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Germany’s Energy Woes Spark ‘Deindustrialization on Considerable Scale’

By Chimausem Nwosu – Sputnik – 15.11.2023

Germany’s automotive, mechanical engineering, and industrial goods companies are prioritizing moving less complex processes overseas to secure their business futures. Berlin’s chances of reversing such a trend are in doubt, as companies have expressed disappointment in the current government’s actions to forestall their departure.

Consultancy firm Deloitte reports that two out of three German companies have partially relocated their operations abroad due to ongoing energy issues in Germany.

Previous reports indicated that nearly half of the country’s small-to-midsized companies were considering moving abroad or ceasing operations. According to Deloitte, 67 percent of German companies have moved some operations abroad, and every third industrial company plans to relocate high-quality areas such as production and preassembly.

Investments in infrastructure, digitalization, and cost-effective energy pricing are essential for securing business locations. The situation is particularly acute in Germany’s mechanical engineering, industrial goods, and automotive sectors, where 69 percent of companies report moderate to large-scale relocation.

Currently, companies are primarily moving less complex aspects like component manufacturing abroad. Florian Ploner, a partner at Deloitte and industry sector expert, remarked, “Deindustrialization is already taking place on a considerable scale here. If the general conditions remain the same, it is very likely that more companies will follow and more and more important parts of the value creation will migrate.”

When considering relocation, one-third of respondents focus on high-value areas like general production (33 percent) and preassembly (34 percent). Currently, companies are relocating evenly across the EU, Asia, and the US, with only 10 percent of companies planning to move to other Asian countries and eight percent considering returning to Europe from Asia.

Germany’s prospects for reversing this trend seem slim. Companies suggest that increased subsidies and reduced bureaucracy might encourage them to stay, but they have little faith in the current government’s actions to prevent their departure. While this trend concerns Berlin, it offers some positives for Brussels, as companies plan to move their manufacturing processes within the European Union.

From the companies’ perspective, reducing bureaucracy and ensuring competitive energy prices are practical measures to enhance location attractiveness, with 69 percent in favor. In contrast, state support for key technologies (45 percent) or simplified immigration of qualified specialists (43 percent) are less critical.

Dr. Jurgen Sandau, a Deloitte partner and supply chain expert, notes that, “The pressure on companies is enormous… Nevertheless, a hasty move rarely makes sense. Companies in this country are well advised to make their capacities flexible over the next five years with the help of platforms and networks. After all, factors such as legal certainty and stability in Germany as a business location are essential for entrepreneurial success.”

Companies not currently relocating are focusing on alternative suppliers and expanding multisourcing. They rely on comprehensive supplier management, collaboration, cross-supply chain data exchange, and risk analyses.

Meanwhile, it should be recalled that the government led by Olaf Scholz, in coordination with the EU and the US, has imposed sanctions on Russia since 2022 due to the ongoing conflict in Ukraine. This action prompted the German government to cease purchasing Russian energy, which had been the bedrock of its industrial boom. The sanctions also exacerbated the fuel crisis worldwide, with Europe becoming its primary victim.

The situation further deteriorated after the sabotage of the Nord Stream pipeline system, built to provide gas from Russia to Europe, allowing German industry to use cheap energy.

In addition, the future of European industrial companies is even more bleak considering the US course towards protectionism. The US Inflation Reduction Act, which provides massive subsidies to US businesses in a bid to concentrate manufacturing sites in North America, caused major concerns in the EU, with French President Emmanuel Macron saying it may lead to the deindustrialization of Europe.

November 17, 2023 - Posted by | Economics, Malthusian Ideology, Phony Scarcity |

2 Comments »

  1. The Rise of Fascism in Germany was caused in part by the Treaty of Versaille and its disembowelment of German industry at the hands of the UK and France. What will become of a deindustrialized Germany this time? Will it be rearmed for a direct war against Russia, as before? Or will its people unite around alternatives such as that suggested by Helga Zepp-LaRouche and her late husband Lyndon H LaRouche? Germany is at such a fork in the road. War or Peace? War against Russia or Peaceful Cooperation and Economic Development under a new International Security and Development Architecture proposed by Political leader Helga-Zepp LaRouche? If the United States tilts toward the latter, Germany will too. If not, if the United States continues its own deindustrialization and zero-energy policies, neither it or Germany will survive to play a role in the new world economic order that is emerging among the global majority.

