€10 billion liquidity reserve found in German industry

Alternative financing solutions increase competitiveness and efficiency

Munich, Germany, A new study by Siemens Financial Services (SFS) has uncovered €10bn of “frozen” capital(capital which is being used inefficiently or offers untapped liquidity potential) in German industry. The reason for this development is the failure to take advantage of various financing options when industrial capital goods and technologies are acquired. Through the use of alternative financing solutions like leasing or hire-purchase, this trapped capital can be turned into liquidity. This, in turn, will enable companies to tap into further efficiency potential and strengthen their competitive position as the economy begins to recover.

Kai Otto Landwehr, Managing Director of Siemens Finance & Leasing GmbH, said: “The importance of freeing up frozen capital is becoming increasingly urgent, as the manufacturing industry in Germany is coming under massive pressure to become more efficient in the wake of the economic crisis. Leasing and rental are important financing tools that help industry afford the most up-to-date equipment and technology, as well as improve efficiency.”

Equipment-replacement periods in Germany have not been lengthened as a result of the recent economic downturn, and industrial companies are increasingly unable to afford to tie up a significant share of their annual investment budget in plant, equipment and technology. The efficient use of company resources has become a top priority on business agendas. In industrial countries like Germany that are battling the aftermath of the recent recession, the release of working capital tied up in acquired assets will help to more efficiently and effectively use capital assets. These are the findings of the latest study by SFS. This research also represents a continuation of the series of studies initiated in 2006 about the financing behavior of six key economies (China, Germany, France, Great Britain, Poland and Turkey).

According the study, German industrial companies had a total “frozen” annual capital expenditure of €10bn in 2009. This represents a drop in tied-up capital of 20 percent compared with 2008. These figures indicate that working capital is being more efficiently used in the German industrial sector. Nonetheless, more working capital is being unnecessarily tied up in German industrial companies than in comparable companies in such countries as France (nearly €6 bn) and Great Britain (€2.5 bn). This is largely a result of the fact that Germany’s manufacturing sector is larger.

Overall, an estimated €110 bn in capital was frozen during 2009 in the manufacturing industries of the six countries studied, a drop of 3 percent from 2008. A larger portion of this capital could be released by using such alternative financing solutions as leasing and rental models.

Siemens Financial Services (SFS) is an international provider of financial solutions in the business-to-business area. With about 1,900 employees and an international network of financial companies coordinated by Siemens Financial Services GmbH, Munich, SFS supports Siemens as well as non-affiliated companies, focusing on the three sectors of energy, industry and healthcare. SFS finances infrastructure, equipment and working capital and act as a competent manager of financial risks within Siemens. www.siemens.com/finance

Reference Number: SFS20100406e