German household names start to disappear amid crisis (News Feature)

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.