Germany: Hertie as a symbol of recession
A few months ago, the Germans were very resistant to the notion that Germany would also suffer greatly in this global downturn. Yet, as the months have past, it has become increasingly apparent that exports from Germany and retail spending in particular are hurting. As a result, the German government has joined the bailout and stimulus crowd.
Germany is proof positive that this is not a moral debate in which only the irresponsible and overleveraged suffer, individually or as nations. After all, the Germans received almost none of the upside during the housing bubble. I suggest those who want to label the downturn a case of just desserts for bad behavior read a few history books on how financial crises drag down the good with the bad.
One need look no further than the German retail sector to see what type of destruction this downturn will create globally. Germans have shut their wallets and the result will be retail bankruptcies, job losses and commercial property losses. I anticipate this will come as a brutal shock for ordinary citizens.
The bankrupt department store chain Hertie plans deep cuts to their branch network and wants 19 of its 73 German stores to close. Affected are 650 of the approximately 3,400 employees currently employed by the company. Focus of the closures is North Rhine-Westphalia. There, twelve stores alone are to be closed. The closures are expected to be completed in late March. In the Essen headquarters of the department store company, sources tell us, 30 of 125 jobs are to be cut.
On Tuesday evening, the company invited employees for all 73 locations and the Essen headquarters to company meetings.
50 million Euro loss
In North Rhine-Westphalia, according to our sources, the sites, Bocholt, Duisburg-Walsum, Erkrath, Eschweiler, Essen-Altendorf, Essen, Essen Borbeck, Herdecke, Herne, Cologne-Chorweiler, Lünen, Marl and Mettmann are to be closed. In Lower Saxony, Hameln and Delmenhorst are on the list, in Schleswig-Holstein locations in Niebüll and Mölln in Aschaffenburg, Bavaria, Hessen Kassel, and the Hertie department store in Hamburg-Langenhorn.
If by the end of February, no solution with an investor is found, the entire company is threatened. This could mean the end for the remaining 54 branches. Negotiations are currently underway with British investor and owner Dawnay Day, above all concerning real estate which is separate from the department store operations.
Last year, the department store chain reported a loss of around 50 million euros. Against the backdrop of the financial crisis, retail spending crashed. Even in 2007, the company was in the red, even though Hertie showed turnover of around 450 million Euros.
The company filed for bankruptcy less than six months ago. In 2005, British financial investors bought Hertie fro the struggling former Karstadt-Quelle Group (now Arcandor).
This story should highlight for you the key that psychology plays in any downturn. The psychology of recession is quite different from the psychology of a bubble. One should hope that policy makers can work their magic before the psychology of deflation also sets in, because things would become much worse then.
Hertie will 19 Warenhäuser schließen – FAz.net