More Japanese Saying Sayonara to Düsseldorf

In certain sensitive situations the Japanese answer is a smile, as the chairman of Germany's main industry association BDI, Michael Rogowski, found out when he asked Toyota Chairman Hiroshi Okuda to name the decisive factors the Japanese consider when choosing a foreign investment location.

"First, the infrastructure, and second, the qualifications of the employees," came the answer, to which Rogowski replied, "Mr. Okuda, East Germany is waiting for you." Unfortunately, the Japanese executive's response to that was only a polite smile, and Toyota is now setting up a new factory in the Czech Republic.

On both sides of the border between the Czech Republic and the German state of Saxony, a fierce competition has emerged to lure the most labor-intensive automotive suppliers. The Saxony Economics Ministry, with considerable justification, worries that other Japanese manufacturers will reject Germany in order to build new plants in the eastern European countries that are set to join the EU.

Companies cite lower costs and tax breaks in the former Soviet bloc, where many of the locations getting the most foreign investment are setting up international schools and developing their service sectors.

While Japanese investment in Germany totaling EUR1.6 billion ($1.8 billion) over the past five years was still three times the volume directed toward central and eastern Europe, most of that money involves ongoing projects decided in the early to mid-1990s, before the admission of the eastern European countries into the European Union became a certainty.

And while Germany remains a popular location for the European headquarters of Japanese companies, there is also a growing preference for the Netherlands.

Tohru Kawahata, a spokesman at Mitsubishi Motors in Tokyo, said that Europe was a difficult market for Japanese companies because of cultural, legal and tax differences, but that the Netherlands was the best starting point. The reasons include the huge port at Rotterdam, operating costs and taxes that are lower than in Germany, and an environment seen as more international, Kawahata said.

The popularity of the Netherlands is being felt in Düsseldorf. Dubbed "Nippon's capital on the Rhine," the North Rhine-Westphalia state capital, only some 45 kilometers (28 miles) from the Dutch border, can still boast more than 300 Japanese company offices or production locations and more than 5,000 Japanese residents.

Still, a few decades ago more than 500 companies from Japan had operations in the city, which counted more than 9,000 "Düsseldorf-Japanese" among its 580,000 residents. Over the past 10 years alone, however, the number of Japanese employees in the Düsseldorf region has dropped by a quarter to a little more than 1,400.

The reason, in most cases, was the relocation of companies. Bicycle components supplier Shimano, for example, moved across the border to Nunspeet. "Lower taxes and rents as well as living costs made the move advantageous," said Frank Pfeiffer, the company's head of marketing and sales. And with many Japanese companies looking to drastically cut costs at their overseas subsidiaries, Pfeiffer said those that remain in Germany are in many cases trying to replace more experienced and expensive managers with younger staff.

"The effects of these policies can be observed in Düsseldorf's daily life," said Ute Winkels, who heads the personnel department at Asiakomm, a human resources consulting company. The Japanese kindergarten and school have seen enrollments drop, while once free-spending Japanese are cutting back on their purchases on Düsseldorf's elegant shopping street, the Königsallee. "Our client base has declined by 30 percent," she said. "This should be symptomatic for the demise of many Düsseldorf services providers."

Trying to adjust to the decline, Asiakomm has started to offer seminars on German culture for Chinese, Koreans and Taiwanese in addition to its courses for Japanese