“As the American consumer now capitulates, the export bubble is the next to go,” the chairman of Morgan Stanley in Asia, Stephen Roach, said. “Export-led economies around the world are in for a very tough rebalancing.”
In Germany, the world’s largest merchandise exporter since 2003, sales to other countries drove growth for the last five years. But in the third quarter, the slump in exports helped push Germany into recession.
Virtually all economists expect 2009 to be a lost year for Germany, which will pay a heavy price for the downturn. The retrenchment bears out what Mr. Haeusgen is seeing, that there is a strong correlation between the Chinese prosperity that rested in part on American profligacy, and German sales to China and elsewhere. Germany’s industrial exports feed a Chinese economy that itself is fed by American demand for goods.
Jacques Cailloux, chief Europe economist at Royal Bank of Scotland in London, has established a strong correlation between Chinese exports to the United States and German exports to China. The American trade deficit in 2007 was $708.5 billion; Germany’s $288.5 billion surplus and China’s $262.2 billion excess represent much of the other side of that equation.
Already, overall manufacturing orders in Germany have dropped significantly. In September, they fell by the largest monthly amount since 1990, when the economy of East Germany was disintegrating. October was nearly as bad.
Hawe, founded by Mr. Haeusgen’s grandfather after World War II, belongs to the group of German companies known as the Mittelstand — medium-size businesses, almost always family-owned. Their products are as ubiquitous as they are invisible to consumers.
With metal shavings littering parts of its shop floor and employees grinding blocks of steel by hand and manually assembling components, Hawe looks like the sort of company that modern economics textbooks suggest would better exist in places with low labor costs.
In fact, skilled Hawe employees are able to mill crucial parts of its hydraulic systems to tolerances of one micron. Hawe has not been able to find any machine — to say nothing of an ill-paid worker — that can manage the feat. It manufactures solely at sites in and around Munich, the capital of Bavaria.
But for all its success, Hawe is by no means immune to the global economic sickness.
Hawe generated revenue of 238 million euros last year, capping five years of growth. But sales are now flat and it is bracing for a slight dip in 2009.
The rapid slowdown in global growth over the last three months means Hawe’s traditional Christmas break has been extended, to varying degrees depending on the product. Several hundred temporary workers have been let go. Other idled employees are drawing full paychecks by tapping accounts in which they stored overtime hours during the fat years.
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“A year ago, this would have been full of employees,” Michael Knobloch, Hawe’s director of marketing, said as he stood between dormant sorters. “Every machine would have been running.”
With machines at Hawe and so many other plants silent, other economic activity in Germany has fallen off.
Deutsche Bahn, the railway operator, has rented space at ports to store train cars this winter for lack of freight. It expects shipments to drop about 40 percent in December over the period a year ago. Specialized manufacturers like Hawe are part of that, but so are iconic automakers like BMW, Daimler, Porsche and Volkswagen, which all extended holiday shutdowns.