German Exporters Slammed by Crisis

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Until recently, the biggest challenge for the employment advisers in Göppingen was to provide companies with enough skilled workers. Now they are struggling with a completely different set of problems.

For instance, apprentices who have not been offered full-time work after completing their training programs are increasingly claiming unemployment benefits. The number of unemployed workers under 25 has grown by 82 percent within a year. And, says agency director Martin Scheel, those who are coming to the agency to look for work are, for the first time, mainly people who have completed a vocational training program. "This time, we can't say that it's only affecting unskilled workers."

Many people have come to the bitter realization that even the kind of specialized expertise which was always prized in Germany is no guarantee against losing one's job. This is a consequence of global competition, which is becoming considerably more cutthroat now that the prosperous boom years are over.

Today, engineering companies and auto parts makers from Asia are penetrating deeply into markets for high-quality goods, markets once dominated by German specialists. The Chinese competitors are making products "of a quality that would leave you speechless," says Putzmeister founder Karl Schlecht.

Schlecht has a certain amount of admiration for his Asian competitors, for their discipline, their business acumen and their thriftiness—all traditional Swabian virtues. "They will soon be making the things we make here just as well as we do, but for a much lower price."

For industry veterans, this raises fundamental questions, questions which are on the minds of everyone in the export industry today. Would it have been possible to prevent this sharp downturn? What should companies do now? How can they bring down labor costs even further?

Daimler has led the way in this regard. Roughly 60,000 Daimler employees now earn and work almost 9 percent less than they did before. But is this enough? Or will companies have to shift even more of their production away from Germany? Moving production abroad was in decline until recently, but now corporate strategists are rethinking their calculations.

Or could the solution be for export-focused companies to abandon their niches and expand their range of customers and products? Some companies have already taken this approach. Auto-parts maker Bosch, for example, is expanding its renewable energy business. But this is only effective to a certain extent, because Bosch's customers in the wind and solar power industries are also struggling and are often unable to secure the financing they need.

The options are unsatisfactory. "We did everything right," insists Mink CEO Zimmermann. He says that he consistently emphasized quality, delivered his products on a just-in-time basis, and maintained a broad base of 20,000 customers and 300,000 products. Even more importantly, his company produces brushes, a product which wears out and needs to be replaced. "We thought that was our life insurance policy," says Zimmermann.

Zimmermann and his son Daniel, who belongs to the seventh generation of Mink owners, walk through a building that smells of fresh paint. State-of-the-art hole-punching machines are lined up on the floor, virtually untouched, precisely placed behind yellow marker lines. Zimmermann constructed the building specifically for Trumpf, an engineering company based in Ditzingen near Stuttgart, at a cost of €3.5 million ($4.9 million). Trumpf needed plastic panels with embedded brushes, which it uses to prevent pieces of sheet metal from being scratched during shipping. But then demand also slumped at the Ditzingen company.

The Mink/Trumpf relationship is indicative of how interdependent companies are in Swabia. When the auto industry is ailing, it no longer needs hole-punching machines from Trumpf. And when Trumpf loses orders, the demand for Mink's brushes declines.

The challenge now is to ride out the recession, says Zimmermann. But there is one thing he refuses to do: sell the company. He points to his son and says: "The two of us will be the last to go."

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