#german industry

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Explore how German industrial giants, particularly SMEs, are grappling with the integration of Artificial Intelligence, the challenges they face, and the potential impact on their global competitiveness.

AI Hesitation: Can Germany's Industrial Giants Catch Up?

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Volkswagen's Historic Agreement with Union Amid Industry Challenges

Volkswagen Reaches Historic Agreement with Union Amid Industry Challenges Volkswagen, the largest automaker in Germany, has successfully negotiated an agreement with its labor union, effectively ending a three-month standoff that has not only impacted the company but also highlighted the broader challenges facing German industry. This significant deal was finalized after extensive negotiations,…

Volkswagen's Historic Agreement with Union Amid Industry Challenges

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Joint CO2 targets must not diminish German industry, CDU leader warns EU

Armin Laschet, frontrunner for next chancellor, says Germany will focus on innovation and market incentives

The frontrunner to succeed Angela Merkel as German chancellor has warned the EU that joint greenhouse gas targets must not come at the cost of diminishing the prowess of German industry, signalling a reluctance to join carbon reduction schemes planned in other European countries.

“Europe has to be modernised: we have to implement the Green Deal together but still remain successful with our industries,” Armin Laschet, the Christian Democratic Union (CDU) leader, told the Guardian in an interview.

“That’s the part that they don’t say out quite so loud in Brussels, but it’s what we expect in Germany: that we do everything to modernise our industries. There are many member states that are no longer industrialised economies. But us, and a couple of others, we want to stay that way.”

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So says the man who obviously has no idea of what is coming despite all the obvious warning signs. He should have his own personal heat doom for a week or two.

[mystlnewsonline]

BERLIN | Industrial production drops in Germany in October

BERLIN | Industrial production drops in Germany in October

BERLIN — Official figures show that factory production in Germany declined in October in another sign that Europe’s largest economy may be slowing.

The Economy Ministry said Friday that industrial production dropped 0.5 percent in October over September after adjusting for seasonal and calendar factors. The drop erased modest gains made in the last two months.

Despite the decline, ING Economist…

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Chinese Expansion Has Germany on the Defensive

By Simon Hage, Martin Hesse, Alexander Jung, Peter Müller, Gerald Traufetter and Bernhard Zand, Der Spiegel, May 24, 2018

China has already taken a significant step into Germany. In the Rheinhausen district of Duisburg, trains are now rolling across the site where steelworkers once fought unsuccessfully to save their mill in 1987 while shipyard cranes stack up containers on the banks of the Rhine River. This is the precise point where the New Silk Road, China’s massive infrastructure project, comes to an end.

The site in Duisburg is known as Logport I and it is one of the largest container ports in Europe. Twenty-five trains arrive each week at Terminal DIT, also known as the China Terminal, after having traveled the more than 10,000 kilometers from Chongqing across Kazakhstan, Russia, Belarus and Poland.

Four years ago, Chinese President Xi Jinping visited the inland port. The engine of a train that arrived from China that day was decorated with red paper dragons for the occasion and Erich Staake, CEO of the Duisburg port, was also on hand.

Staake, who, like the Chinese president, was born in 1953, sees the rail connection as a boon both for the port and for the entire region, which badly needs it. “We want to grow,” he says. “China and the New Silk Road offer us great potential.” One way of seeing it is that the trade route brings China and Germany that much closer together.

There is, though, another way of seeing it: Namely that the multibillion-dollar project provides the Chinese with a kind of bridgehead in Europe from which they are pushing their expansion across the Continent and broadening their economic influence.

So which is it? An opportunity or a threat?

It isn’t easy to find an answer to that question--and that itself is telling. Chancellor Angela Merkel’s visit to China this week will have a different flavor to it than her previous 10 visits to the country. The relationship between the two countries has changed in the interim and is no longer as balanced as it once was.

Until recently, the relationship had seemed almost symbiotic and the roles were clear: Germany sold high-end machinery and vehicles in China, including more than 5 million automobiles in 2017 alone. In return, China exported furniture, refrigerators and electronic devices to Germany at unbeatably low prices. But now, China has reached adulthood much more quickly than expected.

Not all that long ago, China was a developing economy, seen by industrialized countries in the West as a gigantic market where they could sell their goods. Then, it became the world’s factory, a place with inexhaustible resources. Now, however, it has matured into a powerful competitor capable of leaving Germany in its dust. Chinese companies are developing intelligent machinery and production facilities; they are building cars, many of them with electric motors; and they’re making inroads into sectors that used to be Germany’s private domain. China has figured out how to copy Germany’s successful model and is now becoming a danger to the original.

