What brought the collapse of giant AEG-Telefunken
In the biggest corporate failure in West German history, the major electrical concern AEG-Telefunken announced this week it was calling in a receiver and seeking a settlement with its creditors.
''We can no longer pay our bills,'' admitted Heinz Duerr, the chief executive brought in by AEG's bankers in 1980 to try to rescue the firm from a deep financial morass.
A household name throughout Europe for its televisions, washing machines, vacuum cleaners, and audio equipment, the widely diversified corporation employs 96,000 people in West Germany and has a worldwide work force of 118,000.
Plagued by bad management throughout the 1970s, West Germany's 10th largest employer overextended itself and became involved in too many loss-making enterprises. It invested heavily in the wrong kind of nuclear technology and its domestic appliances business fell prey to growing competition in a stagnant market.
In the last four years, it posted operating losses of 4 billion marks ($1.6 billion) and despite massive injections of credit from the banks in 1979 and again last year, it did not recover. Mr. Duerr partly blames the worldwide recession and high interest rates for the failure.
The receivership for which AEG has applied falls short of bankruptcy proceedings. The company can continue to trade while a receiver sells off enough assets to raise the cash needed to finance an agreed-upon settlement with creditors. AEG has offered big creditors 40 percent of their claims while assuring some 29,000 small claimants they will be paid in full.
AEG's plight has not provoked the panic in the currency and stock markets that some analysts had feared. The banks, who stand to lose at least 2 billion marks ($800 million) in the settlement, had long written down the debts.
Economists were quick to point out that no other major West German firms face problems of a comparable magnitude. Nevertheless, the AEG crash has dented West Germany's famed economic self-confidence.
Even optimists are forecasting that 20,000 AEG workers will lose their jobs because of the failure, without counting the effects on supplier companies. The firm's lucrative capital goods sector will almost certainly survive - United Technologies have shown interest in taking a stake. The Telefunken television and radio subsidiary also looks safe, providing the federal cartel office approves a bid from Grundig.
But many jobs will be lost in the home appliances sector, pushing up unemployment toward the politically sensitive 2 million mark. At present 1.8 million West Germans are out of work - 7.2 percent of the work force. The figures are lower than in all other major Western countries, but unemployment is growing faster in West Germany than elsewhere.
That problem, and the potential damage to the reputation of West German export industries, have combined to put pressure on the Bonn government to bale out AEG. But for a variety of reasons, Chancellor Helmut Schmidt's administration is particularly ill-placed to intervene.
Apart from its attachment to free market principles, championed by economics minister Otto Lambsdorff, the government is also restricted by severe budgetary difficulties and is still smarting from its experience in 1979, when a big Duesseldorf building firm went bankrupt only months after receiving big state loan guarantees.
The trade unions, which also suffered a loss of prestige by failing to prevent the AEG insolvency, have criticized Bonn for holding back. They have demanded that the state take a direct share in AEG. Their appeals may prompt the government to consider more loan guarantees if a viable rescue plan emerges, but Mr. Schmidt has already personally ruled out a direct or indirect nationalization of the firm.
So far, some 5,700 firms went broke in the first half of this year, more than 50 percent more than in the same period last year.