Perhaps the BMW investment in Leipzig that bucks the trend of manufacturers heading to Eastern Europe is cause to remind companies why Germany is still a good place to locate.

Helmut Panke, CEO of BMW, recently said that the automaker’s decision to invest in Leipzig has everything to do with unprecedented flexibility of German labor unions.

For example, BMW and the unions were able to agree to allow line workers to work Saturdays without extra pay, resulting in a 40 percent boost to production with no overtime charges and a total payroll savings of nearly 20 percent.

Salaries can be high in Germany. At $42 per hour, autoworkers there are among the highest paid in the world. But BMW was able to nab $454 million in European Union subsidies to employ its 5,500 workers. The jobs are much needed. Unemployment in Eastern Germany is at more than 20 percent.

Such scenarios have caused Ernst and Young in its 2005 “European Attractiveness Survey” to call Germany “the epicenter of the new Europe” and the best destination in Western Europe for new investment. There are many reasons why.

Berlin-Brandenburg hails success in attracting U.S. companies. In the information technology (IT) sector, eBay stands out among the rest. When it opened in 2001, eBay employed 20 workers. Today, 700 employees work for the company in Berlin.

Berlin-Brandenburg’s infrastructure is arguably its most attractive quality, with a new highway system, state-of-the-art telecommunications and a new international airport under construction. Delta and Continental recently introduced direct service to Berlin.

In no other region in Germany does one find such a high concentration of research institutions, including 23 technology centers and 28 universities.

Key industry sectors are media, communication, IT, life sciences, aerospace, microtechnologies and enabling technologies, energy and environment, logistics, automotive, and chemical.

“Berlin has the largest biotech cluster in Germany,” said Rolf Seliger of Berlin Partner GmbH.

Eastern Germany offers companies investment grants of 28 percent to 35 percent of the cost of a project, which is extended for three years. While such grants are available throughout Eastern Germany, they make Berlin distinct given the fact it is the largest city in the region and Germany’s capital. Berlin also offers a business recruiting package that helps companies select and train employees.

Gillette is doubling the size of its plant in Berlin. The operation is already one of the company’s most state-of-the-art production plants in the world.

Coca-Cola has also moved its German corporate headquarters to Berlin from Essen.

Attracting Investment

Magdeburg in Saxony-Anhalt has attracted key U.S. companies, including Dow Chemical, Tyco Healthcare and Guardian Industries. The city offers excellent transportation connections. Currently, it is promoting 758 acres of prime land north of the city, which is being developed as the Industrial and Logistics Center Magdeburg-Rothensee. Twenty-eight enterprises have decided to locate there.

Magdeburg offers distinct economic development schemes to encourage investment. One, called the Feed-In Tariff for Photovoltaic Solar Electricity, is a utility subsidiary where households subscribe to environmentally sound electricity and receive it at the same price as their former electricity. (The cost of Photovoltaic Solar Electricity is subsidized to encourage its use.)

In turn, their charges are used to attract companies by offering businesses that locate in Eastern Germany 54 acres of land free of charge.

The program has been so successful that both Spain and California are considering implementing similar proposals, said Anna Wohlthat of KGE Kommunlgrund in Magdeburg.

Saxony-Anhalt also provides investors with inexpensive land and support, including hiring and training workers.

“The incentives depend on the industry and the skills needed,” Wohlthat said. “Our traditional industry is machinery and mechanical engineering. We are the strongest city for mechanical engineers in Eastern Europe.”

Orangeburg, N.Y.,-based Nice-Pak, a wet wipe industry company, relocated to Osterweddingen in Saxony-Anhalt last year for these reasons and for the state’s infrastructure, legal environment, community support and qualified labor force.

Construction of the factory took less than eight months to complete.

The city of Hannover, in Western Germany, offers a distinct economic development scheme at its Hannoverimpuls facility in Lower Saxony. The EXPO Park Campus, located at the door of CeBit, the world’s largest IT trade show, offers free office space for a year, free Internet and telephone service, marketing and networking support to identify new clients, and administrative service on a per-use basis. About 30 companies have established offices in the complex.

The Hannover region specializes in the IT services sector. Scientific and research institutions, such as the University of Hannover, University of Applied Sciences and Arts, and Academy of Media Technology, as well as a superb communications infrastructure and excellent roadways are located in Hannover.

“As the system house for the Sparkasse Finance Group, we profit from Hannover’s central location, the range of highly qualified staff and the good infrastructure for our IT business,” said Thomas Noth, CEO of FinazIT. “We can quickly reach our clients and offices in Northern and Eastern Germany, and in Saarland. Important partners like IBM are in the direct vicinity. In addition, CeBIT takes place just around the corner.”

The Hannover region excels in the optical technologies sector, as well. At its heart is LZH Laser Zentrum Hannover e.V., an internationally known research institute that focuses on practical applications. To promote this competency, Hannoverimpuls is expanding its “Lighthouse 2005” startup and relocation initiative aimed at this industry sector.

“Lighthouse 2005” is an opportunity for startup entrepreneurs and companies to work in the direct vicinity of LZH. Incentives totaling 100,000 euros will be awarded, mainly in the form of service packages. Companies with successful business concepts will receive rent-free offices for one year, financial assistance and comprehensive know-how transfer to help jump start their businesses.

“One of the strengths of the Laser Zentrum is the technical integration between physics, materials science and production engineering,” said Hans-Kurt Tonshoff, board member of Laser Zentrum Hannover e.V.

The region of Bavaria continues to be noted as innovative. In 2004, 13,449 inventors were awarded patents, the highest total of any German region. Bavaria has long been Europe’s top award recipient of patents.

Many of the researchers work for Siemens, which, with nearly 3,900 patents, is the most innovative company in Germany.

Meanwhile, Cologne continues to stress its logistics advantages. Recently, UPS began developing a $135 million freight transshipment operation at Cologne Bonn Airport. It is the biggest investment UPS has made outside the United States. Cologne Bonn Airport is the second largest freight airport in Germany and the investment of UPS strengthens this position.