German American Business Outlook survey predicts growth in transatlantic business despite uncertainty

By Susanne Gellert, LL.M.

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German businesses in the US play an important role in the US market: As a driver of growth in industries from automotive to wind energy, as an investor of roughly $292 billion in the US and as an employer of almost 700,000 people.

Every year, the German American Business Outlook (GABO) provides powerful insights into the current state and future expectations of German companies in the US. What are the opportunities and key challenges for German companies in this country?

For the eighth consecutive year, immediately after the elections in Germany in September 2017, the German American Chambers of Commerce (GACCs), in cooperation with the Representative of German Industry and Trade (RGIT) and KPMG, surveyed over 1,900 German subsidiaries in the US to assess their economic outlook.

Despite all the uncertainty and skepticism regarding the state of free trade and the availability of a skilled workforce, German subsidiaries are growing and investing heavily. A full 100% of the German companies surveyed in the US are now expecting growth for their own businesses for the first time since the inception of the GABO survey. In fact, when it comes to sales volumes, 2017 was just as successful for German subsidiaries in the US as the previous two years. At the same time, only 2% expect the US economy to contract in 2018. This positive outlook is based on a solid US economy. Harnessing the power of digitalization as well as driving innovation in research and development (R&D) through cooperation with universities and start-ups are key trends for German subsidiaries in the US.

Nevertheless, as German companies are expanding through mergers and acquisitions (M&As) or the creation of new manufacturing capabilities in the US, the struggle with an ever-increasing shortage of skilled labor is predominant and needs to be addressed by the US administration. This skills gap is the impetus for German companies to take the initiative and start cultivating their own workforce. Already 25% of German companies are upfront when it comes to establishing apprenticeship programs to keep their productivity at maximum capacity.

Moving forward, German companies are looking to the US administration to prioritize investment in a skilled workforce, as well as digital and physical infrastructure to sustain a favorable business

An executive summary of the key ­findings of GABO shows that:

Workforce, open markets and digital infrastructure are top priorities

Almost every company finds that investing in a skilled workforce is a very important factor to be addressed by the US administration, alongside the openness of markets. Also, investment in digital infrastructure is a much higher priority for German companies than investment in physical infrastructure.

Open markets

For 76% of German companies in the US, open markets are essential to their supply chain. A total of 52% of the companies consider openness to market a key issue for the US administration in creating a promising business environment. On the other hand, just 18% believe that a rollback of NAFTA would not harm their business.

Apprenticeships are rapidly gaining popularity among German companies

As sales volumes rise, German products and technologies continue to enjoy high demand in the US. Still, German companies are facing the increasingly challenging reality of hiring the skilled workforce they need to match their production capabilities. Currently, there are a record 6 million jobs open in the US. As a consequence, 87% of German companies find it difficult to attract qualified US talent to fill their vacancies – a 21% increase since 2016. Based on the absence of available talent, the share of German companies expecting to expand their workforce actually decreased from 80% in 2016 to 62% in 2017. More than half of German companies are now either already part of an apprenticeship program or would like to join a consortium-style program in order to train their staff.

Expansion on the rise

A total of 11% of the participating companies are planning to develop their businesses in 2018 through an M&A, up from a steady 7% to 8% from 2015 to 2017.

Data analysis

59% of the GABO survey participants anticipate future challenges when it comes to data analysis. Among the most pressing are data security, a lack of in-house know-how and the protection of company data. Nevertheless, there are fewer companies in the US than in Germany that report data-analysis challenges.

Research and development (R&D)

When it comes to R&D, four out of five companies in the US are collaborating with partners to achieve their goals. Partners that are most important to German companies are universities and community colleges, followed by start-ups and large tech companies.  <–

Editor’s note: 
The German American Chambers of Commerce (GACCs) in Atlanta, Chicago, Detroit, Houston, New York, Philadelphia and San Francisco all work together under the network of AHK USA. With nearly 2,500 members and a broad national and international business network, the GACCs offer a broad spectrum of activities and services. The Representative of German Industry and Trade (RGIT) is the liaison office of the Federation of German Industries (Bundesverband der Deutschen Industrie, e.V., BDI) and the Association of German Chambers of Industry and Commerce (Deutscher Industrie- und Handelskammertag, DIHK) in Washington, DC RGIT represents the interests of the German business community to Congress, the US administration and the international organizations based in Washington, DC.