Germany’s Corporate Blitzkrieg
“German companies have stepped on the gas in the past 12 months.” That’s what Tim Albrecht, a fund manager at dws Investment in Frankfurt, said earlier this year. “They’re in conquering mode, and we’ve not hit the peak yet” (International Herald Tribune, March 16).
In the first quarter of 2006 alone, German companies agreed to spend a record $99.5 billion on takeovers—more than in all of 2005. Swiss bank ubs says nearly 65 percent of this year’s bids by German corporations have been either hostile or at least unsolicited (German Foreign Policy, August 9).
These takeovers are one sign of an economy on fire. Germany has the largest economy in Europe, accounting for 20 percent of all economic activity in the European Union. It has also become the world’s third-largest economy and its largest exporter.
This is an amazing position for German business to be in, considering the state it was left in six decades ago. During the closing year of World War ii, Germany took one of the worst poundings ever administered to any nation. Every city with a population over 50,000 was destroyed, and many other smaller cities as well. Every fourth home in the country was left in ruins. The Germans were broken both militarily and economically.
Near the close of the war, the Allies signed a document stating, “It is our inflexible purpose to SLps ensure that Germany will never again be able to disturb the peace of the world. We are determined to … eliminate or control all German industry that could be used for military production ….”
However, the Allies never followed through with ensuring Germany would not be able to ever again dominate Europe and the world. Instead they embraced a postwar policy designed to reconstruct the enemy.
Today, riding on its rebuilt industry, Germany has successfully reclaimed its role as the economic powerhouse of Europe. As a result, mainland Europe’s economy is being pulled along at its fastest rate in six years—even surpassing Britain and the United States, according to recent figures.
Consumer confidence is swelling, and the German economy may finally be emerging from a decade of poor performance characterized by consumers saving rather than spending. According to the Guardian, domestic investment and consumer spending have now surpassed exports as the primary driver for Germany’s economic growth (August 15).
The New York Times says a reinvigorated Germany has “far-reaching implications” for Europe and even the whole world (January 17).
Strengthening Corporate Sector
German companies are perfectly positioned to take advantage of the new German consumer spending. The years of weak economic growth gave many German corporations the bargaining power needed to bring their unions under control, often by threatening to move jobs overseas. All across Germany, domestically owned corporate giants such as Siemens, Volkswagen and DaimlerChrysler cut staff, demanded employees work longer hours, and increased productivity. They were forced to innovate and become more efficient in order to remain afloat. The effect is a stronger, more competitive corporate sector.
Meanwhile, as Germany’s corporate giants restructured, they also focused on increasing their exports, largely within Europe. In fact, over the past 10 years, German enterprises have expanded their eurozone market share by over 25 percent—more than double that of their French rivals and more than 2 _ times that of the Italians. Foreign sales have also allowed German corporations to become highly profitable. Both 2004 and 2005 were record revenue-generating years for German companies, and according to current predictions, this year will set a new record again. Last year, more than 130 industrial, commercial and service companies listed on Germany’s four leading stock exchanges increased their net profits by an average of 30 percent.
This German corporate strength is beginning to be recognized: 2006’s second-quarter stats showed German business confidence close to a 15-year high, and German corporations are hiring again. The result: a more confident German industry, which, “[b]ack in fighting trim … has begun flexing its muscles overseas” (New York Times, op. cit.).
The most visible manifestation of German corporate muscle-flexing has been the recent deluge of German corporate takeovers—many of them hostile.
Business Week called the corporate leaders of German hunter companies like Siemens, the engineering group Linde, and energy conglomerate E.On, “young lions” that are “quick to pounce” (April 21).
When commentators start referring to these companies as young lions that are quick to pounce, or as being in conquering mode, any person who reveres history should take note. To a large extent, these companies are the very same ones that marched in step with Germany’s World War i and World War ii attempts to take over Europe and the world.
Siemens, for example, is a company whose roots extend back to 1847. During World War i, two fifths of Siemens’ entire corporate value was destroyed. After World War ii, four fifths of Siemens operations were destroyed. Yet today Siemens is back as one of the world’s largest companies, employing 461,000 people in over 190 countries. Siemens is a leader in information and communications, power, transportation, medical and lighting technologies.
Linde, a 127-year-old engineering corporation, recently bought the strategic British-owned boc Group, the world’s second-largest industrial gases manufacturer. During the world wars, Linde played an essential role in producing liquid oxygen and other explosives as well as in pioneering coal-to-liquid technology and nitrate fertilizer production in support of the German war effort. The boc purchase now makes Linde the world’s foremost producer of industrial gases, employing 53,000 people throughout Europe and around the world.
E.On’s heritage can be traced back to two founding companies, viag and veba, which were established prior to World War ii by the German government to oversee the nation’s metals, mining and power industries. In 2000, the two companies merged to form Germany’s dominant gas and power utility, E.On.
Earlier this year, E.On announced a $34.3 billion hostile takeover of Spanish energy company Endesa—the largest takeover proposed by any power company ever. If this deal goes through, E.On, which is already Europe’s dominant combined electricity and gas provider, will become Spain’s largest power supplier and probably Germany’s largest publicly owned company. Endesa also has holdings in Portugal, Italy, North Africa, Brazil and Chile.
