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In Honor of Labor Day – Georgia: the Mittelstand Model of the United States

| September 7, 2015 | 0 Comments


Wijnberg Senior Project Manager-International Investment, Georgia Department of Economic Development.

Erdrich USA, one of a number of German companies that have located their business operations in Georgia.

Hailo USA, Wacker Polymers, Freudenberg-Nok General Partnership and Erdrich Umformtechnik all have at least two things in common: they’re all companies with roots in Germany, and they all have chosen Georgia as their home away from home in the United States.

The driving forces behind their decisions are centered on what Germans traditionally refer to as Mittelstand. In the Mittelstand model, businesses intently focus on doing one thing very well. To compensate for the narrow focus, the companies then grow internationally to take advantage of worldwide B2B markets. Great value is placed on working closely with universities and researchers, and being located near large manufacturers. Given this definition, it is easy to see why Georgia has become the Mittelstand capital of the United States.

In the first half of 2015 alone, five major German businesses in the automotive and manufacturing industries announced their decisions to set up shop in Georgia. NIFCO KTW, GEIGER Automotive and Häring are all establishing manufacturing facilities in the state. Many suppliers have landed in Georgia partially because of its close proximity to manufacturing facilities of BMW, Mercedes-Benz and Volkswagen, all located in neighboring states, to which Georgia’s logistics corridors provide easy and quick access. Automotive giants are also joining their German suppliers in Georgia. Porsche Cars North America recently opened its new corporate headquarters in Atlanta, and Mercedes-Benz announced its plans to relocate to the region.

Announcements such as these are not a new phenomenon. The relationship between Germany and Georgia began more than 40 years ago, when the Georgia Department of Economic Development first established an office in Munich. Since that time, the Mittelstand model has blossomed to include more than 500 German businesses that now call Georgia home.

One such example of the success German companies achieve in Georgia can be found in the town of Dublin. Here, a number of corporations representative of the German Mittelstand model have established an enclave in which the U.S. and German cultures flourish side-by-side.

One of those companies is auto parts manufacturer Erdrich Umformtechnik, whose CEO, Georg Erdrich, said, “Following an extensive multistate search for the right U.S. business location for our company, we were delighted to find the right fit in Dublin, Georgia. This very pro-business community met our requirements with respect to logistics to our customers, access for our suppliers, operating costs, workforce and quality of life. The economic-development leadership at the state and local level worked closely with us to make our decision based on confidence in the data, the business analysis and the leadership.”

Mr. Erdrich’s remarks are a fitting summation of the advantages so many German companies continue to find in Georgia. In addition to the cultural synergy, factors such as access to universities and researchers, an ample and skilled workforce, a favorable financial climate, and logistical advantages also add to Georgia’s appeal to German companies.

Flexible and adaptive education models also help the most strictly traditional German companies flourish in the state. In one case, a pilot educational program was developed following the traditional German apprenticeship model, and others make use of Georgia’s Quick Start workforce-development program, which offers complimentary training that is fully customized to the needs of individual businesses.

The above elements do not stand alone, however; they work well when combined with the state’s low cost of doing business. Georgia’s single-factor tax apportionment, which applies the six-percent corporate tax rate to only the portion of income earned inside the state, is taken advantage of by nearly 500 German companies; a substantial boon to their bottom lines.

No other state is as well connected to the rest of the U.S. and the world as Georgia. Hartsfield-Jackson Atlanta International Airport is the busiest in the world, offering direct flights to more than 70 international destinations, including daily departures to four German cities. Georgia is also served by two deep-water ports: the Port of Savannah moves 20 percent of the East Coast’s overseas containers and is the fastest-growing U.S. container port; the Port of Brunswick is the nation’s busiest seaport for automobile imports. Georgia is also a major hub for both highway and rail transport. Eighty percent of the U.S. population is located within a two-day highway drive of Georgia.

The principles behind the German Mittelstand model have resulted in thriving business relations between Germany and Georgia. It is an international partnership that has resulted in countless win-win situations, and is only continuing to grow.

Nico[1]By Nico Wijnberg

Senior Project Manager-International Investment, Georgia Department of Economic Development


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