A German Double Standard - TheStreet

A German Double Standard

The country's leaders don't mind when their firms go on global shopping sprees, but they balk at foreign ownership when it applies to them.
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Thriftiness, hard work and discipline are qualities typically associated with Germany. If the nation's leadership has its way, however, hypocrisy may become the next attribute associated with the country.

The potential hostile takeover of German telecommunications giant



by the U.K. company

Vodafone AirTouch

(VOD) - Get Report

has triggered a rash of protests by Germans against the deal. The protestors have latched onto the fact that Vodafone is not from Deutschland. Mannesmann workers went so far as to post a sign outside headquarters that read, in English, "Not For Sale."

This weekend, German Chancellor

Gerhard Schroeder

joined the fray. In an interview in the French newspaper

Le Monde

, he condemned the deal, saying "hostile takeover bids destroy the culture of a company." He urged "extreme prudence" when considering whether foreign companies can buy German companies, although he did not call for an outright ban on such purchases.

The hypocrisies are as thick as a

Thomas Mann

novel. As


Nick Watson


reported, Vodafone undertook the hostile bid to protect itself after Mannesmann bought the U.K. mobile-phone operator



, threatening Vodafone's position in the market.

In addition, there is the long record of German takeovers of other companies around the globe, from


in the U.S. to


in the U.K. Those, of course, were not hostile, but Schroeder seems to be as much distressed about takeovers by foreigners in general as he is about hostile ones.

Yes, a hostile takeover affects and may possibly destroy the "culture of a company." The very nature of a hostile takeover certainly leads one to believe that the "victorious" company will destroy the "conquered." Any time a company is bought and merged with another, new management may bring disruptions, layoffs and a change of corporate culture. Sometimes that is good for a company, and sometimes it backfires.

Indeed, there are valid reasons for viewing takeovers with skepticism. Bigger is not necessarily always better for a company, but that is a decision a company's managers, its stockholders and the market should decide, not the government. Beware of attempts to resist takeovers based on nationalism rather than economic fundamentals.

The furor over the Mannesmann takeover brings to mind similar episodes of economic nationalism that occurred in this country in the 1980s. Japanese purchases of

Rockefeller Center


Pebble Beach

golf course were viewed as America selling off its heritage, rather than simple real estate transactions. In retrospect, however, some of those sales were smart, others less so. As far as I can tell, however, none contributed to a loss of U.S. heritage or sovereignty.

Some of the concerns over Japanese purchases were clearly racist in motivation (British purchases at the same time weren't criticized) but fortunately that type of thinking seems to have abated. When


bought Chrysler, there was little outcry. There is, of course, a great deal of anxiety over globalization in this country, but we seem to tolerate at least one aspect of the international economy: Foreign investors are, for the most part, able to buy and sell companies or stocks or bonds in most countries. That is what globalization is all about, and the increased competition and economies of scale that come from it bring enormous benefits to an economy.

The danger in this episode is that Schroeder forgets about the benefits of foreign ownership (if he understands it all) and begins to sharply limit foreign ownership of German companies. Other nations would certainly reciprocate.

That would be a grave mistake. Perhaps it could be avoided if nations and their leaders learned to refrain from viewing companies as sources of national pride. Indeed, it is extremely difficult to identify the nationality of your run-of-the-mill large corporation these days, with its headquarters in one country, and branches and subsidiaries around the globe. Schroeder and other Germans should remember this. They will prosper if they take that lesson to heart.

David Kurapka wrote speeches for Treasury Secretary Robert Rubin from 1996 until 1999. Before that, he was U.S. Trade Representative Mickey Kantor's speechwriter from 1993 to 1996. Kurapka writes from Oakland, Calif.