This takeover attempt by E.On follows a string of others. In 2001, E.On purchased British-owned Powergen for $9.5 billion, making it Britain’s second-largest electricity and gas provider. In 2002, E.On purchased Hungarian utility Edasz. Then in 2003, E.On purchased Ruhrgas, the Continent’s largest importer of natural gas. This purchase gave E.On a 6.5 percent stake in Russia’s super-giant gas company Gazprom, making it the largest foreign shareholder in the group. In 2005, Romanian utility Electrica Moldova was E.On’s successful takeover target. Electrica Moldova, supplying 1.3 million customers, controls approximately 11 percent of Romania’s wholesale market. In January 2006, Hungary’s largest oil and gas company, mol, headquartered in Budapest, was acquired. E.On also owns significant operations in Italy, Sweden, the Netherlands and a host of other European countries.
An E.On adviser says the reason the German company is so successful at takeovers is that its huge pile of cash allows it “to blow rivals out of the water” (Financial Times, February 22). With 80,000 employees, E.On is the world’s largest privately owned energy service provider; by these takeover actions, it is rapidly becoming the literal powerhouse of Europe.
Other German corporations are also taking over strategic industries throughout Europe.
German stock exchange Deutsche B_rse’s battle for control of the Euro _next stock exchange is perhaps the most high-profile example of a major prospective German takeover. Deutsche B_rse officials tout the potential Euronext purchase as the first creation of a “truly pan-European exchange organization” representing a “significant step forward in the integration of European financial markets” (Agence France Presse, May 22).
Deutsche B_rse shareholders lauded the potential pairing as the creation of a “European champion.” If this merger proceeds, Europe’s major financial markets in Frankfurt, Paris, Brussels, Amsterdam and Lisbon will all fall under German control. Additionally, the Italian stock exchange based in Milan has reportedly indicated that if a pan-European exchange led by Germany is created, it too would like to join the group.
German-owned companies such as Deutsche Bank, Deutsche Post, Deutsche Telekom, Allianz Group, rwe and many others have all actively bought out foreign competitors, extending their reach and influence throughout Europe.
Across Europe, major power, gas, water, manufacturing, telecommunications, finance and media corporations have fallen to German buyers. These are industries no nation would want in the hands of an enemy during a crisis. Even in good times, it opens a nation up to coercion—in bad times, blackmail or worse.
German financiers and businessmen—merchants of the earth—are turning their nation into the economic hub for Europe and the world. Their success is worth noting, since twice last century such merchants—to a large extent, the very same companies—marched in step with the military, with devastating results.
German Corporate History
In 1996, the U.S. government declassified a top-secret World War ii document that exposed agreements made between several of Germany’s largest industrial giants and top German officials at a meeting just nine months before the war’s end in Europe.
According to the document, on Aug. 10, 1944, principle German corporate leaders representing Krupp, Volkswagenwerk, Messerschmitt, Rheinmetall, R_chling, Büssing and others met with top German military and political personnel from the SS, Navy, and the ministries of armaments to prepare for a “postwar commercial campaign” after the eventual German loss.
German industrialists must, the document said, “through their exports increase the strength of Germany.” They were instructed to place existing financial reserves at the disposal of the Nazi Party “so that a strong German Empire can be created after the defeat.”
This document highlighted the exact worry the Allied powers tried to address by seeking to destroy Germany’s future war-making capability.
Have Germany’s World War ii corporate industrialists followed through with their directive? Germany has become the world’s largest exporting nation, and German corporations are again economically powerful—but has a corporate Germany actually conducted a “postwar commercial campaign” to increase its influence over Europe?
A look at the astounding post-World War ii success of the above-mentioned six companies identified in the declassified document not only suggests a postwar German commercial campaign, but a highly effective one.
Take steel and weapons manufacturer Krupp (now ThyssenKrupp). When Germany lost World War ii, the company was forbidden by the Allies to manufacture arms (as it was after World War i) and Alfried Krupp, the company’s owner, was convicted of war crimes including the use of mass slave labor. He was sentenced to 12 years in prison and ordered to forfeit all his property. Later, however, the U.S. high commissioner for Germany granted him amnesty and restored much of his holdings. Alfried Krupp was released in the early part of 1951, and even though many of the Krupp factories, shipyards and steel and coal mines had been damaged, destroyed or dismantled, Krupp was still able to reestablish itself as a leading German company by the 1960s, to continue its 100-year tradition of supplying Germany with the arms needed for war.
The speed at which ThyssenKrupp reestablished itself as a corporate giant is astonishing.
Today, ThyssenKrupp is one of the largest steel and technology groups in the world, employing about 184,000 workers in more than 70 countries. It is also a leading naval military supplier, building some of the most technologically advanced submarines, frigates and corvettes available. Its fiscal 2004/2005 sales of approximately _‚_42 billion (us$53.3 billion) were generated in bulk from its roughly 600 foreign subsidiary companies, located in the UK, France, Italy and 13 other European countries. Thyssen _Krupp also has operations in the U.S. and Asia. Not bad for a company that was all but destroyed in two world wars.