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    Thomas Lee Simpson's avatar Comment by Thomas Lee Simpson | November 17, 2023 | Reply

  2. First of all, those massive subsidies Biden’s administration offered have a caveat. They must be carbon neutral or zero carbon. The United States is not longer interested in energy-intensive, capital intensive production. What it no longer produces it will rely on imports. Second of all, the United States was created on the basis of protectionist policies. Anyone who has ever read Treasury Secretary Hamilton’s reports to Congress in 1791 knows that. After FDR died the “American System” was replaced by Keynesian monetarism or British System. But it wasn’t until August 15, 1971 that the remnants of the American System was replaced with the British System of looting and speculation. The Uruguay round of GATT, and WTO, together with deregulation finished off the fumes of American production. While deregulation of Transportation, Energy and Banking did the rest.

    We can point a finger at powerful corporate interests who were behind zero tariffs and excise taxes. They pushed Congress into deregulating the US economy for the purpose of maximizing corporate profits which was driven by greed. It would be at the expense of the General Welfare but no one cared. Profit was to come before the interests of the nation or the people. Ohhhh but what about the trickle down theory? Wasn’t surplus profit supposed to trickle down somehow and prop up the American economy? That was a myth intended to silence critics of corporate greed, into submission. Adam Smith’s invisible hand was the one reaching into your wallet, ripping off American cities, counties and municipalities. GATT, WTO, NAFTA, and banking deregulation was their objective. Not building dams, bridges, water and energy systems or mass transit or healthcare. R&D would only be funded if it helped the surveillance State. The captains of industry during the time of Lincoln and FDR were long gone. Today’s corporate leaders are nothing more than pirates and profiteers looking for victims to loot.

    In order for the deindustrialization and cannibalizing schemes to succeed, Wall Street speculators had to put an end to Glass-Steagall banking regulation. So they had their friends in Congress and a giddy President Clinton, repeal Glass-Steagall. Once the Commercial Banking system was left unprotected from Wall St. investment bankers, big money centered bank holding companies, BOA, Citi, Chase-Morgan, Wells Fargo etc moved in lock stock and barrel to gobble up the commercial banking system. To make matters worse, the FDIC is now tasked to insure trillions of dollars of gambling debts thanks to post 2008 Dodd-Frank banking reform.

    The Corporate takeover of America could not have happened without the collaboration of the Federal government. This arrangement has created a situation that will destroy our nation unless we do something about it. The 33 trillion dollar federal debt bubble is tiny compared to the 2 quadrillion dollar derivatives bubble. 90% of American workers don’t producing anything. They get 0% earnings on savings accts. They pay 25% interest on credit cards. And 8% interest on home mortgages. Energy brownouts are becoming commonplace while high inflation costs force American families into an economic lifeboat of terrible decisions. America has no mass transportation anywhere. Identity politics, and Political Correctness keep us apart while our kids are being taught that parents are the problem. Wedge issue after wedge issue is used by corporate media to divide Americans so that the corporate powers and Federal government at the top remain in complete control. At some point, over the course of the next period ahead, this situation is going to turn terribly ugly. The financial everything bubble is set to implode. The Fed will move to bailout the failed banking system at the expense of the life of our nation. It will be a time of decision for most Americans to decide what kind of America they want for them and their families. Hell on earth, or the beginnings of building a beautiful America we will all be proud of. It starts with your support for restoring Glass-Steagall. HR 2714 sponsored by Marcy Kaptur, D-Ohio.

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    Thomas Lee Simpson's avatar Comment by Thomas Lee Simpson | November 17, 2023 | Reply


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