German, U.S. Firms Tie Transatlantic Knot
For a society that has devoted so much of its time in recent years to deploring U.S. business practices, Germany is certainly exhibiting a sudden taste for American business.
The merger this month of Daimler-Benz and Chrysler Corp., coming just weeks after German media giant Bertelsmann announced it was buying Random House, highlighted a phenomenon that has been gaining momentum for the past four years: The German-American corporate wedding.
In 1994, the German Cartel Office recorded just 55 German acquisitions of American companies. The total has since risen annually, to 97 last year. Examples include the takeover of Westinghouse Electric Corp. by Siemens, the purchase of U.S. machine-tool giant Giddings & Lewis by German steelmaker Thyssen, and the merger of U.S. pharmaceutical manufacturer Marion Merrell Dow with Hoechst. Analysts here expect more alliances in banking, insurance, electronics, the media and other sectors.
Nor is the transatlantic love affair one-sided. Last year, American executives managed to get their hands on 248 German businesses, according to the German Cartel Office, compared with just 193 such acquisitions in 1994.
General Electric Co. embodies the trend: Its German subsidiary has achieved tenfold revenue growth since 1992 on the basis of an extremely active acquisitions policy in Germany. In the last two years alone, GE has invested more than $2 billion in Germany, in areas as diverse as medical technology, credit card services and telecommunications.
“Germany, after the United States, is the second-most important market for GE,” said Arno Bohn, head of the company’s German subsidiary.
Yet in German lecture halls, on newspaper editorial pages, in adjoining seats on airplanes, you can hear complaints about America’s brutal, “hire-and-fire” business ethic, where pink slips are issued at will and human values take a distant second place to the bottom line.
American-style practices would never work in Germany, it’s said: Chaos and social breakdown would result.
But if the U.S. corporate culture is thought to be so incompatible with German “social market” values, why the boom in U.S.-German mergers? Because those differences pale next to the economic imperatives of globalization.
“These deals are going on in every direction,” Siemens spokesman Mark Derbacher said. “What’s going on is a global market, and companies are always looking for chances in that market.”
From the American perspective, the attraction is the big single-currency trading zone that is to be created in Europe in the next few years. American businesses are eager to do business in the coming united Europe, and Germany dominates the scene.
And for Germans going global, given the great size of the U.S. consumer market, there is no question about where to shop.
“The American market,” answered Bertelsmann spokesman Helmuth Runde when asked what prompted his giant television, music and print-media company’s acquisition of the prominent U.S. publisher Random House. “Two hundred million people. One language. One culture.”
Clearly, America is a market worth catering to, but Bertelsmann can’t possibly expect to sell large amounts of, say, German pop music to monolingual American teenagers.
“Media products are not products to be exported,” Runde said. “Media are created in the different countries, the different cities, where people live. We see great chances in America. We want to be there, making American media for Americans.”
Runde’s focus on markets corresponds with the thinking behind other recent German-American transactions.
“If you want to be one of the big players, you have to have a foothold in the U.S. market,” said Eugen Mueller, spokesman for Hoechst.
“If you don’t, you will just remain a niche player.”
In pharmaceuticals, Mueller said, the American market alone accounts for a full 40% of world revenue. That’s irresistible to a company like Hoechst, which must spend vast sums on the research and development of new prescription drugs. Only by selling to a huge market can Hoechst hope to recoup these costs quickly.
Selling in America means getting new drugs past the Food and Drug Administration, Mueller added, making it important to have a U.S. partner to run the approval gantlet. “And the FDA sets standards worldwide,” Mueller noted.
And despite the dismal state of German public finances--groaning under the burden of paying jobless benefits to record numbers of unemployed; underfunded pension and health insurance schemes; and municipal woes so serious that some public buildings can’t even run their elevators--it doesn’t seem to be crimping the style of Germany Inc.
“Well-run companies in this country have had good profits in recent years,” said Michael Pfeiffer, a spokesman for the Assn. of German Chambers of Industry and Commerce.
“These German managers have very easy access to the American mentality,” he added, citing for example Juergen Schrempp, the chief executive of Daimler-Benz, who once served as president of Mercedes-Benz’s American truck subsidiary. “They have international friends and an international mind-set.”
Schrempp has, in fact, been criticized in Germany for demonstrating too much of the American managerial style by spinning off and closing unwanted Daimler subsidiaries, throwing people out of work in the process.
His American-style nickname: “Rambo.”
