Family-run companies dismiss debt crisis | Business| Economy and finance news from a German perspective | DW | 11.05.2012
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Family-run companies dismiss debt crisis

The sovereign debt crisis appears to have had little effect on the German economy. Family-operated companies have been particularly successful, with many saying they intend to invest more and hire new employees.

There are about 3.7 million companies in Germany and about 95 percent of them are run or owned by families. From an economic point of view the largest of these companies - the ones with annual revenues of over 50 million euros ($64.6 million) - are the most important. Among them are: BMW, Miele, Dr. Oetker and Bahlsen.

Though these big, family-run operations represent just 0.1 percent of all German companies, they are crucial to the country's economic health, according to Frank Wallau of the Institute for Small Business Research in Bonn.

"They turn over roughly every fifth euro in Germany and about every seventh worker contributing to German social insurance schemes works for a large family-run company," he said.

More investment, more employees

Manufacturing of Miele washing machines

Family-run companies like Miele are confident about their economic situation

Commissioned by Deutsche Bank and the Federation of German Industry, Wallau has polled Germany's 400 largest family-run companies for the past four years. The most recent survey, published Thursday, showed that nearly three-quarters of company bosses rated their economic situation as "good" or "very good." Nearly half of the companies polled said they are investing more and looking to hire new employees.

Arndt G. Kirchhoff said his company, which manufactures automobile parts, tools, trash collectors and systems to make cars accessible to the physically handicapped, has noticed the trend.

"Our strengths are our bond with the community, a long-term business orientation and relatively flat hierarchies," he said, adding that long-term perspectives came before short-term profits. "A long-term orientation also, of course, drives innovation. We are always anxious to make sure we don't miss the product of the next generation. Markets are moving fast and we have to adapt."

Nine out of 10 large German family-run companies also conduct business outside of Germany. Their best customers are in neighboring France, closely followed by China, the United States and Russia.

Troubled looks towards southern Europe

Kirchhoff said he has observed the economic crisis in southern Europe with increasing concern. If banks in Spain decide not to lend money, his customers will have trouble making payments and some suppliers would face difficult times as well, he said.

That's already the case in Greece and now some economists talk of the country leaving the eurozone. The consequences of the discussions can already be seen, according to Jürgen Fitschen, the designated head of Deutsche Bank. Now the moment is approaching when German family-run business will have to take action.

Jürgen Fitschen of Deutsche Bank

'German family-run businesses will have to get their funds out of Greece'

"Put simply, they are trying to get all their liquid funds out of these countries to minimize their risk in case the drachma is reintroduced," he said,

The main questions for family-run businesses would be how the drachma would be valued and how companies would get their money back into euros, Fitschen said, adding that companies were changing the conditions of their contracts to stipulate payment in euros.

Fitschen said he does not think German family-owned companies will escape the economic crisis unscathed, but he also pointed out that two-thirds of the companies expect to maintain exports despite difficulties selling in the European market. One third of companies even said they expected to increase exports in 2012.

Author: Sabine Kinkartz / sms
Editor: Andrea Rönsberg

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