Roland Berger Study: Majority of companies surveyed expect a return to significant growth by the end of 2011

• Survey covered approx. 800 board members and CEOs of businesses from over 14 different industries
• 57% of respondents believe the crisis has already bottomed out. Economic growth expectations for 2010: 1 to 1.5% (for 2011: 1.5 to 2%)
• 54% of companies surveyed expect to reach pre-crisis sales levels (2007/2008) again by 2011
• Companies plan to lay off far fewer people in 2010 than in 2009
• Only 9% believe their liquidity position is still dangerous for the company; but around half complain of worsening credit terms

The majority of the German company board members and managers take the view that the crisis has already bottomed out. They believe the worst is over and anticipate a return to growth as of 2011. However, they do see the situation for unemployment and the lending climate worsening. These are the findings of Roland Berger Strategy Consultants' latest study on restructuring in Germany, conducted this year for the sixth time. Companies ranging from SMEs to major corporate groups in more than 14 different industries took part in the study. The study was designed to find out how strongly and in which areas German companies are still concerned about the crisis in 2010 and how managers judge the prospects of an imminent upturn.

"The mood among the majority of German CEOs and executives is again positive. They believe the worst phase of the crisis is now behind them," says Max Falckenberg, co-author and Partner in Roland Berger Strategy Consultants' Corporate Performance Competence Center. "But we have an even more significant finding: Nearly three fourths of them now expect to reach their pre-crisis sales – the 2007/2008 level – again by 2012. Indeed, just over half think they'll get there by 2011."

As for the immediate period, the companies believe this year's economic growth will come to between 1 and 1.5%, but then rise in 2011 to between 1.5 and 2%. "There are, however, still some dangers lurking on the path to recovery," warns Falckenberg. "For instance, almost two thirds of our respondents expect rising unemployment and worsening credit terms in the short term." In the midst of the crisis, companies sought to avoid layoffs, frequently opting for part-time working programs to reduce costs. Many businesses cut overtime and introduced government-compensated short-time working. In addition, moderate wage agreements have helped save jobs.

Focus on financing and growth markets

What issues are now on the business agenda? "In 2009, there was a clear focus on actions to reduce costs. But for 2010, 83% of companies report a return to growth and sales initiatives," explains co-author Jakob Rüden. "As for restructuring, this has not yet become yesterday's issue for business. Most of these projects are currently in the implementation stage." The majority of firms run their restructuring projects over a total period of 12 to 18 months. "Companies now feel that pressures on labor costs are less than in 2009. They were already cut by 10% in 2009, while the cost-reduction targets cited by respondents are usually around 12%. These means only slight cuts are to be expected in 2010," says Falckenberg. "In many cases, companies have been able to avoid lay offs thanks to the good cooperation on all sides."

During the crisis, 26% of the companies surveyed described their liquidity situation as critical, but now only 9% consider their situation to be acute. The new problem is credit terms. 50% of respondents complain about the high cost of loans and tough collateralization requirements. This explains the current focus on operational steps to safeguard liquidity. In view of the difficult credit situation, the overwhelming majority of companies (69%) plan to finance future growth through their own resources. As for the sources of this growth, they tend to see the impetus coming from the Asian market: 79% expect strong growth in Asia, while only 10% see Europe as a growth market.

Lessons learned from the crisis

The study's findings indicate that business executives have drawn four lessons from the crisis: First, companies need greater liquidity reserves and equity ratios to be in better shape to face future crises. Second, working capital must be permanently optimized to secure liquidity. This should be considered a core operational action. Third, companies need to create variable cost structures, especially in human resources, so they can respond flexibly when the volume of business collapses. And fourth, they must lay the basis for future growth by taking sales initiatives already in the downturn. They can then exploit the weaknesses of their competitors. "True, the crisis has not yet been overcome, and there are still some dangers lurking on the path to economic recovery," concludes Falckenberg. "Yet the findings of our study point to good news on the horizon."