Car makers are becoming even more dependent on China

Nobody can yet estimate the damage caused by the corona crisis. The VW group is already calling for purchase premiums for new cars, flanked by unions and those prime ministers who are concerned about the well-being of the key industry in their country. Those who are in short-time work and fear for their job will probably not buy a car for the time being.

The loss of production and sales weighs heavily. Now the corporations face a second problem. There are billions of leasing and loan contracts on the balance sheets of the German auto industry, which come under pressure as the crisis grows. Daimler alone had to spend 400 million euros in risk provisioning for the possibly bursting financing this quarter. If things go badly, then we see the tip of an iceberg here.

Almost every second car that automakers sell is financed, mostly by the company’s own banks. This makes the auto industry a key component of the global debt economy, especially in the United States. Nowhere else is more pumped up than in the country of seemingly unlimited credit options.

Americans don’t save on a car, they sign a lease that is paid at the end of the month from current income. Unlike in Europe, manufacturers generally also assume the residual value risk if the car is resold at the end of the lease term.

In the past ten years, thanks to low interest rates, this has been good business. The car companies financed a car for the consumer and enjoyed a well-calculated cash flow each month. For many customers, a small car became an SUV. So not only ford, Toyota and GM increased their sales but also Daimler, BMW and the VW group.

Faster crash than in the financial crisis

At the end of 2019, the credit volume for car purchases rose to $ 1.3 trillion, which is the same as before the financial crisis in 2008. But as long as the labor market worked and borrowers and lessees were able to stutter their rates, things turned this wheel faster and faster. This is now over for many people. Since the outbreak of the corona crisis, 26 million Americans have registered as unemployed – a faster and deeper crash than in the financial crisis a decade ago.

If these people don’t find work again soon, the auto industry will be hit twice. In addition to the broken credit agreements, the automakers then remain on the used cars, which their customers are placing in ever increasing numbers on the yard. At BMW, the memories of the last burst bubble are still painful. In the financial crisis, the group had to write down around two billion euros on loan defaults and lease returns on the US market. How carefully the corporations calculated this time is open.

While the credit-financed US market threatens to collapse like a house of cards, China shines all the brighter. The giant empire has replaced the USA as the world’s largest sales market in the past ten years. The fact that the corona crisis is over for the time being in the Far East is making some car managers sleep better. The Chinese market has already almost reached the old level again. And unlike most Americans, the Chinese largely pay for their cars in cash.

If the credit bubble bursts in the United States, the market there will remain on the ground for a long time. This does not apply to China. In the shutdown of the past few weeks, the German auto industry has continued to run its component factories in Germany in order to supply parts to the factories in China. When VW, Daimler and BMW build cars again in their German factories, some of them go straight to the Far East.

And the US factories of the Germans are also supposed to start producing again because the mass of the off-road vehicles built there is shipped straight to Shanghai and Beijing.

Crises shift forces. Even before Corona, business in China was very lucrative for the auto industry, also because foreign automakers are increasingly relieved of the obligation to work in joint ventures with a Chinese partner.

With BMW, the majority takeover has already been approved for the first car company. Daimler and the VW group want to follow suit today rather than tomorrow and increase their production in the Far East. That will now accelerate. The industry will mainly collect car keys on the US market in the coming months, but cash in China.

More: Daimler suffers a sharp drop in profits due to the corona crisis.

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Two brothers take care of the hospitals and the fire brigade

Dusseldorf A few employees of the fire department in Mülheim an der Ruhr gathered in front of the syringe house. The sun is shining, Chef Sven Werner and his department head for emergency services and disinfection, Andreas Johann, are wearing short-sleeved uniforms. A forklift and a red truck are already waiting in the yard. The onward transport should go as quickly as possible.

The men are waiting for a product that is currently in demand like hardly any other product in the world: respiratory masks. It is corona time and they are their currency: the masks are an important tool in the fight against the virus. And they are not easy to get. There are still supply shortages five months after the outbreak of the corona virus.

In Germany, too, face protection is increasingly becoming a mandatory item of clothing. All federal states introduce mandatory wearing. And the federal government has “strongly” recommended wearing masks when shopping or on buses and trains.