Mikko Huotari was one of the first to identify this development several years ago. Huotari is a scholar at the Mercator Institute for China Studies (merics), a think tank in Berlin. The old logic which held that “China needs us” is no longer true. In fact, he says, the situation has flipped: Germany is increasingly reliant on China as the country increasingly becomes a driver of global innovation. “The entire mechanics of the system have changed.”

Just how confident, or perhaps even aggressive, the Chinese have become can be seen when they buy companies in Germany. They used to target second-tier firms, but in recent years, the focus has increasingly shifted to key industrial players. “Germany is home to around 1,000 mid-sized companies that are global leaders in their sectors. The Chinese want access to them,” says Kai Lucks, head of the Federal Association of Mergers & Acquisitions in Germany.

Recently, Chinese buyers have even shown an appetite for companies listed on the DAX, Germany’s blue-chip stock index. In February, billionaire Li Shufu quietly acquired a 10 percent stake in Daimler. Dieter Zetsche, the company’s chairman of the board, believes that an additional large Chinese investor may also acquire a stake in the company: the state-owned firm BAIC, Daimler’s Chinese partner. Politicians and executives are beginning to wonder what large company might be targeted by Chinese investors next.

Along with those investments, uncertainty has been growing. And it’s not just coming from the Far East. Reliant as it is on exports, the German economy is sensitive to shifting trends in global trade and Merkel’s visit to China this week is coming right in the middle of a period of transition. China is growing stronger, America has become unreliable and Germany has to figure out what its new role will look like.

The economy has become used to seemingly eternal growth in the Far East, with exports to the region almost tripling in the last 10 years. But what will happen once China begins building high-tech machines of its own or exporting its own electric vehicles? That’s the point when German industry will quickly become painfully aware just how dependent it has become on China.

At the same time, though, German companies are confounded by the erratic course currently being charted by the U.S. president in Washington. If Donald Trump chooses to introduce punitive tariffs on steel and aluminum imports on June 1 and the EU retaliates, Germany will become even further alienated from America, which is still its top export market. This development likewise poses a significant risk to the domestic economy.

And everything is overshadowed by the potential of a trade war between the Western superpower and the Eastern superpower. The Trump administration accuses China of unfair trade practices and massive theft of intellectual property. As a consequence, he has threatened to introduce punitive tariffs worth $150 billion and China has vowed to respond in kind should he do so.

If both countries follow through, Germany would find itself in a hopeless--and extremely dangerous--position directly between the front lines. If Germany makes concessions to one side, the other side will be displeased. The country must find a solution to this dilemma, but it isn’t clear what that might look like.

China has a plan. Few in Germany took much notice when Beijing announced it in the form of a document called “Made in China 2025.” Written in the rather unwieldy terminology of communism, it describes how China intends to become an economic superpower. It was essentially the equivalent of throwing down the gauntlet to the West.

The plan calls for transforming China into a “major manufacturing power” by 2025, reaching an “intermediate level among world manufacturing powers” by 2035 and becoming “the leader among the world’s manufacturing powers” by 2049, the centennial of the founding of the People’s Republic. The master plan does not allow for potential economic crises. “Advanced technology is the sharp weapon of the modern state,” President Xi said in a 2013 speech that offers a powerful expression of the country’s new industrial strategy. “Our technology still generally lags (behind) that of developed countries, and we must adopt an asymmetrical strategy of catching up and overtaking.”

What he means is that he wants to make more rapid progress than others in 10 key fields: information technology, automation and robotics, aerospace and aeronautics, oceanographic engineering and high-tech shipping, high-speed rail, electric vehicles, electric power equipment, agricultural machinery, new materials, pharmaceuticals and medical equipment.

In contrast to previous long-term plans, the 2025 strategy seeks a global reach. Its goal is that of leaving behind Western competitors and transforming domestic companies into international champions. It is a blueprint for restructuring the country’s economy, from the factories to the laboratories, from industrial production to the service sector, from state-owned factories to privately owned businesses.

Other countries have pursued similar strategies in the past, including South Korea, Japan and, perhaps most significantly, Germany, whose industrial history Chinese experts studied closely before presenting China’s own plan. “The catch phrase ‘Industry 4.0’ hit China like a bomb,” says Changfeng Tu, who is a partner at the law firm Hengeler Mueller. It provided the blueprint for “Made in China 2025.”

The difference is that China is governed by an authoritarian system and the country is vast in size. If the Chinese leadership wants to, it can revamp entire economic sectors, as it did previously in the steel and solar industries. And now, it is doing the same in the automobile industry, Germany’s preeminent economic sector.

