Who owns Germany’s industrial future?
German family businesses are the backbone of the country’s economy. To protect them from the threat of erosion, we need a response to the age of AI. How can Germany become a champion of industrial AI? An essay.
Oliver Hermes is President & Global CEO of the Wilo Group, Chairman of the Board of Trustees of the Wilo-Foundation, Honorary Consul of the Republic of Kazakhstan in North Rhine-Westphalia, Deputy Chairman of the Near and Middle East Association (NUMOV), Member of the Board of Trustees of the Foundation for Family Businesses, Member of the Board of Trustees of the Africa Association of German Business, and Member of the Executive Board of the Sub-Saharan Africa Initiative of German Business (SAFRI). Representative of the Wilo Group in the Germany-UAE Business Council (GUBC) and a member of the University Council of TU Dortmund University. He is an essayist with articles published in independent media.
There is intense debate in Germany about deindustrialisation, skills shortages and low levels of investment. However, less attention is paid to a structural link: At the same time, the location is becoming less attractive to investors, highly skilled workers and business owners. Taken together, this points to a gradual shift in economic fundamentals that extends beyond traditional economic cycles.
There is as yet no scientific basis for speaking of a ‘sell-off Germany’. However, the available data reveals several trends which, taken together, paint a worrying picture.
Family businesses: the foundation of German prosperity
Germany differs structurally from many other major economies in that family-run businesses play an enormously important role. According to the Foundation for Family Businesses, around 90 per cent of private companies are family-controlled. They employ around 18.3 million people, or 58 per cent of the private sector workforce, and generate around 46 per cent of private sector turnover.
Germany therefore possesses an exceptionally large pool of privately held entrepreneurial capital with a long-term outlookThis ownership is more than just an asset. Family businesses typically combine capital with a long-term commitment to their sites, employees and regions. Strategic decisions are often made with generations, rather than quarters, in mind. That is precisely why the decisions these owners make today about where to locate their operations are so crucial.
Competitiveness: Germany as a business location is losing ground
Germany is becoming less attractive as a business location – and there are clear warning signs of this. According to the Family Business Country Index published by the Foundation for Family Businesses, Germany ranks at the lower end of the scale in an international comparison of key location factors. In terms of taxation, Germany ranks 20th out of the 21 industrialised countries surveyed; the same applies to labour costs, productivity and human capital. Germany also performs poorly when it comes to regulation.
That alone is not enough to cause a company to relocate. Location erosion works in a more subtle way. A family business rarely relocates its headquarters overnight. What matters, rather, is where the next factory is built, the next research centre is opened or the next billion is invested.
This is precisely where shifts become apparent. An ifo survey of around 1,500 companies revealed that just under a third were planning to relocate existing jobs abroad. Bureaucracy, energy costs and labour costs are cited as the main burdens.
The Deutsche Bundesbank reports a similar trend: in 2025, companies based in Germany provided affiliated companies abroad with around €97.5 billion in additional direct investment funds. It is particularly noteworthy that, for German industrial companies, cost reduction – at 35 per cent – was, for the first time since 2008, just as important a motive for foreign investment as the expansion of sales and customer service.
However, one important caveat must be noted: Germany continues to attract substantial foreign direct investment. The figures therefore do not indicate a one-sided outflow of capital. However, they do reveal a shift in the motives of German industrial companies. The problem therefore does not begin with a factory closure – it begins with the decision not to build the next factory in Germany.
When human capital becomes mobile
However, capital is not the only mobile factor in production. Academic research shows that German emigrants to certain destination countries are disproportionately highly qualified. In the case of the US in particular, there is evidence of strong positive selection of German emigrants and a high proportion of STEM qualifications.
Switzerland, too, is growing significantly in importance. According to the Federal Statistical Office, around 330,000 German nationals were living there in 2025, some 32,000 more than ten years earlier. A further 240,000 or so Germans were living in Austria. These figures do not suggest any ‘exodus’ driven by tax or regulatory factors. People emigrate for a wide variety of personal and economic reasons. However, they demonstrate just how mobile skilled labour has become within modern economies.
Human capital and entrepreneurship are closely linked. After all, it is not only engineers, scientists and managers who can relocate. Owners can, too.
The search for the next generation
Added to this is a demographic trend of historic proportions. According to KfW’s succession monitoring, 57 per cent of small and medium-sized business owners are now aged 55 or over. By the end of 2029, around 109,000 small and medium-sized enterprise owners are expected to arrange succession for their businesses each year.
