The incredibly shrinking Germany, Inc., by Ulf Sommer.
Germany’s leading firms are dropping out of the global corporate rankings. The reason: shrinking banks, exposure to a Chinese slowdown and a striking lack of home-grown IT.
Germany might boast some of the world’s most successful and recognizable companies, from automakers BMW and Mercedes to global sportswear giant Adidas. But among the world’s highest-valued corporations, German companies have been rapidly dropping down the list. On Handelsblatt’s ranking of the world’s Top 100 by market capitalization, German companies have disappeared from the highest 50 spots altogether. The highestvalued German company, coming in 66th place, is drugs and pesticide maker Bayer, worth €96 billion, or $105 billion (see chart).
The dominance by U.S. firms in the top spots of Handelsblatt’s worldwide ranking has become almost total, especially following the seemingly unstoppable growth of America’s biggest Internet and IT companies, such as Apple, Amazon and Alphabet, the holding company that owns Google. The top 10 spots are all American. The first non-U.S. firm is Industrial and Commercial Bank of China in 11th place. Fifty-four of Handelsblatt’s Top 100 are headquartered in the U. S., while only 26 are based in Europe. Only six of the latter are German.
Corporate America has not dominated the rest of the world to this extent since the early 1970s. With a combined value of €1.4 trillion ($1.54 trillion), only three companies — Apple, Alphabet and Microsoft – are worth some €300 billion more than Germany’s 30 largest listed companies all together. These 30 make up the entire DAX stock index.
Corporate Gerrmany’s relative shrinkage is no short-term aberration. All of Europe has struggled to produce successful, fast-growing companies in the digital economy. German business software maker SAP, number 73 on the list, is the one exception that proves the rule. Among the European corporate giants on the list, the Old Economy still prevails — including companies like oil majors Royal Dutch Shell and Total, drug makers Roche and Novartis and food products group Nestlé.
The list shows that the U.S. has reestablished itself as an economic superpower by harnessing the digital revolution better than others. U.S. companies now dominate the entire supply chain, from network giant Cisco to telecommunications company AT&T, from chipmaker Intel to online retailer Amazon.
America’s dominance in the Internet economy seems to grow by the day. Particularly worrisome for Germans is the massive treasure chest of cash that companies like Alphabet are now spending on things like driverless cars, which could be bad news for the German economy’s most important industrial sector. Volkswagen, the Wolfsburgbased automaker that briefly surpassed Toyota to lead global sales figures in early 2015 but fell back to second place later that year, has dropped out of the list altogether. Hit by a massive emissions scandal in addition to more general worries over the future of Germany’s all-important car industry, the maker of VW, Audi and Porsche cars has lost a fifth of its market value.
Germany’s banking sector like much of Europe’s still reeling from the double whammy of the financial and euro crises — is also shrinking back down to size. Although Deutsche Bank is still one of the globe’s biggest banking behemoths by total assets, investors seem not to trust the bank to translate its outsized balance sheet into stable profits. Deutsche is now worth just €31 billion, a small fraction of the €255 billion valuation that makes Wells Fargo the world’s largest bank by market cap. Other worries weighing down on corporate Germany include the slowdown in China and other emerging markets. With almost 50 percent of German GDP generated by exports and a large German corporate footprint in China, German companies are more exposed than many others to developments around the globe.
Handelsblatt’s ranking does not include unlisted family-owned businesses, which are especially prevalent in Germany. Leading family companies include car parts maker Bosch, retailer Aldi and publishing firm Bertelsmann, which owns Penguin Random House. But though they count among the global leaders in their fields, none of them can compete in size with the world’s largest listed corporations.
Ulf Sommer covers finance and business for Handelsblatt.