German insolvencies rise amid runaway costs and inflation

DW (English)

Longstanding contracts present a problem for successful German manufacturers. Rising prices for raw materials are cutting into margins, often not allowing for goods to be produced at prices previously agreed upon.

Transcript

00:01They're very busy here at Leipzig-based Heiterblick.

00:05The trams built here service commuters all across Germany and beyond.

00:10The order books are full, and there's enough work for years to come.

00:14And oddly enough, that is a major problem.

00:17In fact, the company with 250 employees has just filed for insolvency.

00:23Heiterblick's problem is that they accepted orders for all these years and had a full pipeline.

00:32Now that they're fulfilling them, they're dealing with higher prices, especially for raw materials.

00:38That means the company is tied to contracts and has to deliver products at prices that it can't profitably build any longer.

00:46They have to write in the requirements that they can't work with.

00:51Heiterblick is not the only company caught in this conundrum.

00:55Many have a viable business model, but were tripped up by inflation.

00:59Patrick Hantsch is an economic advisor at credit reform and has seen examples where not only prices,

01:05but disrupted supply chains have become a problem due to the war in Ukraine or more recently US tariffs.

01:12Now corporate insolvencies are on the rise according to credit reform research.

01:17And in Germany, mid-sized companies are especially affected.

01:20They're behind 96% of the country's exports.

01:23Even worse, every insolvency puts expertise and competence at risk.

01:31Among the highly developed industrial nations, we are the one with the highest level of industrial production.

01:37And our engineering know-how, the made-in-Germany factor, is currently disappearing.

01:43And then we're left with only service jobs that won't do as much for our economic growth,

01:47that won't pay the same wages and don't have the same productivity.

01:50And that's a problem for the entire economy.

01:53Not all is lost just yet, says Hantsch.

01:59Compared to many other countries, Germany is looking good.

02:02But many companies are forced to rethink their business model and adjust to new realities.

02:07Meanwhile, he says the government has to show some support.

02:11Meanwhile, at the Heiterblick tram company, they're seeing the insolvency as a chance.

02:16A chance to renegotiate contracts and stabilize the company in the long run.

02:22So engineering expertise can be secured in this eastern German region.

02:27So freed up into those two schools.

02:30Here in the next year.

02:35Here we go to several minutes to reach this up.

02:38Under the beginning.

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02:43Where to compete with high-tech moves,

02:46word to primary brain按assadors.

02:49You're up to the East.

02:50How does the American익ery meinem director here?

02:52How does East Jen know depreciating with the Imperium?

02:55Well done.

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