In response to the “destabilization of the world.”
About 20 German industry chieftains, rattled by the hits German companies
have recently taken, including Deutsche Bank and Volkswagen, spent Saturday
and Sunday two weeks ago on the phone with each other. They were fretting
about the future of Germany’s export-dependent industry and outlining
solutions. Some of the participants have since talked to the German daily, Die Welt, which published its report on Sunday.
Participants included Siemens CEO Joe Kaeser, BASF CEO Kurt Bock, Deutsche
Bank CEO John Cryan, BDI (Association of German Industry) president Ulrich
Grillo, and BDI General Manager Markus Kerber.
How to protect key industries in Germany is also topic of a paper being
worked on by the Economy Minister Sigmar Gabriel and his folks, the Welt
reported. They’re searching for “protective walls,” and are working on a
“list of options for actions to protect key German industries.” Finance
Minister Wolfgang Schäuble and State Secretary at the Finance Ministry Thomas
Steffen are in on it.
For months, top executives and politicians have been discussing the impact
of foreign governments on the “pillars of the German economy.” The recent
“re-nationalization” of economic policies in many countries, in parallel with
the “destabilization of the world,” scares these managers.
“We are in a new phase in global politics, in which many countries are
reverting to their national interests, where globalization is being turned
back,” Kerber explained. Other executives have used similar words in their
confidential conversations.
Everyone is looking for answers. Nothing has been decided. Solutions are
being worked on “behind the scenes.” And it shows, the Welt said,
that “protectionism is suddenly no longer a dirty word” in business and
politics.
These four events shook up German industry leaders:
- Deutsche Bank’s potential fine of $14 billion that the
US Justice Department has proposed to settle allegations concerning
mortgaged backed securities sold before the Financial Crisis by its US
unit. The largest US banks have already settled, and Deutsche
Bank’s fine won’t be the largest one.
- Volkswagen’s nightmarish legal situation in the US, and
to a lesser extent in other countries, after having gotten caught in a
monster fraud case that has become known as dieselgate.
- The acquisition of German robotics darling Kuka by the
Chinese firm Midea.
- The proposed acquisition of lighting specialist Osram by
Chinese firm San’an Optoelectronics.
In the first two instances, the tycoons fear foreign governments’ reach
into their home base, and suddenly they feel vulnerable, after their
enterprises had committed those acts of deception and fraud for years
overseas. They want to defend their enterprises and the economy against this.
And in the instances of acquisitions, the tycoons want reciprocity.
“Germany is in a phase where it has to once again act with more
self-confidence,” BDI’s Kerber told the Welt. “We’re demanding
reciprocity from countries like China. If the Chinese want to buy German
high-tech firms like Kuka or Osram, then Germans must be able to completely
take over Chinese enterprises too.”
But relations with China are getting increasingly difficult, these
executives said.
Major foreign firms cannot start their own subsidiaries in China but have
to do it with local partners in joint ventures, often requiring technology
transfer. And foreign firms cannot take over Chinese firms; they’re only
allowed to buy stakes in them.
One of the proposals is that the government would have the right to forbid
the sale of companies once a buyer obtains more than 25% of the voting
shares. A government veto would be justified when a large state, such as
China, is somehow involved in the transaction.
Germany’s export-oriented economy perhaps depends more than any other on
globalization. And so these business leaders are watching with deep concern
the national efforts by many other countries.
“The German economy has about one trillion euros in overseas assets in the
fire,” Kerber told the Welt. “We have to take care of that.” The
solution is in a stronger cooperation between the political powers and
business leaders, he said. “The times when politics could do without
business, and when business could do without politics are over.”
“We Germans must focus on the interests of our industry,” Kerber said,
adding that Deutsche Bank, as biggest bank in Germany, is an example.
In those phone calls on Saturday and Sunday two weeks ago, the business
leaders struggled with a delicate topic: Does the German economy still need
Deutsche Bank? And if yes, how could they support the teetering bank? Is
there even any will to do this?
“Everyone agreed that we have to support the bank in an emergency,” one of
the participants told the Welt. So among these executives there was
a consensus to help the bank with a declaration of confidence – not
surprisingly, we’ve since heard plenty of such “declarations of
confidence.”
And if that doesn’t work they’d even help the bank with money, such as an
equity stake – which raises an intriguing question: Would they borrow those
billions at negative interest rates from Deutsche Bank and use the funds to
acquire the new shares Deutsche Bank would sell? The Welt didn’t
say. But it would be a nifty idea.
To defend against foreign governments’ attempts on their companies, some
CEOs want the “conceptual revival of Deutschland AG” (Germany
Inc.).
Deutschland AG was the tightly woven network of banks, insurance
companies, and industrial companies in the second half of the 20th century,
marked by cross-shareholdings and shared board members. The network was
largely disentangled in the 1990s.
Many of the companies won’t confirm these conversations, and some are
denying them, according to the Welt. But the idea of greater and
tighter industrial and political networks and mutual solidarity against the
outside world, particularly US government intrusion and Chinese lopsided
aggression find a lot of support.
A “structural change” is taking place in
China: capital flight in yuan. Read… What
the Heck’s Going on with the New Global Reserve Currency, the Chinese Yuan?
