German construction companies are having a tough time at home, and after Walter Bau filed for bankruptcy earlier this week more firms are looking to for profits outside of Germany -- where business is booming.
Moving oversees can be profitable for German building businesses
After weeks of searching for a bank that believed in them, Walter Bau, Germany's third-largest construction company, was forced to file for bankruptcy on Feb. 1. The path of insolvency has been well-tread by German builders: Construction giant Holzmann went bankrupt two years ago.
Companies created own problems
After German reunification in 1990, the government subsidized scores of construction projects in the former East Germany and building companies came out of the woodwork to take part in the then lucrative business. At the time, the construction industry created nearly half the nation's gross domestic product.
When the large, state-financed rebuilding and renovation projects ended, there were "massive consequences to be expected" for the new companies, said Volker Russig of the Ifo Institute for Economic Research in Munich.
Europe keeps building
Construction projects can be hard to see in Germany
A look outside of Germany's borders, however, showed a very different scenario. While Germany suffered, other nations kept on putting up new buildings.
"The rest of Europe is doing significantly better than Germany," Russig said.
Great Britain led the European construction charge. Thanks in part to structural reforms put in place years ago, there were just over 200,000 houses built on the island in 2004, and with a lack of existing homes, experts say the country could use another 70,000.
Construction booms in USA
While the Sept. 11 terrorist attack in the United States were a blow to the US economy in general and construction companies also felt the effects of a reserved public that was in debt and not looking to invest in new real estate.
But most the effects proved to be temporary and low interest rates helped bring building volume went up 5.1 percent in 2003 and 9 percent in the first 10 months of 2004 -- the biggest construction boom in decades, according to Steffen Ehninger of the German Office for Foreign Trade in Cologne.
German profits come from abroad
German companies will build parts of Taiwan's high-speed train track
Germany's construction companies are looking to foreign countries as a way of getting out of the crisis. To help the bottom line, German companies have moved from home to take advantage of large building projects in Australia, the United States and south east Asian countries.
"German construction companies have an excellent reputation abroad," Ehninger said. "The German building industry in Australia is responsible for a fourth of all sales."
Quality sets Germans apart
Bilfinger Berger, Germany's second-largest construction company, is active both in Australia and Taiwan, where it is taking part in building the Taiwan High Speed Rail.
The German company will build 80 kilometers (50 miles) of high-speed train tracks and take in €1.3 billion ($1.65 billion). Planners said they chose the company because its technical know-how set it apart from other companies.
Earlier than many others, Bilfinger realized globalization would push construction work abroad and has long used cooperation partners as a way of keeping up a presence in a number of foreign countries, with projects taking place in Bangkok, Beijing, Shanghai and Sydney.Until Germany's overall economic situation improves, challenges at home will continue for the nation's construction companies. It's not the quality of the work that is causing the problem, according to Ehninger, but "a bad environment" that is making the industry wait for a revival.