The insolvency marks a further humiliation for Deutsche Bank, which chairs the supervisory board of Deckel Maho and is one of the company's main shareholders and creditors.
Deutsche was the architect of the merger last year of the traditional Bavarian rivals, Deckel and Maho, which between them accounted for 40 per cent of the German market in milling and boring machines. Both companies had plunged into heavy losses during the recession.
Deckel's products had become too expensive to keep up with eastern competition, while Maho was paying the price for an overambitious investment programme that had left it with excess capacity. Deutsche's gamble was to force the rivals together in an attempt to achieve the size and efficiency to beat the Japanese competition.
But the banking consortium's hopes for swift benefits from the shotgun marriage proved optimistic, as Deckel Maho is set for a loss of DM140m ( pounds 57m) in the year to June 1994 on sales of DM340m. At their peak in 1990, the two firms had a turnover of more than DM1.4bn.
The company, which employs 2,000, was forced to seek protection when one of its creditors refused to pay its share of the banks' latest rationalisation plan. The Bavarian government and the leading banks, Deutsche and Bayerische Vereinsbank, are expected to continue their efforts to rescue a firm once described as a pearl of German technology.
Deckel Maho's insolvency has come at the point when the battered German machine tool industry was beginning to emerge from three years of recession. For the first time since 1991, new orders were increasing, mainly from the US and Asia. The German firms have made efforts to cut costs - the sector's workforce in western Germany has shrunk to 73,000 from 102,000 in 1990.
Richard Schramm, engineering analyst at Trinkhaus and Burkhardt in Dusseldorf, predicts new orders rising by between 15 and 20 per cent this year, after dropping by 26 per cent in 1993.