So far, the economy of Germany is the only one in Europe that has dodged recession, or a reasonable projection of one. Among the causes of its strength are an unemployment rate that is the envy of most of the developed world — just above 5%. It nominal gross domestic product is $3.6 trillion and still growing, albeit slowly. France, the second largest nation in the region by GDP, is much smaller at $2.8 trillion. Many of the nations in Europe are mentioned as bailout targets. At the other end of the sovereign debt crisis is Germany, which has the financial power to underwrite much of the bailout funds.
Germany is unique economically in terms of the companies that are the engines of GDP. Each is a major exporter, or has large operations overseas, and an exporter of goods and services that still enjoys demand around the world.
At the top of Germany’s corporate giants are auto manufacturers. Of the seven largest companies by revenue, three are car firms — Volkswagen, the biggest corporation in Germany, Daimler, the second largest, and BMW. Daimler makes products other than cars, but its flagship division is Mercedes. Volkswagen is about to get larger because of a tie-up with Porsche.
German car companies are fortunate, perhaps by design. Each has exposure in the weak European car market, but each has substantial exports as well. Volkswagen is the region’s largest car company, but it is also tied with General Motors Co. (NYSE: GM) for sales in China, the world’s largest car market. And its sales in America are surging.
BMW and Mercedes fall into a class of their own. Each is considered among the best car makers in the world. Because of that, each can command high prices for its vehicles, which creates large margins. BWM and Mercedes are the two leading luxury car brands in the United States by sales. Each does particularly well in China. Germany has been able to export superior engineering. Volkswagen has annual revenue of more than $220 billion. Daimler’s is more than $130 billion and BMW’s is nearly $100 billion.
Among Germany’s other largest companies are two financial firms — Allianz and Deutsche Bank. Deutsche Bank is the largest bank in Europe, and among the largest in the world. It has some balance sheet risk in Europe, but its presence in the strong Germany market helps offset that. And Deutsche Bank has large operations outside the European Union that include investment banking and large commercial operations. Allianz is called an insurance company, but it is really a financial services holding firm that also has businesses worldwide. Allianz claims to have 78 million customers, and it is active in money management and banking.
Germany’s fourth largest company — Siemens (NYSE: SI) — is often called the General Electric Co. (NYSE: GE) of Europe. The firm is in so many businesses as a conglomerate that its suffers as GE does. Not all of it electronics, automation, financial and health care operations do well at the same time. And it operates in so many countries that it is hostage to changes in global GDP. With sales of $98 billion, it can count itself as one of the biggest diversified corporations in the world.
Finally, among the huge corporations that make up an outsized portion of German GDP is chemical firm BASF, with sales of more than $80 billion. With primary businesses in agriculture, chemistry and practices, it is cousin to U.S. companies Dow Chemical Co. (NYSE: DOW) and E. I. du Pont de Nemours Co. (NYSE: DD), both of which are smaller than BASF.
If Germany continues to hold its own in the global economy, it will be to some large extent due to seven companies that among them have nearly $850 billion in sales.
Douglas A. McIntyre