival Air Berlin.
“Did we underestimate the complexity? We did,” he said. In an effort to reassure investors, Mr. Spohr affirmed the company’s commitment to being dependable and efficient. “In the end, we’re boring. We’re German.”
Another contributor to German corporate troubles is the country’s legally mandated board structure—which flanks the management board with a powerful supervisory board, half of whose members represent workers. While such checks and balances have helped maintain labor peace at large companies, they can also inhibit quick decision-making and discourage risk-taking.
“It can be an advantage to have a strong CEO, who can react quickly in times of crisis,” said Christian Lawrence, a partner at consulting firm Brunswick Group in Munich. “Whereas if you have a German system, the CEO is one of many making decisions and there must be consensus for things to be done.”
Hubert Barth, chief executive of Ernst & Young Germany, said some German blue chips aren’t keeping pace with the transformation of the economy toward “more digitized business models.”
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Marc
4 years ago
“Sara Germano”, the name matches the article. However, it is naive to believe
that there is somith like a “German” industry. No longer in the age of multinati-
onal corporations. How many branches with how many employees do these
companies have abroad/overseas, how much foreign share capital do they
have? The only thing that is in German hands is the so-called Mittelstand. https://en.wikipedia.org/wiki/Mittelstand
That’s the reason why the Mittelstand is shrinking, exploited and ensla-
ved. Because it is the backbone of Germany. While the army of the de-
stitute grows below, and large corporations are freed from tax burdens.
I can only see Germany going out the back door as company after company suffer, a snowballing effect. All those companies that also supply the big corporations will suffer.
Good post, knightsstrength; perhaps there is a smattering ot Karma in there somewhere, too.
Liatris Spicata
4 years ago
As tempting as it may be to think of the Deutsche Bank crisis as some sort of analog of the Lehman Brothers collapse that so rattled Wall Street in 2008, I suspect European companies have made provisions for exactly this scenario. BNP is coordinating with Deutche Bank to take over part of their operations:
its worse than that, the German bonds have a negative yield
The 10-year Bund yields touched a fresh record low of -0.219% on Monday. Portuguese and Spanish bonds also touched new all-time lows, while across the Atlantic US Treasury yields fell to their lowest point since 2017.
The Euro-peons are owned by the Globalist EU banksters…
“the synogogue of Satan” ie= “the moneychangers”
stated by Christ Himself; for
“the root of all evil is the love of money” + “you can’t serve both God + money”
*”They” own the worlds economies.
“Choose you this day whom you will serve” – God
“You got to serve somebody” – Dillon
“America is freedoms last stand on Earth…WE are only one generation from a thousand years of darkness” – Reagan
Art~Spectrum
4 years ago
“There is a crisis at the moment. The German economy was so good for such a long time, people thought we’d go on and go on and go on,” — Markus Schön
From different personages, financial or economic experts, business or government leaders, over diverse nations, how many times have we read that comment variation. Things were so good, graph-lines had been soaring, we thought it would “go on and go on and go on” — then correcting jolt, traumatic bust, or bottom drops out! Even Great Recession, or Great Depression. Generations through, human nature never changes. American, German, Chinese, etc., we tend to leap into the same crises and disasters. History’s lessons too oft ignored, or discarded. So the past is relived to our sorrow — then awaken to reemerged danger.
Lynn D
4 years ago
And on top of all their financial woes, they have an ever increasing welfare bill to foot..Keep importing welfare dependent people, on top of a troubled financial system…..Germans will sulk in their lunch pails and look for a ‘new fuhrer”
Yes, and in point of fact, this one singular component is pivotal. The EU, and in particular Germany has provided the just under 6 million welfare bums with an automatically topped up “money card”. These are topped up automatically with 37 Euros every day. Just do the math on that: Say 5,500,000 welfare lepers X 37 Euros = 203,500,000 Euros each and every day. So, the Grand Total is: 74,277,500,000.00 Euros each year. That does not include their free housing, medical, dental, heat, lights etc. It only covers their food and incidental daily expenses. It is F-ING mind boggling.
:
We should be so lucky.. Oh no it’s 40 hours plus a week, in a job we aren’t that thrilled about and to find that nearly 40% of the tax each person pays goes to nothing else except keeping these leeches in money so they don’t riot..
Doesn’t cover the hospital and funeral costs of their victims either.
Roma Mikhasev
4 years ago
enemy inside – Merkel & Co
John Acord
4 years ago
In the USA it is estimated the cost of maintaining an illegal immigrant is $50,000 a year. With 40 million illegals that’s 2 TRILLION dollars a year or about 45% of the federal and state budgets. I would suspect the cost in Germany is much higher given the large subsidies and the fact that most of their immigrants are now legal. If you have 5 million immigrants that’s probably costing the Germany economy 500 BILLION a year and that may be an underestimate. THis leads to higher taxes and other inefficiencies which will drag the German economy down.
Hey John, I just commented on that (above to Lynn D) then I scrolled down and read your comment here. You are right on the money here. So, the Grand Total is: 74,277,500,000.00 Euros each and every year, and growing by the day..
Murielle
4 years ago
I can’t say I’m surprised, but wonder how much of this has to do with the EU and how much has to do with the enormous burden on Germany’s social welfare system, etc., that the huge migration has wrought?
Bonnie Pupowner
4 years ago
Germany used to have strict work rules and high tariffs.
Apprenticeships were common.
Lived there for four years twentysome years ago and don’t remember all of this crime.
We went everywhere on trains with no fear.
) Bill Ford
4 years ago
Germans do not respond to opportunity or market change effectively. Not in their DNA. They perfect they rarely create and they never adjust. They are Germans!
Rivia
4 years ago
This crisis inevitably must climax in abandonment of the US Dollar as the benchmark. Europe WILL divest itself of the IMF and the Federal Reserve. There is literally no other option but to do that in order to preserve their way of life. Russia and China have already started down that path. The Euro will become the new benchmark and those countries that refuse to “sign up” will be completely ostracized. I can’t help but wonder if this is the final 10 Nation combine that is mentioned in the Book of Revelation?
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