But the fire department in Mülheim has no masks. Marvin and Aaron Steinberg are supposed to solve the problem. The brothers, 32 and 35 years old, have just climbed out of their pickup truck, wearing a T-shirt and jeans. With your Sixt– Rental cars transport the sought-after face protection.

“20,000 go straight to one of our hospitals,” says fire chief Werner, while he examines documents and the forklift lifts the first boxes. “The remaining 30,000 remain here.” These are not masks that you can sew yourself. Most are those with filter protection.

Marvin and Aaron Steinberg (1st and 2nd from left)

Appointment at the Mülheim fire department.

(Photo: Steinberg)

The federal government has so far failed to meet the huge demand for masks. According to Minister of Economic Affairs Peter Altmaier (CDU), Germany needs a total of several billion pieces within a few months. The large German manufacturers such as the Lübeck-based company Dräger have been producing at their limit for a long time despite the expansion of production. And the global market, in which companies like the US group 3M dominate, is eaten empty by all affected nations like grasshoppers.

This is why makeshift production facilities are being set up all over the world, including in Germany. Whether on an entrepreneurial basis, such as recently at Trigema, the laundry manufacturer of the eccentric owner Wolfgang Grupp. Or at Daimler, where breathing masks are now produced for your own needs. Or citizens sew them at home.

All of these are commendable initiatives. But: The resulting products often offer only limited protection, for example when shopping in a supermarket. They are usually not suitable for medical personnel.

And so there is a gap that people like the Steinberg brothers encounter. Small business owners who are quick to grab, who have contacts with professional providers abroad – and who do it instead of looking at the federal government – and who naturally hope to make a profit.

“What we do is of course just a drop in the ocean,” says Marvin Steinberg. He wears glasses and his shirt says “Corona Crisis”. “But it is a drop that leads to happy faces in many places.”

Also in Mülheim. “We are very happy to have enough stock now,” says fire chief Werner. The mask market has been going crazy since Corona. And no one can say how the situation will develop. “If the infection situation remains as it is, we are well prepared,” says Werner. “But who knows that?”

15 cents profit per mask

Aaron, the trained nursing nurse, and Marvin, who runs a marketing GmbH, have been in business for four weeks. You have set up offices in Mainz and Koblenz. According to their own statements, they pick up between 50,000 and 200,000 masks three to four times a week at Frankfurt or Cologne airports.

The Steinbergs are founding a company. Her name: “Pflegeliebe GmbH”. The Steinbergs customer base is growing steadily. Clinics, pharmacies, old people’s homes, hairdressers and taxi services now order from them. Sometimes small amounts are also donated.

The demand is great. Hospitals sometimes run out of masks, and resident doctors are also concerned about whether they can still treat their patients. It is particularly important that the Steinbergs also offer FFP2 and FFP3 products.

They belong to the type of mask that protects the wearer. FFP2 and FFP3 masks are therefore the appropriate equipment for doctors or nurses who handle potentially infected people. These masks cannot be made at home. Nor do companies like Trigema manufacture them. Special companies are needed for this.

Mask transport in the rented minibus

The entrepreneurs with helpers.

(Photo: Steinberg)

And that’s where the problem begins. There are also producers in Germany. In addition to corporations such as Dräger, medium-sized companies are now trying to gain a foothold in this field. The “Fight Covid-19” consortium, for example, which includes smaller companies such as the bikini company Maryan Beachwear or the mechanical engineering company Reifenhäuser, is currently building a network. Your production goal: half a million FFP2 masks per week.

However, the major mass producers among the specialist companies are primarily located in China. And the market remains chaotic. Even if production has started again in China, the purchase price continues to skyrocket. Before Corona, an FFP2 mask cost about 50 cents. Today, prices in the double-digit euro range are sometimes called up for this.

Of course, this also attracts fraudsters who try to sell unusable goods at a high price or only deliver material against prepayment – which then never reaches the customer. “A lot of providers are dubious,” says Marvin Steinberg. “Many of our customers have already fallen for fraudsters.”

The topic should be rather uncomfortable for the entrepreneur. Because Steinberg, who was also active in the field of gold-backed cryptocurrencies for a while, had once separated from an ex-partner in the dispute. Now there are anonymous articles online that accuse him of fraud. Even a criminal complaint is circulating.

