BERLIN, Sep2: Thousands of workers at the insolvent German retail group Arcandor face an uncertain future amid growing signs that the company will be broken up, reports BBC.
The company’s collapse has also all but wiped out the $5.5bn (£3.4bn) fortune of its reclusive shareholder Madeleine Schickedanz, introducing her to a life of cheap pizzas, discount supermarkets and home-grown vegetables.
All eyes are now on Klaus Hubert Goerg, the court-appointed administrator who has the unenviable task of restructuring Arcandor.
On Tuesday, the insolvency proceedings were officially opened and Goerg presented the bankruptcy court in the German city of Essen with a plan mapping out the road ahead.
The plan coincided with news that there are 18 potential investors for Arcandor’s mail-order unit Quelle, with eight or nine of them interested in Arcandor’s entire mail order operation.
Yet many unresolved questions remain, not least with regards to how many jobs will be cut.
The saga surrounding the collapse of Arcandor has gripped Germany throughout this summer, ever since the retail giant filed for insolvency on 9 June.
With 40,000 jobs in Germany under threat, it was one of the biggest insolvencies Europe had seen since the financial crisis started last year.
German newspaper commentators referred to the “nightmare at Arcandor” and the company’s share price continued its downward slide.
Even its main investors, the Schickedanz family and the private bank Sal. Oppenheim, said they could not stump up any more cash.
Despite a heated public debate, Chancellor Angela Merkel’s government refused to help Arcandor, claiming the group ran into trouble before the current downturn.
It was a controversial decision. At the time, there was much focus on how ministers had given the green light for a bail-out of the troubled carmaker Opel, whilst at the same time ruling out state aid for Arcandor.
The company’s Karstadt chain of department stores, the German mail-order unit, Quelle, and the Primondo service group were all affected by the insolvency, among other entities.
“Chancellor Merkel’s government was right not to bail out Arcandor because it’s better to let the market decide whether a company has a viable business model,” says Stefan Kooths, an economist at the German Institute for Economic Research in Berlin.
“But the government sent a contradictory message when it [vowed to] bail out Opel.
“That was clearly a protectionist measure designed to help the German car industry.”
Back in June, Arcandor hoped a single investor could be found, but the company’s optimism proved to be ill-founded and separate investors are now being sought.
Arcandor is searching for buyers for its different divisions and the group’s creditor banks are looking to sell most of its 53% stake in Thomas Cook, the UK tour operator.
“Our priority is to save as many jobs as possible,” says Gerd Koslowski, a spokesman for Arcandor.
“We tried to find an investor for the whole Arcandor group, but that wasn’t possible in these difficult market conditions.
“We’re still looking for two investors for the Primondo mail order unit and the Karstadt stores and we’re hopeful.”
Arcandor’s decision to file for insolvency was seen by many as inevitable, given the group’s long-standing difficulties.
Once called KarstadtQuelle, Arcandor almost went bankrupt in 2004 and the company later struggled to stay afloat.
Karstadt’s department stores, which employ 30,000 people in Germany, were regarded by analysts as retail sector dinosaurs.
In recent years, large shopping malls were built outside city centres and the catalogue business of Quelle faced a massive threat from internet companies.
After the German Woolworth chain filed for insolvency in April, Karstadt’s days were numbered.
“We’ve seen a gradual demise of traditional department stores in Germany over the past couple of decades,” says Professor Thomas Roeb from the Bonn-Rhein-Sieg University of Applied Sciences.
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