Berlin - The economic storm that has swept across Germany
over the last year is rapidly reshaping Europe's biggest economy's
main street as a number of the country's household business names
start to disappear.
The uncertain future now facing the 128-year-old department store
chain Karstadt after its owners dramatically filed for insolvency
this week came as a number of other well-known corporate German names
battle to emerge from the biggest world financial crisis since the
Great Depression.
Chancellor Angela Merkel's government last month threw a financial
lifeline to ailing US carmaker General Motors Corp's German offshoot,
Opel, to help it pave the way for its sale to the Austrian-Canadian
spare parts group Magna International Inc.
But the deal with Magna has still not been completed, which leaves
Opel's future still up in the air and the carmaker's around 2,000
dealers in Germany pondering their fate.
German insolvencies jumped by 10 per cent during the first three
months of the year as the economy dramatically shrunk, the Federal
Statistics Office said this week.
Nevertheless, ING bank economist Carsten Brzeski believes that the
string of insolvencies do not point to 'a common weakness in the
German economy.'
However, he is concerned is that Opel for one could turn into
another Philipp Holzmann, which was forced to close about two years
after former German Chancellor Gerhard Schroeder spearheaded a
controversial plan to save the more than 150-year-old building firm.
In addition, now looming large over Germany's business sector is
threat of rising unemployment as companies are forced to make layoffs
as well as consider restructuring and consolidation moves as they
grapple with the fallout from the global slump.
Karstadt's owners, Arcandor, have been considering merging its
department store operations with rival German retailer Metro AG.
But the question is now how many of the Karstadt department store
branches, which have occupied pride of place on many of Germany's
main shopping drags for decades, would survive its fusion with Metro
or another group. Under Metro's takeover plans, only 60 of Karstadt's
stores would be retained.
'Without Karstadt life losing a feeling,' said one elderly
customer with his wife adding: 'A city without a department store is
dead and deserted.'
A similar story is facing the 137-year-old Dresdner Bank, which
giant German insurer Allianz AG sold to Commerzbank AG after the
financial crisis triggered by the US mortgage market meltdown
heightened the financial woes that have engulfed Dresdner.
However, apart from Commerzbank having duplicate branches on many
of the same streets as its cross-town Frankfurt rival Dresdner, under
the merger deal between the two banks the Dresdner Bank will
disappear by the end of next year.
The pressures that have raised doubts Opel about the business
prospects for Opel and Karstadt came the wake of other long-
established German companies finding themselves in financial trouble.
This includes even the legendary model train maker Maerklin and
underwear manufacturer Schiesser.
But in a sense the global economic crisis that began to gain
momentum late last year brought to a head the challenges that have
confronted German industry in recent years.
What is more, the same economic demands are likely to continue to
define the business culture even once the economy manages to shake
off recession and return to a growth path.
This includes the often fierce forces of competition unleashed by
fast-paced globalization and the impact on private consumption
resulting from the greying of the German population with every second
person in the country projected to be over the age of 50 by 2035.
The business consulting group Roland Berger estimates that over
the next quarter of a century the over-fifties' share of consumer
spending will rise to about 60 per cent.
Already, the consulting group says that every second euro spent on
private consumption in Germany is from older people, who have rather
different consumer desires and requirements than do younger shoppers.
Coupled with this, businesses, notably retailers, have taken a big
hit as a result of the global recession as the economic upheaval
results in consumers tightening their belts amid fears about rising
unemployment.
Having survived two world wars and the depression, German retailer
Hertie shut in May for the last time after creditors pulled the plug
on the group, which had a history dating back to 1882.
This followed the Bavarian porcelain manufacturer Rosenthal filing
for insolvency after its Irish owners Waterford Wedgwood ran into
financial difficulties and as a result throwing into doubt
Rosenthal's future after 130 years of business.
In April, the discount retailer Woolworths also decided to launch
insolvency proceedings 83 years after it was established in Germany.
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