Can we ever learn to love the Germans?

The Rover, Thomson and Kleinwort episodes point to a clash of cultures

On the floor of Dresdner Kleinwort Benson's dealing room in the City, the news that Deutsche Bank's merger with Dresdner had failed because they could not agree on what to do with the British merchant bank was met with a cheer. "Two world wars, one world cup and a merchant bank," sang one trader.

Meanwhile, in Germany, the tabloid newspaper Bild decided to take a jingoistic stance on the bid for Thomson Travel Group by Germany's C&N Touristic. "In England they're already worrying about Germans flying them on holiday and giving them bad seats. Sorry, Britain, we've won the towel war," it said.

After Rover and BMW, Vodafone and Mannesmann, and Siemens and Tyneside, it seems there is little love lost between British and German business. It is a view borne out by a report commissioned by the Anglo-German Foundation, which may have hoped for a different conclusion.

Instead of fostering the spirit of international co-operation, British managers used the cloak of anonymity to rail against their German masters' love of rules and procedures. One British manager, describing his parent company's insistence that he report back constantly, said: "It is 3,000 ways of giving the same figures. Awful." Another complained: "Reporting is worthwhile, but every week's stupid."

Collin Randlesome, senior lecturer in European management at the Cranfield business school, says: "There's a rule for everything in Germany. You can tell by all the verboten signs."

Derek Pugh, emeritus professor of international management at the Open University business school, believes this obsession with rules explains BMW's secretive approach to the impending sale of Rover. "There wasn't a law saying they had to tell the British government, so they didn't," he said.

It seems that deep-seated mistrust between the historic enemies remains. "I had to learn that they are quite a racist nation. [They're] anti non-Germans," complained one manager. "There is also some arrogance."

It is perhaps no coincidence that Germany has a word for "knowing better", besserwisser. Indeed, the story of German companies either taking over or being partners of Anglo-Saxon groups is that the Germans often end up on top.

The classic example is DaimlerChrysler, when the US firm thought it was a merger of equals but found that in all key areas of the merged group, from the technical committees to the board of directors, the Germans dominated.

This is an extreme case. Thomas Cook has been under German control for eight years but the British operator has largely been left untouched, which may be some comfort for Thomson as it resists a German interloper of its own.

And for all the criticism of its treatment of Rover, there is no denying the commitment BMW demonstrated by investing £3bn in the British car marque. That is more than British Aerospace managed in the 13 years it owned Rover.

But making cars is the kind of long-term business requiring strategic investment at which Germany excels.

Professor Pugh says: "The issue with the motor industry is the vast amount of capital required. Germans are less good with innovative things like computing, where you have to be on your toes." Hence, perhaps, the difficulties Siemens had in installing the new computer systems at the Passport Agency.

"The British are good at patching things up," says Professor Pugh. "Germans have procedures to ensure that these problems don't occur in the first place."

Nor do British workers beholden to German bosses benefit particularly from the concept of "corporatism", in which a company is run in the interest of its employees and the wider community as much as for its investors.

Such behaviour is more a product of German law, which guarantees the representation of unions on company boards, than any corporate conscience. So says Tony Woodley, the chief union negotiator who has fought to convince BMW that the Rover jobs at Longbridge should be saved. "The reality is that they're consensual because they've got labour laws which dictate that," he says. "Most would prefer not to deal with unions at all."

In Germany, however, the social forces dictating corporate behaviour appear just as strong as the economic ones. Robert Bosch, the electrical goods maker, funds a foundation that runs charitable hospitals. Companies as diverse as Volkswagen and WestDeutsche Landesbank are wholly, or partly, owned by their regional councils.

But this is changing. Last year DWS, the fund manager owned by Deutsche Bank, launched an unprecedented attack on the board of Siemens, saying the performance of the group was a disgrace and that it should care more about its investors. Such "shareholder action" was condemned in many quarters in Germany as going against the grain.

"There is a rather uneasy, if not unstable, equilibrium, between the predatory methods of the UK and the US and the smooth corporatist methods championed in Germany," says David Marsh, vice-chairman of Hawkpoint Partners, the merchant bank, who is a long-time German watcher.

This unease has shown itself not least in the willingness of German shareholders to support Vodafone's bid for Mannesmann. However, it is also seen in the change in attitudes to risk among small investors in Germany.

Traditionally, Germans left their money in the bank or invested it in bonds, but they are rapidly embracing the equity culture. Last year Germans invested 342bn euros in mutual funds - about the same as in the UK. But while 91 per cent of British money was directed into equities, only 55 per cent of German money went that way.

However, this was a sharp rise from 1998, when only 39 per cent of German funds went into equities. At the same time, the value of direct investment in the German stock market by individuals has doubled in the last year to 170bn euros. The trend will only encourage German companies to take more notice of shareholders and less of workers, as in the UK. Whether our management cultures merge is another matter.

"The Dutch school says we're heading towards a pan-European culture", says Professor Randlesome. "I believe we may be crawling towards that, but we've a long way to go."

Part of the reason is that German managers tend to speak good English, while Britons and Americans speak little German. Another is that English organisations are often less complex and involve fewer interlocking relationships than German ones.

"The English and American economic landscape is like a wide plain with occasional rivers," says David Marsh. "However, the German economic landscape is full of hills and valleys with unexpected, dangerous crevasses."

As Rover and Stephen Byers have just found out.