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Globalization's Toll

Goodbye 'Made in Germany'?

Globalization has reached a new level: it's threatening the basis of Germany's industrial core. More and more Germany companies are moving their factories and production abroad. Is there any way of stopping it?

[M]DPA;mm.de

Some economists say so many parts in German products are already fabricated abroad that the label "Made in Germany" is a deceptive advertising practice.

Germany will soon set an unfortunate new record: for the first time, the number of Germans working in industry will drop below the 10 million mark. Indeed, the land famous for its engineers, car-makers and white coat-wearing lab assistants is losing its industrial base. Even at Volkswagen, a symbol of the German auto industry, managers have said 176,000 jobs at its domestic plants will be at risk if personnel costs aren't reduced by 30 percent. Those jobs would likely end up in Poland, the Czech Republic, Slovakia or Hungary.

The Volkswagen wage dispute comes on the heels of massive impending job cuts at Opel, another traditional German automaker which is now owned by General Motors. While car giants make the headlines, smaller companies are disappearing. A fundamental transformation is occurring in the German economy: its core industry is shrinking. Hardly a week goes by without another company announcing the closure of plants. Jobs are being moved abroad almost as quickly as factories in low-wage countries can be built. German labor costs of €28 per hour just can't compete with €1 to €2 per hour found elsewhere even as 63 percent of German workers say they would accept pay cuts to save their jobs.

Germany is still one of the world's top exporters, but lately it's taken on the dubious distinction of also becoming the world champion in exporting jobs. Here are some unsettling facts. For the past six years, Siemens has employed more people abroad than in Germany. And the trend is clear: German companies are growing abroad as they shrink at home. When companies like engineering firm Hochtief or pharmaceuticals and chemicals giant Bayer invest it's usually happening on the other side of the border. If a company like ThyssenKrupp opens a new steel mill, it's more likely to be in Brazil than the Ruhr Region. If BASF opens a new factory, it's going to be in China.

Fearing for their livelihoods

Influential Munich-based sociologist Ulrich Beck says Germans need help to keep their jobs safely at home. Elected officials are sitting "powerless and helpless in the stands while people we didn't elect are making key decisions that determine our lives and survival." Though Beck's quotes may sound like the clarion call for a class war, they are also part of mainstream thinking. Every fifth western German and almost one-third of eastern Germans fear they will lose their jobs, a TNS-Infratest survey for DER SPIEGEL found. And they have reason to worry.

Since the mid-1990s, companies in Germany have eliminated 2.2 million jobs, an average of 600 per day. When the purge began, Germans were just beginning to feel the effects of globalization. But now a second and much larger wave is hitting. This time, it's not just giant conglomerates looking for cheaper places to do business. Small and medium-sized businesses are now following suit, opening up shop far afield in the Baltic states, the Ukraine or even India and China, which offer cheap labor and a growing market. Nor is it just blue-collar jobs that are being shipped abroad -- white collar jobs in research and development and other areas are also under siege.

A recent survey by German business consultant Roland Berger and the University of Aachen found that 90 percent of Germany's heavy machinery and construction firms want to relocate parts of their businesses by 2009. A full 50 percent of car parts manufacturers are moving abroad, a study by Ernst & Young found.

The worst is yet to come

Most German companies, though, have only just begun to think about outsourcing. The worst is yet to come. Munich-based economist Horst Wildemann surveyed companies and found 60 percent of those polled intended to expand their international manufacturing centers over the next four years compared to only 32 percent who had done so during the past four years. The Boston Consulting Group offered a similarly bleak prognosis for German workers in a study released last week. "If no countermeasures are taken, between 1 and 2 million industry jobs could be threatened."

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