This is not the type of German Potato Salad that I grew up with, my grandma made a version that is also delicious, but it is quite different. I do think I prefer this salad warm, but my grandma's cold.
Warm German Potato Salad
3 lbs. small (2 inch diameter) red boiling potatoes, peeled if desired
10 bacon slices (1/2 lb.), cut into 1/4-inch-wide strips
1 large onion, chopped
1/2 tsp. sugar
3 Tbsp. cider vinegar
3/4 c. beef stock or store-bought broth
2 Tbsp. chopped fresh flat-leaf parsley
1/2 tsp. salt (or to taste)
1/8 tsp. freshly ground black pepper (or to taste)
Garnish with additional parsley (optional)
Combine potatoes with cold salted water (1 Tbsp. salt per every 4 Qts. water) to cover by 1 inch in a 6 Qt. pot, bring to a simmer, and simmer until just tender, about 20 minutes.
Meanwhile, cook bacon in a large heavy skillet over moderate heat, stirring, until browned and crisp, about 10 minutes. With a slotted spoon, transfer to paper towels to drain. Set skillet aside.
Drain potatoes. When just cool enough to handle, cut crosswise into 1/4-inch-thick slices. Transfer to a large bowl, add bacon, and cover to keep warm.
Pour off all but 3 Tbsp. fat from skillet. Add onion and cook over moderately high heat, stirring, until softened, about 3 minutes. Add sugar, 2 Tbsp. vinegar, and stock, bring to a simmer, and simmer until slightly reduced, about 3 minutes.
Add onion mixture to potatoes, along with parsley, remaining 1 Tbsp. vinegar, salt, and pepper, and toss gently.
Serve potato salad warm or at room temperature, sprinkled with additional parsley, if desired.
Source: The Gourmet Cookbook