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GERMAN ECONOMICS.   Term Paper ID:25008 Click to get this paper

Essay Subject: Overview of monetary policy, trade, market & industry issues, labor, focusing on automobile production. Tables.... More...

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Paper Abstract: Overview of monetary policy, trade, market & industry issues, labor, focusing on automobile production. Tables. Paper Introduction: AUTOMOBILE MARKET AND INDUSTRY IN GERMANY Introduction This research examines the automobile market and automobile production industry in Germany. The findings of this research are presented in two major discussions—country issues and market/industry issues. Country Issues Country issues related to Germany are addressed in four contexts. The areas of consideration are (1) cultural, social, and demographic trends and concerns, (2) political/governmental concerns, (3) exchange rate issues, and (4) macroeconomic issues. Cultural, Social, and Demographic Trends and Concerns Germa Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. 2.1 1956-73 3.8 .8 2.9 1973-9 2.3 1.1 1.2 1973-79 .8 1.1 -.2 1979-9 3.1 1.1 2. Automobile Market and industry in Germany Introduction This research examines the automobile market and automobile productionindustry in Germany. (1996,Summer). Short-term prospects for the German motor industry and market. Statesman's year-book, 1997-1998. (1998, 11 April). Industrial activity employs 43 percent of Germany's workforce,while 54 percent are employed in the service sector of the nation'seconomy, and the remaining three-percent are employed in agriculture. Feast, R. Thus, General Motors and Ford based in theUnited States have subsidiaries in Europe, including those located inGermany, which compete on equal terms with European-based automobilemanufacturers. While hours worked were declining in German manufacturing at the rateof .6 percent per year, hours worked in the United States increased at therate of .8 percent per year. Therefore, labor wage rateincreases have been moderate. High labor rates in theGerman automobile industry also have hurt the industry, as Germanmanufactured automobiles increasingly are unable to compete within thecontext of price ("Short-Term Prospects for the German Motor Industry andMarket," 1996). World Bank. One Japanese automobile manufacturer has a plant located inSpain. Upper-segment cars in Western Europe: A market under siege. Automobiles manufactured in Japan, as wellas those manufactured in the United States, and then shipped to theEuropean Community, however, are subject to both tariffs and traderestrictions in the form of import quotas. (1997, October). Motor Business Europe, 1 3-116. (1997). (1996, August). (1997, 7 July). The reunification of East Germany and West Germany into a single statehas produced economic, political, and social problems. The rateof population growth in Germany approximates one-percent per year. No infrastructure major problems exist in the old WestGerman states; however, some problems continue to exist in the old EastGerman states. Monthly Labor Review, 118(7), 39-55. (Ed.). While not all ofthese problems have been completely solved, they do not represent a sourceof instability in the country.Exchange Rate Issues Germany has pursued a monetary policy of that emphasized the controlof inflation, relatively high interest rates, and a strong mark, often tothe complete dismay of the country's European Community partners. Germany's international trade balance is traditionally in the black(Hunter, 1997). Monetarypolicy emphasizes interest rates and money supply management. A great leap forward. World development report 1997. Roby, E. European sales are in a funk:The vise of overcapacity tightens in an increasingly fragmented market.Automotive Industries, 177(1 ), 143-144. 2.6 United States 3.3 1.2 2.1 Difference .3 - .2 .51956-1993: Germany 3.1 .8 2.3 United States 3.2 1.1 2.1 Difference - .1 - .3 .21973-199 : Germany 1.4 - .4 1.8 United States 2. New York: OxfordUniversity Press. (1997,Winter). The output of this plant competes on an equal footing with European-based automobile manufacturers. Theareas of consideration are (1) cultural, social, and demographic trends andconcerns, (2) political/governmental concerns, (3) exchange rate issues,and (4) macroeconomic issues.Cultural, Social, and Demographic Trends and Concerns Germany is a nation of 81.5 million people (Hunter, 1997). 