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FT.com / Home UK / UK - Germany's engineering groups shrug off financial crisis

Germany's engineering groups shrug off financial crisis
By Richard Milne in Hanover

Published: April 23 2008 03:00 | Last updated: April 23 2008 03:00

German engineering companies are enjoying their biggest boom in 40 years despite the credit crunch and the strong euro, according to industry executives.

Renowned for their -conservative outlook, the family-owned Mittelstand - small and medium-sized -concerns - are in the unusual position of being one of the most optimistic sectors about growth prospects in the financial crisis.

"The subprime crisis is not noticeable to us at all. Despite all the negative things, we are in the biggest boom since the end of the 1960s," said Manfred Wittenstein, chief executive of the motor maker Wittenstein and head of the VDMA engineering association. "The underlying conditions are positive for us, with a good global presence and demand for products that are energy efficient."

Other heads of Mittelstand companies - which form the backbone of the economy - at the Hannover Messe, the world's largest industrial trade fair, agreed.

"I have no angst at all when I look at the future because the world still needs German machines," said Thomas Kaeser, head of -Kaeser Kompressoren, the world's largest air compressor company. In line with other German specialist manufacturers his company is benefiting from growing demand for more energy -efficient products.

The VDMA predicts a 5 per cent rise in production this year after double-digit growth both last year and in the first two months of 2008. Companies expect a slowing of growth from the end of this year but all remain optimistic for growth in 2009.

With large listed German groups such as Siemens and BMW cutting thousands of jobs in anticipation of a downturn, the Mittelstand are striking in that they are hiring large numbers of workers. The VDMA this week lifted its forecast for the number of jobs to be created this year in the sector from 10,000 to 30,000.

Eberhard Veit, chief executive of Festo, one of the world's largest makers of automation products, predicted 7-8 per cent growth in revenues this year after 9 per cent in 2007."People don't want cheap technology because a stop in production costs €10,000 a minute. So they are buying high-quality, highly reliable products from us - that come at a cost."

Erhard Tellbüscher, chief executive of Lenze, a maker of drives for conveyors and other machines, tempered the positive mood somewhat. "We are optimistic but we have become less optimistic," he said. "We are seeing some big projects being postponed. So we see 2-3 percentage points less growth but we will still grow in the high single digits this year."
Copyright The Financial Times Limited 2008