German Firms' Success Isn't Trickling Down

Hamburg is home to the cosmetics giant Beiersdorf AG -- owner of Nivea, the world's largest skin-care brand -- whose global sales should reach nearly $6 billion this year. More than 10 percent of its sales are now in Asia, with the China market growing by more than 50 percent annually. But Beiersdorf supplies foreign markets from a network of four dozen factories around the world, including operations in Poland, Thailand, Mexico and China. Its Hamburg plant employs about 1,500 people, roughly the same number as five years ago.

Out at the airport, Lufthansa Technik AG is something like the maintenance garage for commercial aircraft worldwide, overhauling engines and hydraulic systems. Global sales have grown about 8 percent every year for the past three, reaching nearly $5 billion this year.

About 12,000 people work for the company inside Germany, the same number as a decade ago, while almost 4,000 have been added at maintenance facilities in Beijing and Manila. The company's chairman, August W. Henningsen, said he envisions shifting more work to those lower-cost operations, declining to offer any reassurance to his Hamburg workforce.

"There's no safety guarantee," he said. "Only the professional and big companies that take a global approach will win this business in the future."

Airbus is a prime counter-example to the trend. In the past decade, the local workforce has nearly tripled, to 11,000, making the company the area's largest industrial employer. Another 500 jobs are expected to be added next year, propelled in part by a $10 billion order for 150 single-aisle aircraft from China, said Gerhard Puttfarcken, chief executive of Airbus Germany GMBH.

But as Puttfarcken acknowledged in an interview, more than half the value of what the local factory produces is from imported components and raw materials. Meanwhile, automation is limiting the demand for workers.

"The more you look to the future, the less you need," Puttfarcken said.

All of which has translated into anxiety among retailers, both in Germany and across Europe, whose livelihoods depend on German spending.

Where Americans are inclined to pull out a credit card and keep spending when hard times come, Germans have a cultural predisposition against debt. They are more inclined to make a deposit at the bank than visit the shopping mall, with the average family now saving 11 percent of its income.

With so many people feeling insecure about their incomes, local merchants are struggling, having lost many of their middle-class customers.

At AST Automobile, a dealership in the suburbs, partner Uwe Hamman recalled the lucrative days of the 1980s, when he dealt only in Mercedes-Benz, BMW and Porsche and sold about 100 cars a month, netting average profit of nearly $5,000 per vehicle. Today, he is lucky to sell 20 cars in a month, mostly economy brands, such as Toyota and Opel. His profit has dropped to as little as $750 per car. His sales staff has shrunk to three from 10.

"The business gets worse every year," he said.

Downtown, Dietmar Kirsch, owner of a chain of menswear stores, explained how he recently shut down one shop in a middle-class neighborhood to focus instead on his lakeside outlet catering to the ultra-rich, with tailored English tweed sports coats and Italian cashmere sweaters selling for $1,000.

"Nobody has any money to spend except the rich," he said. "The barons and the earls, these people are still buying. We are the tailor for the executives, for the upper class, who have the necessity of being well-dressed. When the papers every day talking of everyone in Germany becoming poor, nobody feels like spending money."