2.1 1956-93 3.1 1. (1997). Unemployment, however, is high in relation totraditional post-war German standards. German employers are encountering difficulties in effecting changesamong the German workforce. Germany's international trade balance is compared with that ofJapan and the United States in Table 1.Table 1International Trade Balance Comparison: Germany, Japan, and the UnitedStates [billions of US$]________________________________________________________________Country January-March 1998 April 1997-March 1998Germany + 4.62 + 7 .5Japan + 8.79 + 1 3.8United States - 18.8 - 199.4 [Source: "Financial Indicators," 1998]________________________________________________________________ German monetary and fiscal policy emphasizes the control ofinflationary pressures. (1998, 11 April). 199 -93 4. German governments (federal, state, and local) do notengage in deficit financing. Phelan, M., & Feast, R. The turnover rate in German manufacturing firms isquite low (Feast, 1996). Thus, automobile manufacturers in Germanytend to look to exports for sales growth.Political/Government Concerns Germany is a parliamentary democracy. Consumer prices in Germany have risen by anaverage of approximately 1.5 percent over the past five years (World Bank,1997). Infrastructure development varies,however, by region. New York:Oxford University Press. "Maastricht follies." (1998, 11 April). General Motors is the fourth largest seller of automobiles inEurope (market share: 11.8 percent), while Ford in number five (marketshare: 11.6 percent). Relevant data are presented in Table 2 which may befound on the following page. Far EasternEconomic Review, 42-43. Why Germany is hurting: High labor ratescould mean there'll never be another new vehicle plant built here.Automotive Industries, 176(8), 43-45. The areasof concerned addressed are (1) demand conditions, (2) the competitivestructure of the German automobile industry, (3) production costs in theautomobile industry, and automobile-specific tariffs and traderestrictions.Demand Conditions Germany's infrastructure is among the most highly developed among thenations of the world (Roby, 1994). Taxes in Germany are unified (Hunter, 1997). 1. Germanworkers are among the best educated, best trained, and most productive tobe found anywhere in the world. Germany is a key player in the drive toward European Monetary Union.The mark remains strong at DM1.84/US$1 and DM3. The findings of this research are presented in twomajor discussions-country issues and market/industry issues. Exports typically exceed imports by approximately five-percent. Thedifferences in labor productivity growth between the two countries isanother question (Lysko, 1995). Financial indicators. Additionally, excise taxes are leviedon most products. Country Issues Country issues related to Germany are addressed in four contexts. Thegoverning conservative coalition, the Christian Democratic Union (allstates other than Bavaria) and the Christian Social Union (in Bavaria wherethe Christian Democratic Union does not stand), has held power since 1982(Hunter, 1997). Unlike the United States, where Japanese automobilemanufacturers hold 27 percent of the market, the Japanese manufacturershave a market share of only 11.6 percent in Europe (Woodruff, 1997).Industry Production Costs A major labor-related problem for industries moving into Germany isthe fact that Germans by and large are unwilling to accept jobs inindustries where the wages are relatively low and the working conditionspoor by German standards. "The net result was that, although the useof combined factor inputs increased more in Germany than in the UnitedStates (an annual rise of 2.4 percent versus 1.6 percent), Germanmultifactor productivity grew marginally faster over this 17-year period;the average difference was .4 percentage points per year" (Lysko, 1995, p.52).Table 2Sources of Manufacturing Labor Productivity Growth, 1956-93 (Percent)_______________________________________________________________ Output Per Capital-Labor multifactorCountry Hour Substitution ProductivityUnited States: 1956-9 3. Economist, 347(8 63), S8-S1 . A proportional representationsystem assures that smaller parties are represented in the Bundestag. The pricing problem has hurt the industry in the domesticGerman market, the wider European market, and the global automobile market.Automobile Industry-Specific Tariffs and Trade Restrictions No tariffs or trade restrictions apply to automobiles manufacturedwithin the European Community, regardless of the country in which themanufacturing plant is located and regardless of where the headquarters ofthe plant owner is located. One action taken by thecompany to reverse this sales decline is the introduction of a new,smaller, and less costly passenger car line in the United States (Martin,1997).. Japanese cars spin their wheels onthe continent. Germany's distribution system is among the most highlydeveloped among the nations of the world (Hunter, 1997). Germany's modest population growth tends to produce market stability,as opposed to market growth. Taxes are levied onpersonal income, corporate income, capital gain, turnover and trade (valueadded), and insurance and accounts. F. Mercedes: Made in Alabama. References Economic indicators. 