So far, however, there is no convincing evidence. A civil law complaint by his ex-partner definitely failed before the Mainz Higher Regional Court. Steinberg has already had several entries in the network deleted by court. “It was a bad time for me,” he says. He was happy to be able to leave that behind.

Marvin Steinberg

The small entrepreneur has valuable contacts in China.

(Photo: Steinberg)

And he does not hide the fact that he also wants to earn money by supplying masks. However, at reasonable prices. One-way surgical masks cost him an average of 99 cents per piece, depending on the quantity, FFP2 masks between four and 5.50 euros. “The same masks are then partially resold by the pharmacies at a price of 14.99 euros,” says Steinberg.

For comparison: Trigema charges 120 euros for ten of its “reusable makeshift mouth and nose masks”. Steinberg even discloses its margin. On average, he and his brother earned 15 cents per surgical mask, and 40 cents for FFP2 masks.

Complicated procedure

And why don’t they sell to the federal government? Health Minister Jens Spahn recently made three billion euros available for the procurement of protective clothing and introduced a so-called open house procedure.

This means that the state buys centrally and at fixed prices if a manufacturer can supply at least 25,000 masks or gowns and guarantee a minimum standard. Masks, gloves and gowns are to be distributed across the federal states and the medical associations.

But there is much criticism of this method. Spahn had reacted too late, the control did not work, the procedure was too complicated. A German businessman from Taiwan recently reported to the Handelsblatt, who wanted to broker the sale of several million FFP2 masks. And not to the USA, but to his home country. But he just couldn’t figure out who to contact.

Did the Steinbergs hear about the federal government’s trial, did he try it once? “No, we’ve just been doing it that way,” says Marvin Steinberg. But that with the federal government is not a bad idea. But he did not know whom to speak to. Does the Handelsblatt have any contact? An inquiry to the Ministry of Health remains unanswered.

Procurement seems so easy. He has contacts in China, says Marvin Steinberg. He has had a business relationship there for a long time with a mask manufacturer who produces himself and can also get goods from other manufacturers if necessary. He doesn’t want to give the name. After all, it was his competitive advantage. The manufacturer vouches for the quality of the masks, says Steinberg.

Because quality is probably the most important criterion in this business. An FFP2 mask that doesn’t protect against corona viruses is not worth a penny.

Many false copies on the way

But how is the goods checked? A few days before the appointment in Mülheim, the Steinbergs are sitting in a van on their way to Frankfurt Airport. Another car is driving. The Handelsblatt is activated via WhatsApp video.

While Marvin Steinberg explains the process, his vehicles drive to a ramp outside the airport, where around 20 boxes are already waiting for loading. Also on board is Mr. Wu, a young Chinese man who supports the brothers in the process. He has a small export-import business himself, says Marvin Steinberg.

Together with Aaron Steinberg, Wu opens one of the boxes to check the contents. 200,000 surgical masks have arrived today.

Of course, you can only see what the goods look like, says Steinberg. The contents are on the boxes, and on the packaging of the masks there is usually also the CE seal of approval. The boxes would also have to go through customs. Ultimately, it is only the end user who will determine whether the masks are really good. “We only have positive feedback from them,” he reports.

The main problem is getting good quality at reasonable prices. Andreas Johann (Mülheim fire department)

Steinberg offers customers to come to his office in Mainz before buying to inspect the goods with an expert. Only then does payment have to be made – for example by bank transfer.

At any rate, the fire brigade in Mülheim is completely satisfied. “The main problem is getting good quality at reasonable prices,” says department head Johann. He doesn’t just say that.

He previously tested the breathing masks in three ways. He cut them apart and checked their strength. 5 layers, that’s good. He lit a mask with the lighter to see if the material just contracts and doesn’t burn. And finally he poured water into a mask. Since nothing flows out, it is tight. “Passed the quality test,” says Johann.

Then he and his boss Werner can thank you for a gift from Steinberg, staged effectively for the press appointment: 2500 surgical masks are available for free.

Yes, Marvin Steinberg also knows how to advertise for yourself, how to stage yourself. But who could blame him in these strange, difficult times – when breathing masks could become the product of the year, if not the decade?

