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Business

U.S. Economy a Bumpy Ride for German Firms

A study released earlier this week has little praise for German companies operating in the United States. It accuses them of "hibernating" as the economic crisis deepened and Americans began laying off staff.

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Not all German companies are having as much success in the U.S. as DaimlerChrysler

According to the survey taken by the German American Chamber of Commerce and the consulting firm Droege and Company, 67 percent of German companies operating in the U.S. were ill-prepared for the economic doldrums that have stifled the business climate there.

Its findings mark a dramatically negative psychological shift among managers of German companies. In a poll conducted in the summer, 80 percent said they were optimistic the economy would soon turn around. But today, only 49 percent remain optimistic. The rest see dark economic clouds ahead and a slower-than-hoped-for recovery period.

Sixty-three percent of the 439 German companies surveyed in the manufacturing and services sector have been hard hit by weak economic growth in the U.S. Firms have been hardest struck on the West Coast and in the Southeast, where troubles in the information technology and telecommunications sectors have been concentrated.

Pulling up the stakes

More than half of the companies polled reported at least 20 percent losses in revenues and earnings. Indeed, 9 percent were so badly affected that they decided to pull up their stakes and head back to Germany -- a figure the report described as "disturbingly high."

The study points to some important differences between American and German business styles that could have played a role. Generally, German companies tend to react less quickly to economic crises.

"German companies are slower in doing layoffs or significant cost-cutting initiatives," Christoph Kühne, a principal at Droege who worked on the survey, told DW-WORLD. Rather than reevaluating business strategies, organizational structures or staffing levels, many have taken the approach of trying to weather out the crisis.

But slowly, the report found, German companies are waking up from their winter sleep. "They're being less reserved about these measures, but they're not laying off in the same massive numbers we've seen at U.S. companies," he said.

Kühne also attributes the split in styles between the continents to differing management and corporate structures.

"One of the reasons is that German management boards that are based in Germany often want to be involved in decision-making for the U.S. marketplace and there's a time delay," said Kühne. "It also makes it tougher for companies to operate if they mimick German business behavior," he says, noting that greater speed and aggressiveness are needed for German companies to compete successfully in the American marketplace.

U.S. opportunities still to be found

Belt-tightening aside, Kühne says there is plenty of upside potential for German companies doing business in doldrums-stricken America. Indeed, there are more than 1,800 German companies with subsidiaries or operations in the U.S. Together, they generate annual revenue of $500 billion and employ more than a million people.

The weak U.S. economy creates new opportunities for global players like DaimlerChrysler, Porsche or Siemens, which have the opportunity to acquire undervalued companies or to expand markets for their products at a time when their American counterparts are struggling and have shrunken marketing budgets.

Among the "winners" cited by the report is Porsche, which in addition to improving its operations, has also created a sport utility vehicle unit in order to better exploit the U.S. market.

"If you have a strong product or service, then it makes sense to try to gain market share and gain new customers while your American competitor is in a weakened state," he said.

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