The German ‘Wirtschafswunder’ (literally ‘economic miracle’) after WW II was closely linked to the economic upswing of the Ruhr area in the West of the country.
First it was the mining industry getting back onto its feet and later on additional steam was provided by the mechanical engineering sector. The latter often produced for the former and so it was a case of cross-pollination. In subsequent years, ‘Made in Germany’ became known around the world as a symbol for quality in engineering.
That’s all long past, of course, and in the meantime the face of the Ruhr area’s economy has changed dramatically. At the beginning of the 1960s almost 1.7m people were employed by the mining or engineering industry of that region. Three quarters of the entire region’s population worked either in mining or in engineering.
Today, less than 0.7m people are left in the Ruhr area’s industrial sector, and unemployment is high throughout the entire region. There was practically no unemployment at the beginning of the 1960s – a mere 10,000 people were out of work. Nowadays the unemployment rate is over 10%. Millions are on the dole in Germany’s most populous area.
Formerly at the centre of Germany’s economic steam engine, now the Ruhr area looks more like an industrial museum.
The German mining industry and parts of its mechanical engineering sector simply weren’t in a position to keep up with global competition. Even the few remaining jobs in the mining industry would already be lost, if it weren’t for the billions of subsidies that the German government is paying out to keep this industry afloat.
Take the subsidies out of the equation, and it’d be cheaper to ship coal from South Africa to Germany, than to lift the same coal from a depth of 1.5 kilometres in the Ruhr area…
The crisis of the Ruhr Area forced many a company onto its knees, and countless formerly successful firms have vanished after declaring bankruptcy. Yet, it’s not all bad news in the Ruhr area. Some companies did manage to adapt to changed circumstances, and some of these smart set-ups are nowadays more successful than ever before.
During my research I recently came across one very special example of successful industrial production in Germany.
When travelling through the Ruhr area in search of lucrative investment ideas, I noticed the sign ‘Bharat Forge CDP’ at the gate of a small factory in the tiny municipality of Ennepetal. The company name stuck out and I researched what it was all about.
Indian readers among you will know already that ‘Bharat’ originally comes from Sanskrit, and that it simply means ‘India’. How did an Indian company happen to set up shop somewhere between Wuppertal and agen, in the deepest provinces of Germany’s former industrial heartland?
I immediately started to investigate once I was back in the office. This is what I found out…
Back in 2004, the Indian Bharat Forge Group had taken over a company fomerly known as Carl Dan. Peddinghaus in 2004. Carl Dan. Peddinghaus had a history stretching back to 1839. Today the company supplies the automobile industry, with car manufactures such as BMW, Volkswagen, Audi, DaimlerChrysler, VOLVO, Scania and Ford among its customers.
In 2004 the new German subsidiary contributed about 20% to Bharat Forge’s profit, and the prospect for further profit contributions in the future looked good. Bharat Forge had bought the German firm to get a foothold in the German car supplier business.
It’s often stated that German, British and American firms have to close down because of cheaper competition from India and China. But, there is also another, lesser-noted trend. Indian and Chinese firms have started to buy up know how intensive businesses in the West, so as to establish themselves in industries that their own employees still have trouble to compete with.
An Indian firm coming to Germany to make money – it’s a fairly surprising case! But Bharat has already announced that it’s on the lookout for further such opportunities. Hence, more German firms will be taken over.
That’s an opportunity for those who are smart enough to figure out in advance which listed German firms are potential take over targets. You invest into these companies before they get ‘into play’, and you cash out once an Indian or Chinese buyer makes you an offer. That’s a cheque from India or China, delivered straight into your bank account.
You sure haven’t heard for the last time about the Ruhr area, the Indians and those shares that soar overnight because of a foreign bid.
Andreas EttFor Profit Hunter Files
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