Download German Business in the U.S.: Opportunities amidst the turmoil

German Business in the U.S.: Opportunities amidst the turmoil
By Ulrich Korff and Jonathan Hardt, Droege & Comp., Inc. New York, USA
In Germany the downturn was initially viewed largely as an American problem. While the
difficulties are now clearly global, the strength of German companies in the U.S. market creates
tremendous opportunities amidst the turmoil.
To better understand German business in the U.S., it is useful to look at the financial results of
the top 50 German companies operating there. Many of Germany’s largest companies are
directly immersed in the U.S. market with production facilities, service centers, and highly active
sales and marketing organizations.
The strength of German companies shows through in the results. While nominal private sector
GDP in the U.S. grew Table #1: German-U.S. Revenue vs. U.S GDP growth
by 5.8% per year from
Revenue of German-Owned businesses in the
2004
to
2007,
Total U.S. Private Sector GDP (in $ Tln)2
U.S. (In $ Bln)1,2
revenues of the top 50
CAGR: 9.4%
CAGR: 5.8%
German-owned
284.5
275.3
12.1
11.5
249.6
companies grew at a
10.9
229.4
10.2
9.4% CAGR (see
Table #1). Half of the
companies surveyed –
which were often
2004
2005
2006
2007
2004
2005
2006
2007
leaders in their fields showed growth at a rate of 10% or higher for those four years. The only companies to show
negative growth appear to have lost sales through divestment of revenue-earning divisions.
German business activity in the U.S. has a well-known focus on tangible products. When
compared
against
a
Table #2: Sector Breakdown of German-U.S. company revenue vs. U.S. GDP
breakdown of U.S. GDP,
the variation is even
Sector
German-Owned Businesses
Overall US Private Sector
starker, showing that 46%
Utilities
1.5%
2.0%
of German-U.S. business
Transportation
7.1%
2.9%
is in Durable Goods, while
Information
9.1%
4.2%
only 6.7% of overall U.S.
Construction
2.9%
4.4%
output comes from this
Nondurable Goods Manufacturing
17.9%
5.0%
sector. A slightly smaller
Retail Trade
7.0%
6.5%
divide is evident in NonDurable Goods Manufacturing
46.0%
6.7%
Durable goods, where
Professional and Technical services
0.5%
7.3%
nearly 18% of GermanFinance & insurance
6.3%
7.9%
U.S.
business
is
concentrated, versus only
Other/Unclassified (incl. mining, recreation, etc.)
1.7%
53.0%
5% of the broader U.S.
economy. Combined, the Durable Goods and Non-Durable Goods sectors account for nearly twothirds of top German company revenue in the U.S.
TH
DROEGE & COMP., INC. • CHRYSLER BUILDING • 405 LEXINGTON AVENUE • 35 FLOOR • NEW YORK, NY 10174
PHONE 212 557-7616 • FAX 212 557-6788 • www.droegeusa.com
© 2009 by Droege & Comp. USA
The U.S. recession began earliest in Durable Goods and in the discretionary segments of the NonDurable Goods sector, and the response by market participants has been aggressive. Cost-cutting,
restructuring, and other actions were undertaken in many of these U.S. industries as early as 2007,
well before anyone realized that Germany’s economy would also fall into a significant decline.
Of course, the more flexible legal and economic structures of the U.S. also meant that these
changes could be enacted much more quickly in the U.S. than in Germany. Having led the
decline, these sectors are being re-tooled to lead the next expansion.
The opportunities for growth and market share gains are made more pronounced by the incentives
that President Obama’s administration has been pursuing to stabilize the economy and slow job
losses. Much of the focus has been on tangible products, such as infrastructure or
green/renewable energy equipment where German firms are world leaders.
Overall, 2009 presents opportunities for German companies in the U.S. to strategically grow
market share, producing a strong return on investment. While multi-nationals slowly address cost
concerns in the Germany, changes have already been made in their U.S. divisions which should
allow them to outperform. German companies with the strength to do so will find it smart to
invest in the U.S. during 2009.
Droege & Comp. is a leading German management consulting firm with U.S. offices in New York
City and a strong track record of assisting German companies in the North American market,
including identification of add-on acquisitions, post-merger integration, and operational
improvements.
Ulrich Korff is a Senior Advisor to Droege & Comp. USA and an experienced executive in the
technology and insurance industries. Jonathan Hardt is a Principal with Droege & Comp. USA
focusing on strategy, marketing, and growth.
TH
DROEGE & COMP., INC. • CHRYSLER BUILDING • 405 LEXINGTON AVENUE • 35 FLOOR • NEW YORK, NY 10174
PHONE 212 557-7616 • FAX 212 557-6788 • www.droegeusa.com
© 2009 by Droege & Comp. USA