By Carter Dougherty

ESSEN, Germany For more than a century after its founding by brothers Balthasar and Philipp Helfmann in 1873, construction giant Hochtief rested on a largely German foundation.

Most of its projects were in Germany, and even those abroad relied almost exclusively on expertise from the home base.

But in the last decade Hochtief has become less and less German by all definitions - short of its company seat in the Ruhr valley. Prodded into action in the early 1990s, as it became clear that Germany's post-unification building boom would invariably bottom out, Hochtief sought salvation in acquisitions outside Europe and businesses outside traditional building.

"The classical construction industry was already an anachronism, and then came unification," Hochtief's chief executive, Hans-Peter Keitel, said in an interview. "We had to be careful we didn't end up afterwards with a hangover."

Today's Hochtief earns 83 percent of its revenues - it had 12 billion, or $15 billion, in sales last year - outside Germany. Of its 36,400 employees, only 8,000 are in its home market, down two-thirds from the early 1990s. Meanwhile, its stock price has risen steadily, from around 15 three years ago to more than 30 today.

Companies like Hochtief - and there are a lot of them in Germany these days - illustrate a central paradox of the country's economy. Amid macroeconomic stagnation and a sour mood among tightfisted consumers, many of Germany's largest firms are enjoying a run of healthy profits and rising stock prices because they are turning away from Germany to cut costs and raise revenue.

Manufacturers are outsourcing more and more of their operations, often by tapping the cheap pool of labor that hugs Germany's eastern border in Poland and the Czech Republic. Service providers, like Hochtief, shed German workers with the brawn to build in favor of a much smaller group of employees who can, together with their international peers, think their way through ever-more complex projects that might be in Chicago or Sydney.

This is Germany's new "bazaar economy," a term popularized by Hans-Werner Sinn, the head of Munich's Ifo Institute and arguably the country's best-known economist, who published a book on the subject last month.

"The German economy," Sinn wrote, "is an enigma."

Despite being among the world's top exporters in goods and services, Germany's growth is sluggish and job creation anemic. Sinn and other economists highlight changes at companies like Hochtief to explain why.

The German economy, Sinn and other economists say, should be understood as a platform from which slimmed-down companies will pick and choose where to do business, without relying on growth or creating employment at home as they once did.

Deutsche Bank recently announced it would focus increasingly on investment banking and trading businesses outside Germany - and this year created a political firestorm by cutting jobs at home while reporting a healthy profit. Even Porsche, known for its commitment to manufacturing in Germany, has become the poster child for the bazaar economy: roughly 45 percent of the value of its Cayenne sport-utility vehicle comes from manufacturing in Slovakia.

Certainly in the area of construction, Germany offers little for Hochtief to rely on. After a rush of building in the East in the early 1990s, the industry began to crumble; within the past decade, with 750,000 of the 1.5 million jobs vanishing as new construction contracts shrank, a trend the industry believes will continue this year.

During that phase, Hochtief embarked on an acquisition rampage that would dilute its dependence on the German market. In 1998 it became a leading builder in the United States by buying Turner Construction, and two years later it took a controlling interest in Leighton, a top firm in the booming Australian market.

For Keitel, chief executive since 1992, the acquisitions did more than simply secure new sources of revenue. They guaranteed Hochtief's access to vital knowledge about increasingly international norms for planning and organization.

In Germany, architects and engineers typically hand off plans for big projects to builders who simply do what the client wants. Elsewhere, particularly in the United States, architects, engineers and builders are partners who share both the risk and the potential rewards - a practice with which Hochtief now has substantial experience.

"The bazaar effect for us means bringing in the best practices from around the world," Keitel said.

Parallel to its internationalization, Hochtief also jumped into other aspects of construction, notably building management and airports, ensuring that fewer and fewer of its employees would be laying bricks. Roughly two-thirds of its profit now comes from new service businesses.

Hochtief now owns shares in airports as near as Hamburg and as far afield as Albania and Australia, allowing it to tap a constant stream of revenue over longer periods and avoid the more cyclical building business.

The expansion into entirely new business areas underscores a major point that often gets lost in the German debate over job cuts at a time of rising profit, analysts said.

"Just cutting capacity didn't create a new business model for Hochtief," said Ralf Dörper, a construction analyst at Düsseldorf-based WestLB. "That came when the company built out its services business and reached a better profit margin."

That development, Keitel hastens to add, has meant that Hochtief is adding lucrative jobs in engineering and logistics, but also in areas far afield of construction, like the doctors it has hired to help manage hospitals.

Indeed, Hochtief's investment in education has risen over the past decade from negligible to a central part of its costs. The company invests roughly a year's salary in training each new employee, and in 2000 opened the Hochtief Academy in Frankfurt to provide a three-year education to selected hires, who often come from universities in Munich, Darmstadt and Aachen.

"Hochtief is not just by chance in Germany - there are good reasons to stay here," Keitel said. "The know-how, the education is still in Germany. But these assets have to be part of a worldwide network."

Germany's unions, on the defensive after years of job cutbacks and wage reductions, view transformations like the one at Hochtief with a mix of envy and consternation. Andreas Hanack, an official with the building union IG Bau, laments that rising demand at Hochtief for highly educated labor is no solution for the bulk of Germany's unemployed. The welder who 10 years ago earned good wages in construction cannot move seamlessly into engineering.

"These are entirely different areas of work," Hanack said, "and the number of union members that have profited from this change is tiny."