German firms, blue-chip and middle-sized, are looking outside of Germany when considering investment spending in the coming year. According to a Wall St. Journal survey, 15% planned on increasing spending in Germany; 54% said they were looking to emerging markets or the U.S.
They cite the lack of sales growth in Germany and in the EU as well as high production costs. These costs include high energy costs in comparison to the U.S. These firms include some of the most prestigious in Germany: Siemens, Adidas, and BMW. BMW is planning on expanding production in Spartanburg, S.C.
There is a lesson here for the U.S. The economic landscape matters and government cannot look to business as a never-ending source of increasing cash to subsidize sweeping plans. Businesses seek the best places to prosper, moves that are good for the business and for all their employees globally. Higher costs, be it in electricity, regulations, taxes, or healthcare can eventually drive nameplate businesses to expand operations elsewhere. That is how the free market works and there is no stopping it.
We are enjoying a return of manufacturing to the U.S.; however, the continuation of this positive trend is not guaranteed. Indeed, it can reverse direction if the cost basis here becomes globally less competitive, as is currently the case in Europe.