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Expertise
How DEUTZ found
a way out of the crisis
Just short of 286,000 engine sales was the record result for DEUTZ in the 2007 fi nancial year. The forecast
for 2008 was promising – engine sales were to reach the 300,000 level. Metaphorically speaking, the engines
were revving at levels never experienced before. The DEUTZ Board of Management and staff looked promisingly
to 2008 and expected another successful year.
The fi rst six months of 2008 seemed to fulfi l all expectations for
DEUTZ, and the previous year’s success look as if it was to continue.
But then in September 2008, a report from the USA hit the
headlines: the US Investment Bank Lehman Brothers appeared to be
bankrupt. The reason was the bursting of a property bubble. Since
the end of the 1990s, increasing numbers of Americans had got
into debt in order to fulfi l their dreams of house ownership. The US
property market boomed and houses purchased on credit continually
rose in price enabling lending banks to give out even more credit.
To fi nance the increasing levels of credit, banks began to trade the
outstanding loans and offered them to the stock markets as securities
with guarantees of high returns. The US economy began to falter,
the Federal Reserve Bank raised base rates and this led to lending
banks then raising their interest rates on loans. This had the consequence
of many house owners being unable to repay loans and then
losing their homes.
The securities, which were based on the property bubble, dramatically
lost value with many banks having to resort to fi nancing the
18 DEUTZLIVE 01/2010
losses through short-term and low interest loans to other banks.
An increasing lack of confi dence then led to banks refusing to give
each other credit. On 15 September, stock markets around the world
collapsed with the German share index dropping to its lowest level
since October 2006.
The crisis then extended beyond the fi nancial sector to the real
economy with a force that nobody had predicted. What began as a
property crisis then slowly hit DEUTZ. For the third quarter of 2008,
DEUTZ reported a weakening in levels of incoming orders and sales,
particularly for engines of less than four litres. It was soon clear that
this was not a short term fi nancial crisis but a fundamental and long
term shift in the global economy. The outlook for 2008 had to be
adjusted to the new economic situation and the fi rst measures had
to be implemented.
DEUTZ took a decision in October 2008 to commence the “MOVE”
package of measures. The package contained short term measures