At the same time, some 569,000 business owners do not plan to continue their operations after they step down. The reasons are particularly noteworthy: 47 per cent of business owners planning to wind up their business report a lack of interest within the family. 42 per cent cite excessive bureaucracy.
This is where two trends collide: A historically large generation of German entrepreneurs is reaching the age when they need to hand over the reins – and at the same time, Germany is becoming less attractive as a business location. This combination is economically highly sensitive. After all, every unresolved succession issue does not just raise the question of who will lead a company in the future. The question also increasingly arises: Who will own it in future?
From loss of investment to loss of ownership
This is where the real economic danger lies. If the next generation does not wish to take over a business, there are essentially three options: external succession, sale or closure. And this is precisely where the debate about German corporate ownership takes on a new dimension.
High-profile transactions over the past two decades illustrate the scale of the operations involved and the strategic technologies that can be affected:
Putzmeister, a German global market leader in concrete pumps, was acquired by the Chinese construction machinery group Sany in 2012.
In 2015, Getrag, one of Germany’s leading gearbox manufacturers, was acquired by the Canadian automotive supplier Magna.
In 2016, a particularly symbolic deal in technological terms took place: China’s Midea acquired KUKA, a German specialist in robotics and industrial automation.
In 2017, the American John Deere corporation acquired the Wirtgen Group, a world-leading German manufacturer of road construction machinery.
In 2019, the Erwin Hymer Group was acquired by the American manufacturer Thor Industries.
In 2021/22, control of HELLA – one of Germany’s leading suppliers of lighting technology, electronics and sensor technology for the automotive industry – finally passed to the French company Faurecia, now known as Forvia.
In 2024, Viessmann Climate Solutions became part of the American corporation Carrier for around €12 billion.
A few days ago, in mid-August 2026, the planned takeover of ebm-papst by Madison Air Solutions was announced.
These cases illustrate a crucial point: it is not just companies whose best days are behind them that are being sold. International buyers are currently particularly interested in companies whose technologies could prove especially valuable for the next industrial era.
This is significant from an economic perspective. After all, the loss of business ownership does not necessarily go hand in hand with immediate job losses. Plants may remain in operation, employment may even increase initially, and an international takeover may open up new markets, capital and growth opportunities for a company.
The crucial question often only arises years later: Where are the next generation of products being developed, the next billions being invested and the strategic decisions being made? Ownership does not simply mean a claim to future profits. In the long term, ownership also means having the power to make decisions on capital allocation, research, sites and technologies.
However, Germany is not merely a seller – the simplistic narrative of ‘sell-off Germany’ does not stand up. After all, German businesses have, for their part, taken over large foreign companies:
In 2015, Merck acquired the US life sciences business Sigma-Aldrich for around $17 billion.
In the same year, ZF Friedrichshafen acquired the American automotive supplier TRW Automotive for around $12.4 billion dollars.
Knauf, itself one of Germany’s major family-owned businesses, acquired the American building materials group USG in 2019 for around $7 billion.
In 2016, Henkel acquired the US-based Sun Products Corporation for around €3.2 billion.
International takeovers are, in themselves, neither good nor bad for the economy. They are a fundamental part of an open global economy. German companies must be able to acquire businesses abroad, just as foreign companies must be able to invest in Germany. What is therefore crucial is not whether Germany buys more than it sells, but which companies, technologies and capabilities change hands in the long term – and what strategic consequences this will have in the long run.
An acquisition of a consumer goods company and an acquisition of a specialist in robotics, automation, energy, sensor technology or cooling may carry the same price tag, but could have an entirely different strategic significance for the next industrial era. It is about an economy’s ability to build up its own ownership, control, expertise and value creation in the key industries of the next technology cycle.
A disastrous chain reaction
Companies invest internationally. People emigrate. Entrepreneurs sell businesses. Generations come and go. German companies buy foreign companies, and foreign companies buy German ones. The danger lies in the interaction of these developments: It becomes economically significant when several processes act simultaneously and in the same direction over a prolonged period.
The deterioration in business conditions is leading to lower levels of investment in Germany and increasing levels of investment abroad. This is how value creation is shifted. Added to this is the mobility of entrepreneurs and highly skilled workers, coupled with a shortage of successors. This is leading to a greater willingness to sell businesses, with the result that strategically important companies are falling into the hands of international investors. That would constitute more than just traditional deindustrialisation – it would be a creeping erosion of Germany’s business capital stock.
