For clues to how the German economy stands out from the European debt crisis, look no further than Champions League finalist Bayern Munich.
Germany’s most successful club on the field will go into the match in two days at its own Allianz Arena having not made a loss off it for 19 straight seasons. It plays Chelsea, the English team that’s been propelled to the top of European soccer thanks to more than $1 billion of cash from Roman Abramovich. The Russian oligarch has covered financial losses during every one of the nine years since he bought the London club.
“We have always had one philosophy and that’s not to spend more than we generate,” said Bayern Munich Chief Executive Officer Karl-Heinz Rummenigge, among the former players who’ve swapped soccer jerseys for suits. “From the very beginning when I came into the executive in 1991 after my career as a player it was quite clear that we have to follow this way.”
Bayern is a microcosm of how Germany manages its economy. While rival soccer nations England, Italy and Spain are in recession, Germany is continuing to grow, its unemployment rate is at a two-decade low and Chancellor Angela Merkel is telling euro partners such as Greece they must stick to austerity measures to undo years of overspending.
The German economy unexpectedly expanded 0.5 percent in the first quarter after contracting 0.2 percent, helping the euro area avoid a second recession in three years, according to figures published this week. Bayern meanwhile is forecasting record sales of more than 350 million euros ($446 million) this year, and profit of as much as 20 million euros.
“Bayern is just run in a very German way,” said Carsten Brzeski, senior economist at ING Group in Brussels. “They only spend on players what they’ve got in their bank account. You might get quick wins out of the debt-fueled Chelsea model, but in the long run you have to ask, is it sustainable?”
Bayern Chairman Uli Hoeness, 60, was the architect of the club’s philosophy. Since quitting a career on the pitch that included three-straight European Cups with Bayern between 1974 and 1976 and a World Cup with Germany, Hoeness has guided the club into the money.
The southern German team has grown to become the fourth-richest in soccer. It took 321.4 million euros of revenue last year compared with the equivalent of 6 million euros when Hoeness took over in 1979.
While governing body UEFA estimates top-level European soccer teams have amassed losses totaling 1.6 billion euros in pursuit of soccer success, Bayern has refused to overstretch to add to the fourth European Cup it won in 2001.
“Is it as interesting when you have a person behind you who is paying everything?” Hoeness said in an interview at a Munich restaurant in January. “To win the Champions League by working hard and generating your own money is much more satisfying.”
Chelsea has enjoyed the most successful period in its history under Abramovich. He bought players like Didier Drogba, Ashley Cole and Petr Cech as well as expensive flops like Andriy Shevchenko and made managerial changes that cost more than $100 million. In return, he got three league titles, four F.A. Cups and now a second Champions League final.
Over the same period, Bayern won four German championships and four German Cups, while being beaten in the 2010 Champions League final by Milan’s Internazionale, which recorded an 80-million euro loss the same year.
“Reaching two Champions League finals over the last three years shows that the Bayern model of healthy club finances can also yield success,” said Brzeski at ING.
Still, Bayern’s recent success hasn’t come cheaply either. The club spent more than 80 million euros acquiring its trio of attackers, Arjen Robben, Franck Ribery and Mario Gomez, and has the sixth-highest payroll in soccer, according to the Sporting Intelligence website. Chelsea is ranked fourth.
It also risks finishing without a trophy for the second-straight year after being thrashed by league champion Borussia Dortmund 5-2 in last week’s German Cup final.
“I believe a club like ours, which always has to be successful and try and win titles, must always invest in quality,” Rummenigge, 56, said in an interview. “Fortunately, thanks to our wealth we can do so.”
While its prudent housekeeping mirrors the German economy, its structure of turning to former players to run the business is also redolent of the “Mittelstand,” or family-run companies that have provided the backbone for German growth.
There are currently about 15 members of staff who wore Bayern’s red and white colors over the years, including honorary president Franz Beckenbauer, 66, and Gerd Muller, also 66, who helps coach the reserve team. A new generation is being led by 39-year-old former defender Christian Nerlinger, who was studying for an international business degree when he got the call from Hoeness to return as general manager in 2010.
Nerlinger, who negotiates player contracts and liaises with coach Jupp Heynckes on team matters, likened his transition to “jumping into cold water.”
Bayern Munich is 81.8 percent owned by its 170,000 members who pay 50 euros each to have a say in how the team is run. The remainder is owned by sponsors Adidas AG and Audi AG, which both hold 9.1 percent stakes. Adidas bought its stake about a decade ago to help finance the 350 million-euro Allianz Arena.
The relationship with Adidas is Bayern’s oldest partnership. Adidas Chief Executive Officer Herbert Hainer said company founder Adi Dassler used to ask players like Beckenbauer to try out new products and even wanted Hoeness to marry one of his daughters.
“That probably would have meant he would have been the boss of Adidas today and not the president of Bayern Munich,” Hainer told reporters in January.
Bayern might also profit from new financial regulations being introduced by UEFA, Hainer said. The rules stipulate clubs limit losses or face sanctions including exclusion from the Champions League starting in 2014.
Hoeness said it would be a “disaster” for his team if UEFA failed to implement its so-called financial fair play directive, saying Bayern would be unable to keep pace with the likes of Chelsea and now Manchester City.
City ended a 44-year wait for an English league title on May 13 thanks to 400 million pounds’ ($637 million) worth of new talent bought by its Abu Dhabi-based owner Sheikh Mansour bin Zayed Al Nahyan since he acquired the team in 2008.
Teams that rely on cash infusions from wealthy benefactors face risky futures, Hoeness said.
“It’s like Mr. Abramovich has I believe put 700 million pounds into the club,” he said. “What will happen if there’s a moment where he one day said, ‘I’m now going on my yachts and I buy pictures’ and so on? That’s a big question.”