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Germany's Mittelstand shares its coronavirus survival lessons

Commerzbank is one of the biggest lenders to Mittelstand firms which is successfully surviving this pandemic with double profits followed by Stihl.

Germany’s Mittelstand shares its coronavirus survival lessons

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  3 Dec 2020 2:03 PM GMT

Berlin/Frankfurt: In Germany's industrial heartland, engineering firms have come up with a recipe for surviving the COVID-19 pandemic.

The strategy is from some of the small and mid-sized "Mittelstand" companies (SMEs) that together provide almost 60% of all jobs in Germany.

Commerzbank is one of the biggest lender to Mittlestand firms, a lot of companies who go into "intensive care" was lower than it had expected and that clients were in no rush to get new credit lines.

For instance, Stihl took an unusual step when the lockdown was encouraged everywhere, it continued making chainsaws, lawnmowers and hedge trimmers to help struggling retailers stay afloat by extending their payment terms.

It helped the company survive.

After a tough couple of months, demand soared for Stihl's tools as people stuck in lockdowns spruced up their gardens. Since the month of May, Stihl enjoyed double-digit profit and is working on Sundays to fill its orders.

SMEs in Germany are generally larger than other European Union states, Eurostat survey shows.

Moreover, 90% of German company specialist engineers in firms featuring prominently among them.

An August survey shows that the management consulting firm McKinsey of over 2,200 SMEs in five European countries showed fewer German firms feared they would have to postpone growth programmes than companies in France, Italy, Spain and the United Kingdom.

Niko Mohr, McKinsey partner and Mittelstand expert said, "Due to the fact that the majority is still family-owned, the equity ratio is high and offers a good cushion for difficult times."

Stihl is a family business founded in 1926, took the decision not to become hostage to banks several decades ago.

It has been successful in building an equity ratio to 70% to ensure it can take business decisions independently.

One such company is Mahle GmbH, which makes auto parts from electric powertrains to air conditioning. It plans to close two other German plants and cut costs to adjust to technological change in its sector to reduce demands due to the pandemic.

Koerber in Hamburg is another Mittelstand company- with businesses from artificial intelligence to machines to package toilet paper- that went into the pandemic with solid finances.

Firms in the right sector with a healthy balance sheet says they are confident to adapt to any situation.

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