German investment

Last year, 43 percent of German companies in the United States cut staff due to the ongoing financial crisis. This year, however, German companies are “cautiously optimistic,” according to Mark Tomkins, vice president and director of consulting services at the German American Chamber of Commerce in Chicago.

“At the chamber, we see a number of companies, more than I've seen in the last four years, actively investing in setting up operations in the United States,” Tomkins told Deutsche Welle.

According to the German American Business Outlook, a survey of 1,600 German subsidiary companies in the United States showed that nearly 75 percent have a positive outlook for 2010 and expect moderate growth. The survey, conducted by the German American Chamber, the Representative of German Industry & Trade and Roland Berger Strategy Consultants, also found that German firms in the US expect to maintain marketing funding for the year, indicating the firms believe they are well positioned to perform in the coming year. In 2009, 20 percent of German companies in the US cut marketing spending.

Last year was the first time the survey was conducted. But German companies with American operations for the most part suffered the same dismal fate as their US counterparts. BMW revenues fell 4.7 percent to 50.7 billion euros in 2009, in part because of decreased demand in America. Other German companies reported similar losses.

The outlook in 2010 and beyond is much more positive. BMW executives have said that they expect to sell more cars in the coming years, as have officials from Volkswagen. Last month, Volkswagen's US chief, Stephan Jacoby, said that his firm is likely to sell 450,000 to 500,000 cars in the United States in 2012 and 2013, compared to 213,000 cars last year.

“We are a little bit more optimistic now than we were a few months ago,” he said.

Not just German cars

Tomkins said that the reputation that Germany built through its car companies has helped other German industries to gain a foothold in the US market and begin to expand.

“If you talk to people in industry and major players, Germany's reputation for quality is excellent, as is [its reputation for] deliverability,” Tomkins said.

This reputation has helped German companies to expand in the growing US renewable energy and energy efficiency markets. Germany is far ahead of the United States in these technologies, and green initiatives by the US government have allowed German alternative energy firms like E.ON Climate and Renewables, based in Dusseldorf, to become major players in the American market.

Tomkins said US investments in German green technology are mutually beneficial. While German firms enjoy increased revenues, the US economy gains manufacturing jobs created by the difficulties involved in transporting the bulky equipment necessary to make alternative energy work.

“The supply chains are becoming local,” he said. “Renewable companies, because of the transportation and logistics of equipment, have to create local jobs.”

“Our experience is that as German companies expand production in the US, employment goes up in Germany” because of increased profits, Tomkins added. “It leads to expansion [of jobs], not relocation. It really benefits both countries.”

A double-edged sword

Tomkins said the weakness of the euro compared to the dollar is an advantage for German exporters, who can charge less for goods being sent to the United States. However, as German know-how becomes more important than German goods, the strength of the euro is losing importance.

“German firms don't compete on price but on knowledge,” Tomkins said. “The price of German goods is a factor [in how German companies perform] but no longer is it the only factor.”

Author: David Francis
Editor: Sam Edmonds