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Business

Will GE Spawn a German Research Renaissance?

The world's largest company has set up a research center in Germany: General Electric (GE) will use its new base near Munich and draw on the brain power of Germany's university system, despite its flaws.

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Ready, steady, cut

The center in the Munich suburb of Garching is GE's third research hub outside the U.S. About 150 scientists from around the globe will work on new materials, renewable energies and medical technologies for the company, which competes with Europe's Siemens and Alstom.

GE has invested $52 million (€42.8 million) in the center, which will join others in Shanghai in China and Bangalore, India. A fourth think tank is located at GE's research and development headquarters in New York. The company will invest $4 billion in research worldwide this year. By comparison, the German government has only set aside about two-and-a-half times as much money for that purpose.

The center seems to show that despite an ailing university system, Germany's standing as a research destination is not that bad after all. GE's CEO, Jeffrey Immelt, said the company banked on using "the good German university system and the engineers it produces."

The decision to come to Munich was largely based on the city's Technical University (TU), which closely cooperates with other academic institutions, especially in eastern Europe. The TU also has a research reactor in Garching, which is considered one of Germany's top research centers.

A "sign of revival"

General Electric eröffnet Forschungszentrum in München, Stoiber und Jeffrey R. Immelt

Bavarian Premier Edmund Stoiber and GE CEO Jeffrey R. Immelt

GE reportedly didn't receive any government subsidies for coming to Garching and Bavarian Premier Edmund Stoiber hailed the technology giant's arrival as a "sign of revival" for Germany.

But company officials also said that proximity to European customers was a reason to set up shop in Bavaria. They hope that this will help to boost business: GE plans to increase sales in Germany by more than 10 percent this year, said Thomas Limberger, who heads the company's German division.

In 2003, the company already did well in Germany, increasing sales by a third from $4.4 million to $6 million. Across Europe, GE raked in €32 million, about half its global revenue when exempting the United States. In 2002, the company made $132 million and employed 300,000 people, 7,000 of whom work in Germany.

Tough competition for German companies

The latter number could increase as GE is going head-to-head with its biggest German rival: Siemens headquarters in central Munich is not much more than a stone's throw away.

The Americans are likely to complicate things for Siemens in the domestic market as they are taking the lead in selling products that haven't been widely used in Germany so far. Alarm systems for private homes, for example, have been ignored by Germans until now. Only about 1 percent use them while 18 percent of U.S. homeowners have had them installed.

There are other ways GE plans to make money: The company's financial subsidiary, GE Capital, contributed 44 percent of revenues in the first quarter of 2003 -- a huge amount for a company that's still widely perceived as an industrial heavyweight.

Company executives have said they plan to increase GE Capital's visibility as a global brand in the future -- something that's likely to worry heads of German banking institutions as well: GE Capital already offers financial products that they haven't even developed yet. At least in the short term, it's still a good thing for Germany: GE Money Bank, which specializes in the consumer credit business, recently opened a call center with 300 employees in Hanover.

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