Germany's exports 46.4 percent of total exports to members of the European
Union, these include top two: France at 11.2 percentage and the United Kingdom
8.7 percentage. The United States receives 9.2 percentage of Germany's exports.
Germany's imports the most from France 11.2 percentage of total imports and then
followed by the Netherlands at 8.4 percentage. The United States imports 8.1
percentage of the total imports of Germany. German monetary and fiscal policy
emphasizes the control of inflationary pressures. Consumer prices in Germany
have risen by an average of approximately 1.5 percent over the past five years
(World Bank, 1997). Industrial activity employs 43 percent of Germany's
workforce; while 54 percent are employed in the service sector of the nation's
economy, and the remaining three-percent are employed in agriculture. Taxes in
Germany are unified (Hunter, 1997). Taxes are collected by a central authority,
and then are distributed to the federal government, the lander (state)
governments, and the local authorities. Taxes are levied on personal income,
corporate income, capital gain, turnover and trade (value added), and insurance
and accounts. Additionally, excise taxes are levied on most products. German
governments (federal, state, and local) do not engage in deficit financing.
Market and Industry Issues Market and industry issues are addressed in four
contexts. The areas of concerned addressed are (1) demand conditions, (2) the
competitive structure of the German automobile industry, (3) production costs in
the automobile industry, and automobile-specific tariffs and trade restrictions.
Germany is a part of the European Union. The EU is a union of fifteen
independent states based on the European Communities and founded to enhance
political, economic, and social co-operation. Members include: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, and United Kingdom. Germany is among the
largest and technologically advanced produces of iron, steel, coal, cement,
chemicals, machinery, vehicles, and machine tools.
Demand Conditions Germany's
infrastructure is among the most highly developed among the nations of the world
(Roby, 1994). Infrastructure development varies, however, by region. No
infrastructure major problems exist in the old West German states; however, some
problems continue to exist in the old East German states. Germany's distribution
system is among the most highly developed among the nations of the world
(Hunter, 1997). The Western European automobile market increased to 12.7 million
passenger cars in 1997, maintaining its position as the largest new automobile
market in the world (Upper Segment Cars in Western Europe: A Market Under Siege,
1997). Competitive Situation Competition in the automobile manufacturing
industry in Germany is not limited to Germany automobile manufacturers. Because
Germany is a member of the European Union, all automobile manufacturers within
the Union compete on an equal footing within Germany (Short-Term Prospects for
the German Motor Industry and market, 1997). Mercedes-Benz has recently
experienced sales difficulties for the company's passenger car line in the
United States. One action taken by the company to reverse this sales decline is
the introduction of a new, smaller, and less costly passenger car line in the
United States (Martin, 1997).. Volkswagen, Germany (market share: 15.4 percent),
Fiat, Italy (market share: 14.2 percent), and Peugeot, France (market share:
12.9 percent) hold the first three places in the European automobile market
(Phelan & Feast, 1997). General Motors is the fourth largest seller of
automobiles in Europe (market share: 11.8 percent), while Ford in number five
(market share: 11.6 percent). Unlike the United States, where Japanese
automobile manufacturers hold 27 percent of the market, the Japanese
manufacturers have a market share of only 11.6 percent in Europe (Woodruff,
1997). Industry Production Costs A major labor-related problem for industries
moving into Germany is the fact that Germans by and large are unwilling to
accept jobs in industries where the wages are relatively low and the working
conditions poor by German standards. Unemployment, however, is high in relation
to traditional post-war German standards. Therefore, labor wage rate increases
have been moderate. Labor stability is higher in Germany than in the United
States. The turnover rate in German manufacturing firms is quite low (Feast,
1996). For years, Germany had a shortage of labor and even brought in guest
workers from Southern Europe and Turkey. Germany has on of the shortest
workweeks at 35 hours per week. The average America worker works longer hours
and receives twelve days of paid vacation verses six weeks and 13 to 16 days of
vacation (holiday) for Germans. Strong industrial unionization and legislation
in Germany create job protection and security for German industrial workers. As
a consequence, both strikes and unauthorized absenteeism among most German
workers is low in relation to most other industrial countries (Feast, 1997).
German employers are encountering difficulties in effecting changes among the
German workforce. The tradition of strong worker social services and strong
labor unions in Germany strengthens the will of employees to resist such changes
suggested by management (Feast, 1997). Growth in manufacturing labor
productivity in Germany and the United States are compared. Relevant data are
presented in Table 2, which may be found on the following page. For both Germany
and the United States, manufacturing multifactor productivity (MFP) is a more
important explanatory factor than capital-for-labor substitution in explaining
labor productivity growth. The differences in labor productivity growth between
the two countries is another question (Lysko, 1995). The contributions to
manufacturing output growth in Germany and the United States by labor, capital,
and MFP are compared. Relevant data are presented in Table 3, which may be found
on page 8. While hours worked were declining in German manufacturing at the rate
of 0.6 percent per year, hours worked in the United States increased at the rate
of 0.8 percent per year. The net result was that, although the use of combined
factor inputs increased more in Germany than in the United States (an annual
rise of 2.4 percent versus 1.6 percent), German multifactor productivity grew
marginally faster over this 17-year period; the average difference was 0.4
percentage points per year (Lysko, 1995, p. 52). Table 2 Sources of
Manufacturing Labor Productivity Growth, 1956-93
