What role German companies play in the reconstruction of Ukraine

The Russian war of aggression against Ukraine is still raging. Nevertheless, there are increasing ideas in Kiev and among investors as to how things could continue after the end of the fighting. What role do German companies play?

Gunter Pilger goes through the assembly hall of the company DGS in Mainz. His employees stand at a large table: This is where automatic transmissions, electric and diesel engines are serviced and repaired before they are delivered. Pilger points to a corner of the hall: a forklift is transporting several packaged engines there.

“These industrial engines and automatic transmissions will soon go to the Ukraine. But I won’t say where,” Pilger clarifies in a friendly but firm manner. “I won’t name the recipients either. Our customers in Ukraine are afraid that there will be targeted Russian bombardments of their companies if the press reports on the deliveries,” says the 57-year-old.

No more business with Russia and Belarus

Pilger is sales manager at DGS. The company with 75 employees sells drive units from manufacturers such as Hyundai and John Deere. The transmissions and engines will later be installed in trucks, city buses or all-wheel drive vehicles. Around 500 transmissions per year are currently going to Germany – including to Mercedes. In addition, DGS exports to the Eastern European market, also to the Ukraine and until the beginning of 2022 also to Russia.

“The Russian market used to account for about 50 percent of our business. With the annexation of Crimea in 2014, that went down significantly because of the sanctions. With the war of aggression, we quickly stopped trading entirely. The same applies to Belarus,” says Pilgrim.

“Someday the war will be over”

But business with the Ukraine continues – despite the war. Pilger recalls that up to 500 gearboxes and engines were delivered to Ukrainian companies each year before the Russian attack. “With the beginning of the war, production at our partners in Ukraine collapsed.” Immediately after the Russian invasion of Ukraine, DGS initially sent two trucks with sleeping bags, mobile phones, clothing and food to the partners there – as a donation. Tools and work materials followed later so that production in the factories could start again.

“Everything is recovering now. President Selenskyj has called for the country to be rebuilt economically,” said the sales manager. “This year we are assuming that around 100 engines and 100 transmissions will be delivered to the Ukraine. They are currently needed for city buses and small four-wheel drive vehicles.” Pilger looks to the future: “The war will be over at some point. The infrastructure must be rebuilt. We see great potential in the country. We then expect up to 1,000 transmissions and engines a year.”

Hope for some kind of Marshall Plan

Cautious optimism can also be felt at an event organized by the IHK Rheinhessen last week in Mainz. It’s about rebuilding. About a hundred interested parties came – including many entrepreneurs from the Rhine-Main area. The IHK Rheinhessen has been active in the Ukraine for years, taking part in construction fairs in the Ukrainian capital, among other things.

“With the Orange Revolution in 2004, the great potential of the country became clear to us,” recalls General Manager Günter Jertz. “What’s most important now is reliability for investors. We want to support that. A safe and stable Ukraine is also in our own interest. We’ve noticed that here in Germany since the beginning of the war.”

The Consul General of Ukraine, Vadium Kostiuk, is also on a promotional tour in the large hall of the IHK Rheinhessen. “We now have to prepare for post-war reconstruction. For our western partners, it’s about long-term planning. We’re hoping for a kind of Marshall Plan. There’s a lot to do. The damage caused by the war is estimated at around 600 billion.”

German companies still on site

Reiner Perau from the German-Ukrainian Chamber of Industry and Commerce is only a few meters away. In the future, labour-intensive productions in particular will be worthwhile in Ukraine because wages are low compared to Western Europe. “Ukraine can become a kind of second China in the future. In addition, the country offers a real alternative for companies that can no longer invest in Russia,” says Perau. The areas of mechanical engineering, logistics, construction, health and agriculture are particularly interesting for German companies. “Despite the Russian attacks, the administration works surprisingly well. After the end of the war, this will be the largest construction site in Europe.”

According to the Eastern Committee of German Business, around 2,000 German companies have been doing business with Ukraine to date. The focus is on the supply of automotive parts and electrical components. But companies from the agricultural sector, building materials and pharmaceutical production as well as medical technology are also represented.

With the beginning of the war, local production initially collapsed, but then recovered quickly. Depending on the industry, the plants are working at around 70 percent capacity compared to the pre-war level. In the future, the country’s mineral resources could also arouse the interest of investors: Ukraine has large gas reserves and lithium.

Ukrainian society in transition

Entrepreneur Pilger has meanwhile arrived in his office and pours himself a coffee. Why does he believe in a good future for the Mainz company in the Ukraine? “Society is changing. The young people are Western-oriented, self-critical and willing to learn,” says Pilger.

In the past, his negotiating partners primarily had their own personal advantage in mind. Corruption was a huge problem. “These were gray gentlemen from Soviet times. The negotiations were often difficult and sometimes ended without a conclusion. But the young Ukrainians are now thinking primarily about their country’s economy, not just about themselves,” says Pilger. Small groups of Ukrainian business partners keep coming to Mainz to be trained on engines and thus build long-term contacts. “Your determination is impressive. That’s why I’m optimistic about this battered country. Ukraine is moving towards the EU and we want to be part of it.”