The Telegraph
Tuesday , February 23 , 2010
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A different recovery path

The soaring glass and iron Siemens factory in Berlin opened almost exactly a century ago. At first, it churned out electricity turbines, then munitions during World War II before being looted by the Soviets, which required it to be rebuilt at the dawn of the Cold War.

Today, it is manufacturing turbines again — except these models are among the most advanced in the world, each one able to power all the homes in this city of three million.

“It’s not a museum; it’s a workshop,” said Michael Schwarzlose, a project manager at the plant.

The same might be said for much of Europe itself, despite American suspicions to the contrary. European companies may not be as nimble as their counterparts in the United States, but in moving to preserve jobs through the worst global downturn since the end of the war, they have forged a different path toward recovery.

They are making old plants more modern and effective rather than watching workers or firms deemed uncompetitive fall by the wayside.

European companies have paid a price: lower profits and productivity than their American competitors. But as long-suffering American workers face the prospect of a jobless recovery, many analysts believe the European model may deserve another look.

“American companies have been faster to adjust their work forces and quicker in protecting profit margins,” said Gilles Moec, a senior economist at Deutsche Bank. But that does not mean companies on the Continent have fallen behind in innovation, experts say.

Americans often assume that newer, smaller companies are the engines of innovation and job creation —hence President Barack Obama’s decision to make a $30 billion programme to encourage small-business loans a centrepiece of his jobs plan.

Europe, in stark contrast, often relies on its large companies to sustain both employment and a cutting edge in important industries. One crucial tool, along with measures like work-sharing, is a reliance on environmental innovation.

“The large incumbents in Europe, which might have been considered technological laggards, have used green technology and sustainability as a core new element of growth,” said Luc Soete, a professor of international economics at Maastricht University in the Netherlands.

Some large companies are surprisingly resilient. The Siemens factory added 500 workers here in the depths of the economic crisis last year, beginning production of new gas-burning turbines that are the most powerful Siemens makes but emit substantially less carbon dioxide than older models.

In Europe, fuel is heavily taxed, and there are substantial subsidies for producing alternative energy. Such incentives serve a dual purpose: supporting employment at green-oriented companies in the short term and, Europeans hope, giving their companies a strategic advantage when the global economy and demand pick up.

At Siemens, for example, with revenue increasing 11 per cent from 2008 to 2009, its broad green portfolio is now growing faster than its other businesses, Barbara Kux, the chief sustainability officer at the company, said.

She points to the state-of-the-art products of the Berlin factory that manufactures turbines. “It’s part of sustainability, and it shows you think long-term and are there to stay,” she said. “It gives you the chance to keep experienced people, to keep their knowledge in-house and develop a high level of loyalty and trust so they feel like part of a family rather than just doing a job.”

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