BERLIN — German Chancellor Gerhard Schroeder said Thursday the German government would not take steps to bail out the KarstadtQuelle department store and mail order group, which earlier this week revealed a $1.7 billion restructuring plan.

Schroeder described the retailer’s current situation as the result of a “failure of management in its most blatant form.” On Tuesday, KarstadtQuelle announced a radical restructuring that includes the sale or closure of 77 small-scale Karstadt department stores as well as the 305 doors belonging to the SinnLeffers, Wehmeyer, RunnersPoint and GolfHouse chains.

With thousands of jobs hanging in the balance, various factions have called on the chancellor to personally intervene. One politician demanded “an emergency package for the retail industry,” but this was quickly nixed by Germany’s secretary of commerce, Wolfgang Clement.

A spokesman for the German Retailers Association also went on record against government intervention in the retail scene. “We don’t need an emergency program, but rather a better economic policy,” said the spokesman, Hubertus Pellengahr. German consumers need “more money in their pockets,” he said.

Some of the 77 smaller department stores to be divested are currently operating in the black, but a member of the National Retailers Union estimated that at best 10 to 15 percent of them would find new owners. Inner city decay is a widespread concern in many of the smaller cities and towns affected.

— Melissa Drier

This story first appeared in the October 1, 2004 issue of WWD. Subscribe Today.