The counter-strategy: Germany as the world leader in industrial AI
In Germany, no fewer than three forms of capital are at stake. It is not just about factories. It is about human capital, investment capital and ownership capital. If an economy loses skilled workers, it lacks skills. If it loses investment, it will lack future value creation. However, if it permanently loses business ownership, it may also lose some of its decision-making power over where skills and capital are deployed in future.
However, the response to this trend cannot be to restrict international capital flows or to make the sale of companies more difficult as a matter of policy. The good news is that this trend is by no means inevitable. Germany possesses an asset that could prove to be of extraordinary importance in the global race to shape the next technological era: industrial AI.
Germany is unlikely to win the global race for general AI models against American and Chinese technology firms. But Germany has something that these companies cannot easily replicate: a globally unique industrial base comprising mechanical engineering, automation, electrical engineering, energy, water and building services, robotics, sensor technology, mobility and industrial production. And that is precisely where the next major phase of artificial intelligence could take place.
Industrial AI should not be understood merely as the application of artificial intelligence in industrial processes. Three dimensions come into play: Embed AI, Enable AI, Embrace AI.
Embed AI: ‘Embed AI’ means integrating artificial intelligence directly into industrial products, systems and solutions. In concrete terms, machines become more intelligent. Pumps optimise their own operation. Production facilities detec deviations before faults occur. Buildings manage energy flows autonomously. Industrial systems learn from operation and adapt autonomously to changing conditions. This is where Germany possesses what could be a crucial advantage. German industrial companies have decades of application expertise, installed product bases, industrial data and a deep understanding of physical processes. This domain knowledge cannot simply be replaced by a large language model. The key question, therefore, is not whether Germany will develop the next ChatGPT, but whether German companies will develop the world’s most intelligent products, systems and solutions.
Enable AI: Artificial intelligence does not exist in a vacuum. Data centres need energy, cooling, pumps and venting systems, as well as water and building services. They require power supply, automation, sensor technology and industrial infrastructure. The massive expansion of global AI infrastructure is therefore creating demand for precisely those technologies in which German industrial companies traditionally excel. German industrial companies cannot, therefore, merely be users of artificial intelligence. It is their products and technologies that make the AI era possible in the first place.
Embrace AI: ‘Embrace AI’ means consistently applying artificial intelligence within one’s own business processes. AI can make development, procurement, production, logistics, sales, service and administration more productive and efficient. This impact on productivity is of enormous significance, particularly for a country with high labour costs and an ageing population. Against the backdrop of Germany’s state-of-the-art industrial ecosystem – which partly adheres to Industry 4.0 standards but is relatively expensive by international standards – AI is facilitating a renaissance for manufacturing companies.
Industrial AI: A key factor for Germany’s industrial future
Embed AI, Enable AI, Embrace AI: This is where the real opportunity lies. Germany does not need to copy Silicon Valley. Germany has the potential to become the world’s leading location for the fusion of artificial intelligence and industry.
However, industrial AI must not simply result in German companies producing more efficiently, while the key digital platforms, data models and value-creation levels remain in the hands of others. The industrial transformation must be used to create new companies, new business models and new forms of ownership. At the same time, today’s ‘hidden champions’ could emerge as the industrial AI champions of the coming decades.
German family businesses, in particular, are especially well-suited to this: They take a long-term view, possess in-depth technological knowledge, have international customer relationships and control technologies that will be crucial in connecting between the physical and digital worlds.
However, Germany should not merely seek to defend its existing industrial capital stock. It should use it as a starting point for the next generation of business ownership. However, this requires better underlying conditions: corporation tax rates must be internationally competitive, red tape must be significantly reduced, the approval process must be speeded up, energy must become more affordable, and capital for growth must be easier to raise. Above all, however, business succession must not be made any more difficult by tax or regulatory frameworks.
In the end, competition between locations does not determine only where companies choose to manufacture their products today. It also determines where entrepreneurs will invest tomorrow. If Germany does not take a proactive approach to this issue of ownership, global competition will determine the outcome. Industrial AI offers the chance to reverse this trend.
The First Industrial Revolution turned Germany into an industrial nation. Industrial AI will determine whether Germany remains one – or becomes a leader once more.
Sources: The Foundation for Family Businesses, the ifo Institute, the German Centre for Higher Education and Science Research, the Federal Statistical Office, KfW
