U.S. Companies Show Renewed Confidence in Germany as a Business Location

Study finds that 57 percent of U.S. companies intend to increase their

investments in Germany, and 40 percent plan to create new jobs

Mar 28, 2007, 01:00 ET from The Boston Consulting Group

    BERLIN, March 28 /PRNewswire/ -- U.S. companies are increasingly
 confident about their business prospects in Germany, according to the
 fourth annual AmCham Business Barometer, a survey conducted by the American
 Chamber of Commerce in Germany and The Boston Consulting Group (BCG).
     Of the 86 companies surveyed, 57 percent intend to increase their
 investments in Germany, and 40 percent plan to create new jobs, the study
 found. And 80 percent expect continued sales growth this year, despite
 increases in the value-added tax.
     The survey, which was supplemented by in-depth interviews with senior
 executives, elicited responses from almost 80 percent of Germany's 50
 largest U.S. companies in terms of revenue. Those companies that responded
 represent total annual revenues of 130 billion euros and 266,000 jobs in
     More than half the respondents (53 percent) said that Germany has made
 further gains in attractiveness as a business center since last year.
 Respondents ranked Germany as their first choice in Europe for locating
 administrative centers (up from second choice last year) and as their top
 choice for "centers of competence" for marketing, sales, and business
 development (the same as last year).
     "Germany has continuously gained in attractiveness for U.S. companies
 over the last several years," says Fred B. Irwin, president of the American
 Chamber of Commerce in Germany (AmCham Germany). "Seventy-two percent were
 able to increase their revenues in 2006."
     Almost half the U.S. companies hired in 2006
     With 130 billion euros in investments, Germany is a favored location
 for U.S. businesses in Europe. From 2005 to 2006, the share of U.S.
 companies increasing their investments in Germany rose from 32 percent to
 56 percent. This year's AmCham Business Barometer indicates that this trend
 will continue, albeit at a slower pace.
     The number of direct jobs -- currently more than 800,000 -- at U.S.
 companies in Germany is also expected to rise. Last year saw the first
 indication of a positive impact on the job market from increased revenues.
 At the beginning of 2006, only 31 percent of companies anticipated hiring
 new employees, but by the end of the year, considerably more -- 45 percent
 -- had actually created new jobs.
     Hiring targets for 2007 look even better. Far more U.S. companies plan
 to hire (40 percent) than dismiss (24 percent) employees this year.
     "We have achieved an emotional turnaround. Growth and growing
 confidence in Germany are proving to be mutually invigorating," says Martin
 Koehler, a BCG senior vice president based in Munich.
     Production relocation is slowing, and some jobs are returning
     One reason for the expected job growth is a slowdown in certain types
 of outsourcing and offshoring. Eastern Europe is still by far the most
 attractive investment location for U.S. companies. However, there is a
 slowdown in outsourcing and offshoring production. In 2006, 24 percent of
 U.S. companies in Germany planned to reduce their production capacity,
 whereas only 16 percent anticipate doing so in 2007. Every fifth U.S.
 company hopes to expand production capacity. "We have even seen the first
 cases of complex production and administrative activities returning to
 Germany," says Koehler.
     With regard to less complex processes and R&D, Germany still finds
 itself in ferocious international competition. "U.S. companies see German
 labor laws as a problem child," stresses Irwin of AmCham Germany. "Nearly
 one in three wants to see a more flexible labor market in order to be able
 to respond to short-term demand peaks." At the same time, however, lowering
 personnel costs in Germany is considered urgent by only 27 percent of U.S.
 companies, a smaller share than last year.
     "German engineers are the best in the world"
     Highly skilled employees are Germany's greatest strength, the companies
 indicated. Without exception, respondents gave German education and
 subsequent on-the-job training high to very high marks -- especially for
 the country's engineers. "German engineers are the best in the world and
 are therefore in the highest demand," says Koehler. "But when it comes to
 putting a business plan behind their good ideas, German graduates lack
 real-life experience and business know-how."
     Germany's good education system can contribute only so much to
 competitiveness in the globalized economy. Otmar Debald, vice president of
 AmCham Germany, says, "In high-tech manufacturing, Germany is still the
 leading production location thanks to its excellent skilled-worker
 training. But when production processes and technologies become simpler,
 the main thing that counts is cost. Wage costs are lower in Eastern Europe,
 and costs of small electronic parts are lower in China."
     U.S. companies seek readiness to take risks
     U.S. companies not only consider labor costs in their decision making,
 but they also factor in such so-called soft skills as dedication,
 initiative, teamwork, and willingness to assume responsibility. In the
 survey, respondents gave their German employees only middling marks on
 these qualitative skills, which they say are more important than the
 "typical German" virtues of reliability and exactitude.
     At the management level, willingness to take risks (73 percent),
 interdisciplinary thinking (59 percent), and willingness to assume
 responsibility (41 percent) are in high demand, but these are
 characteristics that from the U.S. perspective are not among German
 strengths. With regard to willingness to take risks, for instance, German
 managers garner only "satisfactory" ratings.
     The AmCham Business Barometer documents the satisfaction of U.S.
 companies located in Germany. For the fourth year, U.S. companies were
 faxed a survey soliciting their views of Germany as a business location
 relative to the rest of Europe. Of 180 companies, 86, or nearly 50 percent,
 responded. This year, the topical focus was human resources. Conducted for
 the first time in 2003, the study reveals early trends and produces
 year-on-year comparisons.
     AmCham Germany is the largest bilateral business association in Europe.
 The companies organized under its auspices represent about 130 billion
 euros in investments and 800,000 direct jobs. The Chamber sees itself as a
 bridge to investors in the United States. Its activities focus on the
 promotion of German-American business relations and Germany as a business
     Since its founding in 1963, The Boston Consulting Group has focused on
 helping clients achieve competitive advantage. Our firm believes that best
 practices or benchmarks are rarely enough to create lasting value and that
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SOURCE The Boston Consulting Group