How Germany's economic success remains robust

How Germany's economic success remains robust
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There is more to the economic success of Germany than meets the eye. In spite of some ingrained problems, Germany coped with the financial crisis better than any European country, and not only because customers outside Europe were still massively buying its exports.

Our special envoy Christoph Debets said: “When you search for the reasons for Germany’s economic strength, you might think of the big names of her industrial history like Bayer or Porsche, Thyssen-Krupp or Siemens; you might think of regions like the Ruhr, Hamburg, Rhein-Main (Frankfurt) or Stuttgart. But we found the answers somewhere else.”

The city of Fulda – population say 100,000 – lies in the heart of Germany, north-east of Frankfurt and not near the country’s outside borders. It is not a control centre by any stretch. But it harbours economic champions – the same as many German towns – small or medium-sized companies (SMEs) that are world leaders in what they do. HUBTEX had its roots in the textile industry, but when those customers left Germany it adapted and thrived.

Its managing director Ralf Jestadt described how: “We went with the flow. We said, ‘our vehicles can be modified so that they can be used in other industries’. These are narrow-aisle sideloaders with a four-way carriage. We developed ones for the steel industry, that can transport tubes or aluminium-profiles, or side-loaders for the lumber industry, to transport large wooden panels.”

HUBTEX’s revenue in 2012 was 92 million euros. Two thirds of the material-handling equipment its workforce of 480 people make is for export. They don’t compete with the big multinational forklift producers, such as Toyota. They custom-build in numbers the giants find too small, for a range of clients, including aircraft and furniture makers. Michael Grömling, a senior economist at the Cologne Institute of Economic Research tells us SMEs like HUBTEX are the backbone of Germany’s economy.

Grömling explained these companies are commonly found away from the big metropolitan regions or economic centres:
“If you are a very successful company in a rather remote region, then your company is a beacon for that region. Many highly-talented people regard these companies as good employers, and that is why, very often, good companies in rather remote regions have the advantage – they attract good employees.”

Highly-skilled workers are key to part of Germany’s economic success. And part of that success is how they become highly-skilled: theory is taught in vocational schools; practice comes through apprenticeship. Companies offer training.

Frank Geiling, an electrical engineering trainer, said: “It used to be that we, the companies, chose the people to whom apprenticeships were offered. But nowadays, its rather as if they choose a company. That’s why we offer a lot of training – to be competitive, to attract apprentices and train really good people for our company.”

Both company and employees benefit. This symbiosis of colleges and companies is a major advantage for Germany’s international competitiveness. Some companies even go further. HUBTEX gives employees time off to attend university. We spoke with one who is both an industrial mechanic and an engineering student at Mittelhessen University of Applied Sciences in Gießen, Michael Schanz.

The industrial mechanic and student said: “You get to know some aspects at university but you won’t have a clue what they are useful for later in life, so you’ll wonder why you’re studying that. Here, you can actually test the knowledge and see its practical application.”

A country’s economic success also depends on good transport. But experts say Germany’s motorways and bridges are crumbling, and need seven billion euros just to fix them up – and more for desperately-needed new infrastructure. Some say Germany’s recent past saw spending cut on the wrong things.

Grömling said: “Politicians were not brave enough to look at some social spending. Public spending drifted away from investment to consumption. There is a price to pay for that now. Capital investment has fallen far behind what’s needed. That is partly due to special factors; in the 1990s we had to rebuild eastern Germany at a high cost. With that, hand in hand, came cuts in capital investment in western Germany.”

A motorway south of Fulda – the A66 – is one of Germany’s largest infrastructure projects – price tag: 214 million euros. They had to shift the railway line, the existing road and a creek. They’d like four sets of tracks here but there isn’t even the money to plan that, let alone do it.

Fulda has one of the lowest unemployment rates in Germany: 3.7 percent. Although that is good, cash can be in short supply. This pushes for creative solutions to get things done – both there and in places like Fulda.

Our envoy Debets said: “The local utility company literally had to pay a high price for an ambitious venture to replace nuclear energy with renewable alternatives. Its profits deteriorated considerably. Germany’s cities don’t have enough money for their tasks. For example, to redevelop its main square, Fulda relied on a public-private partnership with the Dutch company – Q-park, running the underground carpark – and the Karstadt department store. One of the big names in Germany’s economic history, Karstadt is another company in economic difficulty – it filed for creditor protection a few years ago. And yet Karstadt occupies a building designed by one of post-war Germany’s most famous architects (Sep Ruf). As is true of many aspects of Germany’s economy, appearances are deceptive.”

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