2.3 1956-73 6.5 3.1 3.4 1973-9 2.9 1.1 1.8 1973-79 4.3 1.7 2.6 1979-9 2.1 .8 1.3 199 -93 1.2 1.7 -.4 [source: Lysko, 1995]_______________________________________________________________Table 3Contribution of Labor, Capital and MFP to Manufacturing Output Growth,United States Versus Germany, 1956-93 (Percent Annual Change)_______________________________________________________________ Manufacturing Labor/Capital MFP GrowthPeriod Output Growth Input Growth __________1956-199 : Germany 3.6 1. (1994, 22 September). Short-term prospects for the German motor industry and market. Motor Business Europe, 18-41. Motor Business Europe, 25-57. Germany's GDP growth in 1997 was 2.4percent ("Economic Indicators," 1998). Volkswagen-Germany (market share: 15.4 percent), Fiat-Italy (marketshare: 14.2 percent), and Peugeot-France (market share: 12.9 percent) holdthe first three places in the European automobile market (Phelan & Feast,1997). 7/(1 ("FinancialIndicators," 1998). Hunter, B. Economist, 347(8 63), 8 . (1997,Summer). 2.6 1956-93 4.4 2. Lysko, W. Conclusion The automobile manufacturing industry remains stable but faces seriousproblems in relation to both costs and work practices. Taxes are collected by acentral authority, and then are distributed to the federal government, thelander (state) governments, and the local authorities. Economist, 347(8 63), 81. Market and Industry Issues Market and industry issues are addressed in four contexts. Germany will qualify for monetary union and the singleEuropean currency as of 1 January 1999 ("Maastricht Follies," 1998).Macroeconomic Issues Per capita gross national product is US$28,76 , gross domestic productis US$2.1 trillion (Hunter, 1997). Strong industrial unionization and legislation in Germany create jobprotection and security for German industrial workers. Martin, J. The contributions to manufacturing outputgrowth in Germany and the United States by labor, capital, and MFP arecompared. Relevant data are presented in Table 3, which may be found onpage 8. Business Week, (3548), 5 . Woodruff, D. The WesternEuropean automobile market increased to 12.7 million passenger cars in1997, maintaining its position as the largest new automobile market in theworld ("Upper Segment Cars in Western Europe: A Market Under Siege," 1997).Competitive Situation Competition in the automobile manufacturing industry in Germany is notlimited to Germany automobile manufacturers. Fortune, 136(1),15 -155. .8 1.2 Difference - .6 - 1.1 .5199 -1993: Germany - 2.2 - 1.8 - .4 United States 2.6 - .2 _ 2.8 Difference - 4.8 - 1.6 - 3.2 [source: Lysko, 1995]_______________________________________________________________ The competitive position of the Germany automobile manufacturingindustry has suffered in the decade of the 199 s, as German unemploymenthas increased by German standards (Feast, 1996). Growth in manufacturing labor productivity in Germany and the UnitedStates are compared. Manufacturing multifactor productivity inthree countries. 1.1 2.8Germany: 1956-9 4.7 2. Because Germany is a memberof the European Community, all automobile manufacturers within theCommunity compete on an equal footing within Germany ("Short-Term Prospectsfor the German Motor Industry and market," 1997). Labor stability is higher in Germany than inthe United States. For both Germany and the United States, manufacturing multifactorproductivity (MFP) is a more important explanatory factor than capital-for-labor substitution in explaining labor productivity growth. The tradition of strong worker social servicesand strong labor unions in Germany strengthens the will of employees toresist such changes suggested by management (Feast, 1997). (1997, 13 October). As a consequence,both strikes and unauthorized absenteeism among most German workers is lowin relation to most other industrial countries (Feast, 1997). Mercedes-Benz has recently experienced sales difficulties for thecompany's passenger car line in the United States. Productionincreasingly may be moved to lower wage areas. (1995, July). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.