Marianne Arens
Once again, Galeria Karstadt Kaufhof (GKK) has filed for insolvency in the Essen district court. Once again, sales assistants are facing the loss of their jobs and future prospects. This is already the third insolvency in less than four years. And now, of around 32,000 employees and 243 GKK stores in 2018, only 15,000 staff (12,500 full-time) and 92 GKK outlets remain.
In an initial statement on January 9, the trade union Verdi said its “absolute goal” was that “Galeria as a whole must be preserved.” And how does Verdi intend to achieve this? Silke Zimmer, responsible for the retail division on the Verdi executive board, replied: “In our view, an investor is urgently needed for this, preferably an investor with retail expertise.”
This shows Verdi has no intention of even considering, let alone taking industrial action to defend jobs. Verdi is simply hoping that a new investor (with or without “retail expertise”) will appear on the horizon.
This is no surprise. For many years, Verdi has shown itself to be incapable and unwilling to defend the store workers. When René Benko took over the Kaufhof and Karstadt department stores for the symbolic price of one euro, the union welcomed him with open arms as a “saviour” and showered him with praise. Benko was mainly interested in the valuable properties in prime city centre locations. The WSWS recently wrote: “Benko is the product and embodiment of a sick society in which profit and wealth count for everything, while the fate and even the lives of ordinary people count for nothing.”
Verdi has repeatedly built golden bridges for Benko. Stefanie Nutzenberger, Zimmer’s predecessor on the Verdi executive, helped the financier from Vienna to close down dozens of branches and cut employees’ wages further and further. For years, allegedly to “secure jobs,” GKK workers have been foregoing wage components such as collectively agreed pay, holiday and Christmas bonuses. Currently, their wages and salaries are on average around €500 a month below the collective agreement for the sector. And most GKK employees have already experienced a branch closure and made the associated sacrifices.
When the coronavirus pandemic began, the Signa holding company took advantage of this to drastically restructure in the course of GKK’s first insolvency in April 2020. Verdi campaigned for the government to provide Benko with €680 million from its economic stabilisation fund. The result at the end of 2020 was a situation in which Benko-owned Signa Prime Selection paid out dividends totaling €200 million to its investors, while GKK employees paid the price with the loss of over 3,000 jobs and 40 branches.
The second insolvency followed in October 2022, and Verdi was prepared to seal the destruction of a further 5,000 jobs and 41 branches in a new restructuring agreement. The last of these stores are being closed right now, in the course of January 2024. So, workers at GKK now confront a third insolvency.
It is not due to the poor business performance of the department stores; GKK is caught up in the maelstrom of insolvency that Benko’s Signa Group is suffering as a result of the global interest rate crisis. Benko’s business model consisted mainly of Signa buying the department stores, increasing their property value and thus trading in real estate. This was accompanied by constantly hiking up rents, which Benko collected from his own department stores. For Galeria, this means the rents that some GKK shops pay to Signa consume up to 32 percent of revenue.
Signa was also able to borrow heavily against the highly valued properties: a kind of snowball principle that resulted in a huge mountain of debt. Benko used the money to pay for his lifestyle, his yacht, his private jet and lavish parties for influential politicians and financial backers. But it was also used to finance the purchases of new projects, such as the recent Selfridges prestige store in London, as well as other ongoing construction costs. Germany and Austria are now teeming with unfinished buildings; the ambitious Elbtower project in Hamburg has now been cancelled.
Above all, the money had to be used to pay the dividends due to investors such as management consultant Roland Berger, logistics entrepreneur Klaus-Michael Kühne, ex-Porsche CEO Wendelin Wiedeking and company heir Robert Peugeot.
The Signa empire consisted of an impenetrable web of over a thousand individual companies. It ultimately failed because interest rates, which have risen again in recent years, made refinancing the high debts a problem, while at the same time the value of the properties fell. The Ponzi scheme created threatened to burst. Within just nine months, Signa Holding’s mountain of debt rose from less than €2 billion to officially around €5 billion. According to JPMorgan, Benko is said to owe his lenders a total of at least €13 billion. Signa itself had to file for insolvency in December.
For Galeria, the Signa bankruptcy means that the promised €200 million investment funds, which would have to come from Signa in March 2024, are probably not available at all. Suppliers are therefore only delivering goods for cash and the management board at GKK headquarters in Essen is running out of money. Insolvency proceedings were filed January 8.
The process is symptomatic of the deeply sick and bankrupt capitalist profit system and its effects on society. The WSWS article quoted above summarises:
Benko, who is only 46 years old, was able to become a billionaire in a very short space of time because the entire political system has long focused on enriching those already rich. Fantastic profits are made on the stock exchanges, in the financial and real estate sector, in industrial and IT monopolies with gigantic salaries paid to managers, while taxes are cut, exploitation is intensified and education, health and public infrastructure are cut to the bone.
GKK workers are now at a crossroads: are they willing to leave their fate to Verdi and its pious hopes for a new investor à la Benko or worse? Or will they take the fight for jobs and wages into their own hands?
This is how business weekly Wirtschaftswoche described the prospects for GKK:
For the experts, the answer is clear: a break-up of the group with its current 92 remaining shops is now the “likely scenario,” says Johannes Berentzen, head of retail consultancy BBE. And: “I would be surprised if more than 20 Galeria stores survive.” Retail expert Gerrit Heinemann from the Niederrhein University of Applied Sciences also believes it is conceivable that only a few “cream pieces” will remain from Galeria. Property specialist Lars Jähnichen from IPH Handelsimmobilien expects that “more Galeria stores will be closed.”
The investment company of billionaire Walter Droege could be a potential buyer, he adds, but would “only continue to operate a few premium shops.” Even if an investor were found who would continue to run a large proportion of the GKK branches, any new start will mean not only revised rental agreements but also employees’ working conditions being renegotiated and worsened. Under the conditions of such investors (better described as “locusts”), a new start will in any case be paid for dearly by the workforce.
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