Volkswagen, another German corporation documented for its collusion with the World War ii Nazis, has become a very powerful and dominant automotive player on the world scene. Although its core market is the European Union, Volkswagen sales make it the world’s fifth-largest automotive company by revenue. Volkswagen owns the Bentley brand, international vehicle manufacturer Audi, Seat and Skoda, which manufacture and sell cars in Spain and in southern and eastern Europe, and Lamborghini, which makes sports cars in Italy.
Messerschmitt, Germany’s famous World War ii manufacturer that built much of the fighting aircraft behind Germany’s Luftwaffe, is also active and prospering today, although under a different name.
Like Krupp, much of Messerschmitt’s infrastructure was destroyed in the war. Further, Messerschmitt was even forbidden to produce aircraft. Yet it too has risen from World War ii to become part of a world-leading corporation. Messerschmitt was eventually allowed to build aircraft again, and in 1989, after several post-war mergers, Messerschmitt became part of Daimler-Benz Aerospace (another German industrial giant). Daimler-Benz Aerospace then later helped found the European Aeronautic Defense and Space Company (eads), becoming a 30-percent owner.
eads today is a global aerospace and defense technology leader. The group includes the aircraft manufacturer Airbus, and the world’s largest helicopter supplier, Eurocopter. It is also a major shareholder in mbda, the international leader in missile systems. eads produces the Eurofighter and other military aircraft. Galileo, the European satellite navigation system being constructed to rival the U.S.’s gps, is also being built in large part by eads. The company employs 113,000 people at more than 70 production sites, primarily in France, Germany, Great Britain and Spain.
Both Rheinmetall and R_chling, two of the other companies indicated by the World War ii intelligence document, have also become very successful corporations.
Rheinmetall has been at the forefront of German military manufacturing for over 100 years, so it isn’t too surprising that it again became a weapons builder after the World War ii loss. In fact, despite the Allies’ initial ban on arms production, Rheinmetall was back mass producing machine guns by 1956. By 1972, Rheinmetall had developed and begun selling the Leopard 2 battle tank.
Not much later, and after a series of corporate acquisitions, Rheinmetall became Europe’s leading military supplier of systems and equipment for ground forces, providing everything from artillery and munitions to communications, surveillance technology and guided missile systems. Rheinmetall subsidiaries, which also include significant automotive component manufacturers, are located throughout Europe, the Americas and China.
R_chling, founded 184 years ago as a coal trading house, has now become a leader in high-performance plastics technologies. In 2004, the R_chling Group’s worldwide operations generated revenue of approximately _‚_1.4 billion (us$1.78 billion) and employed 8,000 workers.
Vehicle manufacturer Büssing also became a successful post-World War ii company, although in 1979 it was purchased by the man Group, another German industrial manufacturer, whose history can be traced back 250 years.
The man Group is now one of Europe’s leading manufacturers of commercial vehicles, engines and mechanical engineering equipment. man builds trucks, buses, diesel engines and turbo _machinery; it also provides industrial services. According to man’s website, the corporation holds “leading market positions in all its business areas,” employing 50,000 people worldwide. Interestingly, this September man made a $12.3-billion offer for Sweden’s Scania, Europe’s fourth-largest truck maker, though the initial bid was rejected. If man does eventually succeed, however, it would become the leading truck-building industry in Europe.
Germany’s Battle of the Peace
While Germany was but a pile of rubble after World War ii, one man—Herbert W. Armstrong—warned that Germany would eventually rise again to dominate Europe and threaten the world.
As early as 1945, broadcasting immediately after a United Nations meeting, Mr. Armstrong warned that German industry was working toward the revival of a German empire. “We don’t understand German thoroughness,” he said. “From the very start of World War ii, they have considered the possibility of losing this second round, as they did the first—and they have carefully, methodically planned, in such eventuality, the third round—World War iii!”
“What most do not know,” said Mr. Armstrong, “is that the Germans have their plans for winning the battle of the peace. Yes, I said battle of the peace.”
Peaceably, through corporate mergers and acquisitions, German corporations are reaching out beyond the borders of Germany to gain control of strategic industry. Even Germany’s most notorious World War ii companies, which were severely disassembled and banned from future arms production by the Allies, have emerged as European and global leaders.
A third world war is coming, but this time Germany will not have to first fight to control Europe. Europe will find itself under Germany’s economic control before war even starts. As German companies increasingly seek to dominate Europe’s gas and power distribution, finance, manufacturing and defense industries, Europe will find itself under increasing pressure to submit to German leadership.
Former British Prime Minister Margaret Thatcher also warned, speaking of the EU in a speech given in America in October 1995, “You have not anchored Germany to Europe; You have anchored Europe to a newly dominant, unified Germany. In the end, my friends, you’ll find it will not work.” It is Germany’s national character to dominate, she said.
Be forewarned. Trouble out of Europe is coming, and Germany will be the driving force behind it. Germany’s recent corporate blitzkrieg is just the precursor to a much larger and non-peaceable event.