The new generation of German executives whose only focus is on bottom line has shaken up country's cosy business elite, writes Derek Scally in Berlin

A new elite is leading a revolution at Germany's iconic companies, burying Rhineland capitalism in response to the demands of international investors.

This week's appointment of René Obermann to head Deutsche Telekom showed just how much things have changed in the last few years.

Obermann (43), formerly head of the T-Mobile wireless division, plans drastic cost-cutting measures to boost Telekom's sluggish share price and placate Blackstone, the US investor with a 4.5 per cent stake that brought down his predecessor.

From his talk of "increasing value" to his youthful appearance - sharp suits and cropped brown hair - Obermann couldn't be more different to previous German chief executives, who were over 60 with white hair and gold-rimmed glasses.

They were all lifetime members of Deutschland AG or Germany plc, a post-war Rhineland capitalism structure where the country's biggest companies - BMW, Allianz, Deutsche Bank, DaimlerBenz and Siemens - all had shareholdings in each other.

Germany plc was a closed country club, with house rules of modest management salaries and social responsibility towards workers.

Four years ago, the Schröder government abolished tax on the sale of cross shareholdings and, almost overnight, Germany plc members sold their crossholdings and threw open the country club gates to foreign members.

Now Anglo-American investors have moved in and are playing hardball.

The successor to Rhineland capitalism has already been dubbed "Kleinfeld capitalism" after Klaus Kleinfeld, who became chief executive of Siemens in January 2005.

Kleinfeld (49) has shaken up the century-old company by setting ambitious profit targets for all divisions and selling off unprofitable subsidiaries - like the mobile handset division to Taiwan's BenQ last year.

Kleinfeld's strategy is already showing dramatic results: company net profit for the fourth quarter will jump from €497 million to €900 million and the total turnover for 2006 is expected to jump from €11 billion last year to €87 billion.

However, his success was soured when it emerged that Siemens managers had awarded themselves a 30 per cent pay rise for 2007, while 3,000 employees of the mobile subsidiary sold to BenQ last year now face redundancy.

Kleinfeld was castigated in the German media and Bild newspaper made him a figure of ridicule by reprinting what at first glance looked like two identical versions of his official company photograph.

Both were issued by the Siemens press office: one when he joined the company in 2004 and another when he became chief executive last year.

The only difference, Bild pointed out, was that in the newer picture, someone had airbrushed out the Rolex watch on Kleinfeld's wrist. Kleinfeld has become a man Germans love to hate, joining a select club of managers headed by Josef Ackermann, the chief executive of Deutsche Bank.

Ackermann has transformed Germany's largest bank and generated record-breaking profits: this week Deutsche Bank announced it had made a post-tax profit of €4.2 billion in the first nine months of 2006, more than in all of 2005.

Similar to Kleinfeld, Ackermann made the mistake of announcing record profits last year on the same day as record job cuts, prompting public outrage.

The arrival of international investors and hedge funds in Germany has seen a rapid change not just in the style and priorities of managers, but also their shelf life.

A study by the consultants Kienbaum shows that German chief executives now serve less than the international average of eight years.

DaimlerChrysler has become the first DAX-listed company to issue its managers with contracts running for three years instead of the more usual five-year term. "An era is over. Now the carousel keeps spinning on," said Claus Goworr of the consulting firm CGC. "These days it is nearly impossible for a chief executive to pursue long-term strategies."

Klaus Ricke, the departing Deutsche Telekom boss, lasted just four years and no one expects his successor to hang on until he collects his pension.

Another prominent victim of Germany's new revolving-door policy is Volkswagen chief executive Bernd Pischetsrieder, fired last week although he had just been given a new contract in May running until 2012.

The door at Volkswagen revolved even faster for Wolfgang Bernhard (46), the executive brought in by Pischetsrieder from DaimlerChrysler last year as VW brand chief.

His task was to restructure the company - cutting benefits and extending working hours - in order to deliver profits of €5 billion by 2008.

Following the firing of his boss, he was expected to resign yesterday.

A Düsseldorf courtroom is currently the scene of the last battle between German and Anglo-American business cultures.

The case to be decided is whether the then Mannesmann chairman Josef Ackermann and others breached their duty to Mannesmann shareholders by approving €57 million in bonuses after Vodafone's takeover six years ago.

Ackermann, who didn't receive any bonus himself, described the bonus practice at the start of his retrial two weeks ago as "normal international practice".

Last year, however, an appeal judge said it was not at all part of German business practice and chastised Ackermann and other board members for treating shareholder money as their own and acting like "the lords of the manor rather than managers of the manor".

The public drubbing experienced by Ackermann and Kleinfeld despite their economic successes shows the contradictory demands facing Germany's new business elite: produce the double-digit percentage profits demanded by investors, yet remain socially responsible employers in the German tradition.

"The pressure on chief executives has grown immensely," said Jürgen Kurz of the DSW private investor association. "The days of the cosy Germany plc are definitely over."