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December 2, 2010
The United States' economy has nowhere to go but up. At least that's what many German companies are betting on.
A survey released this week by the German American Chamber of Commerce in New York shows 91 percent of German companies expect the decline of the US economy is over. What's more, 22 percent foresee significant growth.
Hans Grandin, president of machine constructor Komet USA, is amongst the optimists. Most of the 190 mid-sized companies surveyed make their money from industrial production – a sector that's recovered more quickly than the consumer goods branch.
But Grandin says he expects consumer goods to take off in the next two years as people start making the purchases they delayed during the recession. A wave of new car sales is likely, which could "contribute to the need for new production methods," he told Deutsche Welle.
New technologies like highly efficient motors are likely to be popular. It could therefore be a time in which German companies are perfectly suited to meet rising demand thanks to their technological capabilities and skilled labor.
New hires in 2010
Komet USA started in 1985 as a three-person outfit and grew to a size of 200 employees. In 2008 and 2009, the recession brought a slump in turnover to the industrial player, which operates in both America and Europe.
Management initially responded by laying off 22 percent of its workforce. The company also cut employees' hours – a labor practice which is common in Germany, and is underpinned by government subsidies there. Not so in the United States, where Komet USA shed an additional 5 percent of its jobs in 2009.
Business has picked up since then, but economic recovery doesn't move in lockstep with a decrease in unemployment figures. Improved processes and automation mean Komet USA is now able to lift its production volumes to 2008 levels with just 5 to 10 percent more workers.
For Rolf Biekert, head of the US subsidiary of Trumpf, anchoring a business in the United States is a key to success. Trumpf makes high-tech machines tools and launched its American unit in 1969. The initially small operation grew to 700 employees, and is now North America's largest producer of sheet metal processing machinery.
"One needs to have patience, one needs a good product, and one needs a good concept to approach the market with," he told Deutsche Welle.
Biekert says it's vital for companies to present themselves as "long-term partners and not as short-term business ideas" and offer complete service for the machines they sell. Trumpf employs 150 people in customer service in the US and maintains a development department capable of putting together individual solutions for customers.
No worries
Neither Grandin nor Biekert are worried about the "Buy American Act." Companies producing in the United States and creating jobs there are unlikely to face problems, they said. However a clause giving US companies priority in being awarded some contracts was strengthened during the last economic stimulus.
Bernhard Welschke, who represents German industry in the United States, spoke out against the provision at Tuesday's press conference.
"Ultimately 'Buy American' is not good for the market," Welschke said. He pointed out that the stimulus package will eventually expire, and that its provisions are therefore not a dominant concern among German firms.
German companies account for more than 650,000 jobs in the United States. The value of their US investments was estimated at 218 billion dollars at the end of 2009. Only British and Japanese companies create more jobs, Welschke said.
While the "Buy American Act" bothers German managers little, they are concerned about the ability to find qualified workers, changes in currency exchange rates and shortages of raw materials. Rare earth elements, for instance, are much needed in the renewable energy sector, where German companies are traditionally strong.
Renewable energy as an economic engine
The fact that sales figures for German businesses in the US have risen some 66 percent in 2010 can primarily be attributed to the manufacturing and renewable energy sectors.
But Hans Grandin says German firms in the US aren't just betting on stimulus money. Instead, they're planning to profit from the country's secure business environment with its clear laws and regulations. In order to make the most of the opportunity, Komet USA recently used its German ties to secure credit on better terms through its parent company.
With economic prognoses improving on both sides of the Atlantic, German companies operating in the United States are beginning to see things in a more positive light.
When the German American Chamber of Commerce did its first such survey in 2009, 29 percent of companies said they believed the future of the US economy to be uncertain, and 8 percent said they expected it to shrink.
This year the number of pessimists has been halved to 4 percent.
Author: Christina Bergmann (gps)
Editor: Sam Edmonds