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Economy: Three companies report on how they are experiencing the recession

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Economy: Three companies report on how they are experiencing the recession

Master baker Sebastian Brücklmaier in Munich. Picture Alliance

Who wants to know how much Germany’s economy is weakening find evidence for it. The International Monetary Fund expects the economy to shrink by 0.3 percent this year – the only one among more than 20 industrialized countries. Inflation eased in July but remains high at 6.2 percent. Rising interest rates make loans more expensive. Corporate bankruptcies are increasing, industrial production is declining. The international business magazine “The Economist” once again sees Germany as the “sick man of Europe”, just as it did 25 years ago.

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Ifo President Clemens Fuest sees it this way: “The situation in the German economy is getting darker.”

The specific impact of the recession is shown by highlights of three companies of different sizes and sectors.

Brücklmaierthe Baker in sixth generation

Master baker Sebastian Brücklmaier stands for a photo opportunity in his bakery. Now in its sixth generation, the Brücklmaier bakery employs around 70 people in five branches in Munich and three in the surrounding area. (to dpa: “Economy in concrete terms – how the poor situation affects companies”) Picture Alliance

Sebastian Brücklmaier has known the baked goods business since childhood. The 31-year-old practically grew up in the bakery and is now the sixth generation to run the Brücklmaier bakery. He employs around 70 people in five branches in Munich and three in the surrounding area. Its sales have risen due to inflation, but sales have fallen slightly. In general, the bakery trade is only moderately affected by economic phases. There are fewer very strong lows and highs, “perhaps because we are basic suppliers”.

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“In the past, my room costs were by no means as high as they are today. It’s brutal in Munich in particular,” says Brücklmaier. Material costs have also risen steadily since Russia’s attack on Ukraine. Price increases could only have partially compensated for the high costs. For some customers, the prices are now too high. To save, they bought more discount stores. In other countries, people are more willing to spend more of their income on food. “We have the greed is cool mentality,” says Brücklmaier about the Germans.

His biggest problem is the staffing situation. “Employers used to be able to choose their employees.” Today the tide has turned completely. For him, however, there is no alternative to Germany as a location. As a bakery, he doesn’t have the opportunity to emigrate abroad. After all, he is a regional supplier.

BASF – the global chemical company

BASF factory in Ludwigshafen Picture Alliance

The global chemical group BASF is suffering from the economic downturn and comparatively high energy prices in Germany. The Dax company announced cuts in February that also affect the main plant in Ludwigshafen. The bottom line is that BASF is cutting 2,600 jobs worldwide, almost two-thirds of them in Germany. At its headquarters, the group is shutting down several energy-intensive chemical plants – for example for ammonia – due to increased gas prices. This affects another 700 jobs in production. With the savings programs, the fixed costs should be around one billion euros lower annually from the end of 2026. The group has already lowered its forecast for sales and operating profit for this year.

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CEO Martin Brudermüller has repeatedly complained about expensive energy and too much regulation in Europe. BASF is increasingly investing in the large Chinese market: Up to ten billion euros are to flow into the new site in Zhanjiang in the province of Guangdong. It is to become BASF’s third-largest production site in the world after Ludwigshafen and Antwerp. Critics complain that the group is making itself too dependent on the autocratically governed country.

Würththe successful screw dealer

Symbolic photo Screw shelf with screws from Wuerth Picture Alliance

The Würth trading group from Baden-Württemberg has seen rapid growth for many years. In 2022, sales increased by around 17 percent and the company scratched the 20 billion euro mark. The operating result also increased. The company is known for its assembly and fastening materials, especially screws.

Growth ran out of steam in the first six months of the year. “After two years with record sales and operating results, the economy is now cooling off,” said Würth CEO Robert Friedmann. In the first half of the year, however, sales still rose by 5.9 percent. However, the operating result fell from 720 to 680 million euros. The company cites higher interest rates on loans as one of the reasons, which is inhibiting demand in the construction industry, which is important for Würth. But higher costs and price pressure are also factors.

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“Against this background, we are very satisfied with the development in the first half of 2023,” said Friedmann. He hopes for falling interest rates, which are the most important impetus for investment. CFO Ralf Schaich said that Würth itself wants to continue investing, even if growth is a bit weaker and the measures are having a negative impact on earnings.

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