Like Germany since the Industrial Revolution, Shenzhen is a place that combines technical know-how with industrial application--a high-tech laboratory that still has the sheen of novelty. “The possibilities that Shenzhen offers are almost limitless,” says German engineer Jens Höfflin.

Wearing shorts and flipflops, Höfflin can be found at the startup community HAX. Together with his American partner, the 36-year-old developed a mobile magnetic resonance tomography device in Boston that will help heart and kidney patients avoid constant hospital visits. At HAX in Shenzhen, they have received funding to do an initial production run. Höfflin says it is easy to find whatever you might need in Shenzhen, whether it be circuit boards or die casting components. “Within a radius of just a few kilometers, you can find the right factory for production,” he says.

At the next desk, a startup founder from Australia is examining a prototype of a device that enables the monitoring of large herds of sheep. It is already the third iteration of his product, he says, adding that he returns to Shenzhen each time he makes an upgrade.

It used to be that Shenzhen’s low prices were the city’s main selling point, Höfflin says. “Now, though, it is its huge selection of suppliers.” The Chinese target young German entrepreneurs to bring to Shenzhen, hoping to profit from their know-how. But they also head to Germany themselves.

Last year in Munich, for example, Huawei opened its second research and development center. Around 300 experts are currently working on G-5 technology at the site, the next generation in mobile telephony. They are developing specialized antennas and semiconductors for smartphones. “Huawei sees Europe as a second domestic market and Germany is the heavyweight,” says Torsten Küpper, an executive at the German branch of Huawei.

No other company in Europe applied for more patents last year--not even Bosch or Siemens. When it comes to information and communication technology, Küpper believes that Huawei is the global leader. Now, though, the company is focusing its attentions on connecting industry in addition to connecting people, he says, which is why it has come to the Munich region, which is home to many mechanical engineering and automobile supply companies.

As a network supplier for German industry, Huawei finds itself privy to sensitive company data and has deep access to the technological nervous systems of its clients. Many have reservations about allowing a Chinese company such access and part of Küpper’s job is to dispel those fears. “Of course, we respect patent and data protection laws, just as we ourselves wish to be respected,” the executive says. He adds that Huawei resembles a large cooperative and that the company belongs to its employees.

Still, such an ownership structure does not provide protection against regime access from Beijing. Companies like Huawei are closely watched in the West. The Trump administration cut off ZTE, a Huawei competitor, from U.S. suppliers from one day to the next because it violated sanctions on North Korea. A few days ago, Trump struck a more moderate tone when it came to the company’s future, but whether it ultimately survives is dependent completely on the moods of a moody president.

Huawei isn’t nearly as exposed in America as ZTE, but Europe too could ultimately reach the conclusion that mobile telephone networks are of systemic importance. Mistrust is growing, particularly as it becomes increasingly clear how strategically China is expanding its economic influence into Europe. And it is doing so by way of the New Silk Road.

Chinese President Xi presented the idea for a new world order shortly after entering office in 2013. The Silk Roads Initiative is a network of trade and energy corridors, pipelines, railway lines and shipping lanes that are to span the entire Eurasian region by the middle of the century--and all of them begin in China.

Xi presented the plan as one for a “common future for humanity” aimed at making “globalization more open, inclusive and balanced.” But in practice, 89 percent of all infrastructure contracts are given to Chinese construction companies. And the main purpose of these projects is to secure trade corridors that can be used by China to import raw materials and to export its goods.

Leading European politicians fear it may be too late to curb China’s growing influence. With the Silk Road Initiative and the 16+1 format, China is already in the process of driving a wedge through Europe, they argue. The 16+1 format includes the 16 Central and Eastern European countries plus China. Beijing initiated the format six years ago as a counterbalance against Russia and the EU. It includes countries like Serbia and Macedonia, but also EU member states such as the Czech Republic and Hungary.

At the last 16+1 meeting in Budapest, Chinese Prime Minister Li Keqiang held court as European leaders voiced their desire for Chinese investment. According to a meeting participant, one European head of government after the other was asked to address Li, each naming a project where Chinese money would be most welcome.

The Chinese, in other words, don’t have to fight for influence--they are essentially courted by European politicians. Hungarian Prime Minister Viktor Orbán has even threatened more or less openly that his country might turn to China if the EU doesn’t cough up enough money or becomes too critical of his leadership.

EU diplomats have pointed out that Germany is not exactly blameless when it comes to the divide that is now cutting through Europe. They say that one reason Eastern European member states may be going their own way is because Germany in the past has been so eager to ensure the best possible access to China for itself. Now, Berlin must learn to learn to deal with the fact that China has become a direct competitor.

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