More German firms turn to cooperatives in tough economic times | Business| Economy and finance news from a German perspective | DW | 13.04.2009
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More German firms turn to cooperatives in tough economic times

While many companies face serious difficulties in the current economic slump, the number of cooperative foundations in Germany is increasing. The business model is seen to provide stability and security in tough times.

Two men shaking hands

More German businesses are forming cooperatives

Already established in the banking and agricultural sectors, cooperatives in Germany are beginning to expand to other fields as small and medium-sized enterprises look for security during the ongoing economic crisis.

"We even notice new fields of activity like health care and the energy sector," said Eckhard Ott, head of the German Cooperative and Raiffeisen Confederation (DGRV). "Due to the hard economic situation of many suppliers in the healthcare sector, medics and health care networks are founded as cooperatives."

Cooperative members retain ownership of their individual businesses but benefit from being able to cooperate to increase profitability by negotiating better prices from suppliers, develop new business opportunities and share risk for large projects they may have otherwise been wary of taking on.

"The decision to run the business as a cooperative was the result of a longer process with the intention to reorganize marketing and sales and increase knowledge exchange," said Dirk Lukas, a spokesman for the BUSO cooperative for the solar heating industry.

Many reasons to form a co-op

A solar panel

Cooperatives have expanded to encompass the solar energy sector

Lukas said the cooperative model allowed the group's 130 members to handle growing demand for their products with a system that meets the needs of manufacturers and installers who may not have otherwise been able to engage in large, profitable projects.

Germany is home to around 8,000 cooperatives with roughly 20 million members. With 250 co-ops created last year, the number of cooperatives formed in Germany has almost doubled in comparison to 2007. Part of the renewed interest in the business model is due to a 2006 legal amendment making the associations easier to form, Ott said.

"New cooperatives now have the possibility to promote cultural or social objects," he said, adding that it takes just three people to form a cooperative. "That makes cooperatives attractive for cultural and social ventures like hospitals, senior citizen homes, cinemas, theaters or even indoor swimming pools."

The economic security provided by cooperatives also entices businesses to form cooperatives. While the most recent data from the German Statistics Office shows about one percent of all German businesses were declared insolvent in 2005, less than 0.1 percent of German cooperatives went bankrupt in 2008, Lukas said.

"The cooperative structure is very safe in terms of economic ups and downs," he added.

Author: Steffen Marquardt / Sean Sinico

Editor: Chuck Penfold

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