German states keep tight industrial hold: Aerospace arm bought against OECD advice

SNUBBING the recent advice of the Organisation for Economic Cooperation and Development, German states are continuing to exert control over large industrial groups.

This tendency has received a further boost through the nationalisation of an aerospace works destined for closure. Lower Saxony, which with 20 per cent is the biggest shareholder in Volkswagen, said last week it was taking over the Lemwerder aircraft servicing operation due to be shut down by Deutsche Aerospace, part of Daimler-Benz. The government, which is carrying out the takeover through its state bank, NordLB, has given a job guarantee to all 1,000 workers until mid-1996.

In its report on Germany published last week, the OECD pinpointed the sizeable industrial holdings of the federal states as one of the structural barriers to a greater opening of the country's markets, undermining the economy's ability to adapt. While the national government in Bonn preaches privatisation, and is proceeding with some sales, the OECD criticised the protective tendencies still strong at state level and warned that they are spreading to eastern Germany. 'All of these shareholdings should be sold off,' the OECD report advised.

The Lemwerder works, which services the Transall military transport aircraft, was recently judged by Roland Berger, one of Germany's leading consultant groups, to be economically unviable. It is one of six factories that Deutsche Aerospace last year decided to close as it battled against heavy losses and shrinking defence and civilian orders. About 16,000 jobs are to go as part of its cost-reduction programme.

Gerhard Schroder, prime minister of Lower Saxony - a structurally weak region - described the takeover of Lemwerder as exemplary for the way in which politics and the economy should co-operate. The state-owned business will concentrate on refitting passenger aircraft into freight carriers.