“To be honest, there’s not much hope. As political paralysis grips Berlin, the energy crisis has been the latest blow to German manufacturers. Bloomberg sees an early end. Germany will soon lose its status as an industrial power, writes in his Saturday article. Industrial production is already on fire and everyone is running. It is so symbolic that a family business with a 125-year tradition, manufacturer of the popular German mid-range appliances Miele, he announced this week layoffs and the move of the entire production of washing machines to Poland. According to co-owner Markus Miele, the conditions for doing business in the Federal Republic are already unbearable and the company must adapt to it. Almost 70 percent of companies are leaving the country or moving production abroad. The Federal Republic suffers from the highest capital outflow of all OECD countries, literally “drying up.”
Miele benefited from strong demand for home appliances during the coronavirus pandemic. In 2022, sales will grow by 12.2 percent to 5.43 billion euros, which is more than at any time in the company’s history. Data for 2023 is not yet available. But Miele talks about a worldwide declining business. The company was particularly affected by the economic consequences of the war in Ukraine. The premium segment is particularly affected. An early market recovery is not in sight. But that is not all.
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“What we are currently experiencing is not a temporary downturn in the economy, but rather a permanent change in the framework conditions that are relevant to us and to which we must adapt,” management said in an internal report to employees. From 2027, all household washing machines will assembled in the Polish factory in Ksawerów Miele had already moved part of the production to Poland earlier.
Markus Miele in an interview with the economic daily Handelsblatt he said, that Germany has always been a country with high wages – but now the costs of energy, taxes and bureaucracy are also the highest. He gives urgent advice to politicians: the price of electricity “should drop significantly for everyone. The state would have to reduce high taxes for this”. But it is also necessary to reduce bureaucracy here. “…There are many regulations that make business difficult and sometimes even against it. This limits our ability to innovate more and more,” said the owner.
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The Miele case is symbolic of German deindustrialization. The country has not experienced anything like this since the beginning of industrialization itself, when the Miele brand was also created at the end of the 19th century. “Industrial production has been ignited by flames and there is a risk of fire,” warn industrial associations. For example, the pride of Germany, the chemical industry reduced production by 23 percent in two years. In one of the many angry letters currently being sent to Chancellor Olaf Scholz, Germany’s four leading business associations (DIHK, BDA, BDI and ZDH) sounded the alarm last week. He claims that frustration and uncertainty are growing in many companies and the relocation of industrial production abroad is increasing.
BASF, Bosch, Volkswagen, Bayer, Continental – the best brands in German industry one after the other they announce mass layoffs. Just a few days ago, automotive technology systems supplier ZF Friedrichshafen announced that up to 12,000 jobs could potentially be lost. “We urgently appeal to you and the entire federal government to take action now,” the letter to the chancellor reads.
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According to a survey by auditing firm Deloitte and the Federation of German Industry (BDI), 67 percent of companies are currently moving production abroad, especially in the key sectors of engineering, industrial goods, chemicals and automobiles.
Several economic analysts are also warning against the deindustrialization of Germany, as the policy continues to worsen conditions in the country. “The latest data on the development of industrial production in Germany worries me,” says Jens Südekum, professor of international economics at the Heinrich Heine University in Düsseldorf. The German Economic Institute (IW) has calculated that roughly $132 billion more direct investment will flow out of Germany in 2022 than was invested in the Federal Republic over the same period. It is not just the highest net capital outflows ever recorded in Germany. Germany suffers the highest capital outflow of any OECD country. No improvement is expected for 2023 and 2024. “Germany is literally drying up,” analysts say quietly.
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But the American agency Bloomberg he sees the situation in the country even more pessimistically. Berlin is hit by political paralysis and Germany will soon lose its status as an industrial power. Analysts believe that competition from the US, the energy crisis and China’s declining interest in German goods led to this.
The performance of Europe’s largest economy has been on a downward trend since 2017, and this decline is accelerating as competitiveness erodes. “To be honest, there’s not much hope,” said Stefan Klebert, CEO of GEA Group AG, a supplier of manufacturing machinery with roots dating back to the late 19th century. “I’m not really sure we can stop this trend. Many things would have to change very quickly,” he said.
The foundations of the German industrial machine are falling like dominoes. The US is moving away from Europe and trying to compete with its transatlantic allies in climate investment. China is becoming a bigger rival and is no longer a voracious buyer of German goods. The final blow to some heavy industry producers was the end of huge volumes of cheap natural gas from Russia.
2024-02-11 10:59:00
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