Arcandor bankruptcy
June 9, 2009
Politicians from across the spectrum in Germany have been reacting to news that retail group Arcandor has filed for bankruptcy. The company's plight and the government's response to it had already been at the centre of vigorous debate in the country in recent weeks.
Berlin's decision not to help save the firm follows its intervention a couple of weeks ago to keep carmaker Opel afloat with billions of euros in state aid. However, Chancellor Angela Merkel has insisted all along that Arcandor was in trouble even before the recession.
To qualify for help from a government fund set up to assist companies hit by the economic crisis, firms must prove that they were healthy before the crisis struck, as well as present a solid plan for the future. The European Commission also said last week that it was opposed to state aid for the stricken company as Arcandor's woes pre-dated the global economic crisis.
Merkel has described Arcandor's insolvency application as ‘'an unavoidable step'', adding that it would give the company an opportunity to create ‘'a new future''.
Some others in Merkel's Christian Democratic Union are blaming the company's managers for the insolvency, saying they had intentionally let the firm fail. Oliver Wittke, the economic policy spokesman for the CDU in the state assembly in North Rhine-Westphalia, where Arcandor has its headquarters, said that the government could not give unconditional guarantees. ‘'The goal must now be to save jobs along with as much of the company as possible,'' he added.
The German minister of transport, construction and urban affairs has called for continuing efforts to ensure the preservation of Karstadt stores.
"I can't imagine what it would look like to have not just the windows firmly shut but also the lights behind them go out,'' said Wolfgang Tiefensee (SPD) in the city of Dessau-Rosslau in the eastern German state of Saxony-Anhalt. ‘'These places are not only vital for employment, but also the appeal of the city centres,'' Tiefensee said.
Daniela Schneckenburger, head of the Greens Party in North Rhine-Westphalia, has described Arcandor's bankruptcy application as a ‘'bitter hour'' for thousands of workers amid already difficult economic conditions. She blamed Arcandor's owners for the failed bid to save the company, adding that as many jobs as possible should be saved.
The chairman of the company's board, Karl-Gerhard Eick, simply said: "Even as the insolvency proceedings are ongoing, we will continue to fight to save as many jobs and locations as possible."
The group, which has over 50,000 employees in Germany and a total of 70,000 across Europe, had hoped for 650 million euros in state loan guarantees and nearly 440 million euros in emergency loans to help the company tide over until a possible merger of its department stores chain with that of a rival group.
On Monday, Berlin gave Arcandor one last chance to file an improved application for state aid. German Economics Minister Karl-Theodor zu Guttenberg called on the company's owners to make "significant contributions" in order to qualify for emergency credit from the taxpayer.
This followed last weekend's last-ditch talks over the proposed merger of Arcandor's department store chain with rival group Metro's Kaufhof. Those talks failed to yield a breakthrough amid differences over price and other aspects relating to the possible sale of 60 of 90 Karstadt stores.
The bankruptcy claim includes the Karstadt chain of department stores, as well as Arcandor's mail-order businesses Primondo and Quelle. However, other subsidiaries like Thomas Cook, which is one of Europe's leading tour operators, the Primondo Specialty Group, which includes mail-order catalogues like Baby Walz and Madeleine, and home shopping channel HSE24, are not affected by the insolvency declaration.
Under German law, a court-appointed administrator can attempt to salvage the profitable parts of the group while closing segments which have no prospect of making a profit.
A district court in the city of Essen, where Arcandor's headquarters is located, is set to decide on the future course of action and is to appoint an interim administrator.
Meanwhile, employees' salaries are to be covered by the German government through August as the Federal Labour Office generally pays salaries to the workforce of insolvent companies for up to three months.
rb/dpa/Reuters/AFP
Editor: Chuck Penfold