More: Protective masks instead of bikinis – medium-sized companies convert their production

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Almost a fifth of the companies want to cut jobs

Berlin Daimler– HR Director Wilfried Porth didn’t gloss over anything: “Obviously something is breaking away at the moment that no one knows if it can be caught up,” the manager said last week. The carmaker had to accept a drop in profits of almost 80 percent in the first quarter, sales of the core brand Mercedes decreased by 15 percent. “The fact that we will need to adjust is obvious,” said Porth. He didn’t say the word job cuts. But even before Corona, Daimler had decided to cut up to 15,000 jobs.

The fear of jobs is back in Germany and the virus pandemic will leave deep marks on the job market. Every second company is already doing short-time work. According to a survey by the Ifo Institute, almost a fifth of the companies want to lay off employees or not to extend temporary jobs.

“The fear of jobs seeps in,” says Ifo economist Klaus Wohlrabe. The job cuts plans are apparently based on the concern of many companies that the restrictions on public life in the corona crisis will not end in May.

On average, the companies surveyed expected four months of partial standstill. 84 percent feel a drop in sales due to the corona crisis, only four percent register a growing business. According to the Federal Employment Agency (BA), almost every third of the 2.2 million companies with at least one employee who is subject to social security contributions have registered short-time work.

Previous employment forecasts are becoming more and more waste every day that the corona crisis continues. “For the labor market, we expect unemployment to rise sharply over the next few months. But many companies keep their people, you can see that from short-time work, ”says Enzo Weber from the Institute for Labor Market and Vocational Research (IAB).

BA boss Detlef Scheele expected a rise in unemployment by 150,000 to 200,000 people in April a month ago. The Nuremberg authorities will present the current data next Thursday.

Domestic demand collapses

There is hardly any improvement in sight if you look at the economic development: the purchasing manager index of IHS Markit has plummeted. In the survey, 75 percent of service providers and almost as many industrial managers said that their sales had shrunk significantly. Service providers’ sales fell more than ever in the 20-year history of this survey. “Both domestic and export demand has collapsed,” writes IHS Markit economist Phil Smith.

“Demand levels will not return to pre-crisis levels anytime soon,” says Sascha Haghani, head of the global restructuring practice at management consultancy Roland Berger. That’s about it GfKConsumer barometer, which measures consumer mood, plummeted to a record low.

“Sooner or later the companies will have to adjust their costs accordingly,” Haghani expects. Probably also through job cuts: According to the IHS, more jobs were cut in the service sector than at the height of the financial crisis recession in April 2009, and the reduction in personnel is also accelerating in industry.

graphic

The Ifo survey also shows how wide the shock waves are spreading in the economy: in industry and service providers, almost every fifth company wants to lay off employees or not to extend temporary jobs. It is 15 percent in retail, and two percent on construction that has so far been little affected by downtime. Leading economists such as the head of business practices, Lars Feld, are starting to adjust their forecasts for 2020 downwards.

After Chancellor Angela Merkel and the Prime Ministers decided a slow restart of the economy last week, he expects gross domestic product (GDP) to shrink by at least 5.5 percentage points in 2020. Even in the economic institutes, which predicted a minus of 4.2 percent for 2020 in their joint forecast two weeks ago, it is now expected that a five will be before the decimal point.

The IAB had anticipated a 4.7 percent decline in GDP in March, when the economy largely stands still for two and a half months and only normalizes by the end of the year. In this case, the number of unemployed could temporarily rise from the current 2.3 million to more than three million, the Nuremberg researchers predicted at the time.

A well-known restructuring expert expects Corona to increase unemployment to as many as four million people. Especially badly hit sectors such as tourism and gastronomy are affected, but also important branches of industry such as the automotive suppliers.

The government is obviously also assuming a long period of weakness on the labor market. For example, for all unemployed people who would slide into Hartz IV between May and December, the duration of the unemployment benefit will be extended by three months. “Those who are just becoming unemployed or who have recently become unemployed currently have little chance of finding a job again,” said Labor Minister Hubertus Heil (SPD).

In order to counter the allegations made by the unions, in particular, that politicians are more concerned with companies than with employees, the coalition committee also decided on Thursday night to increase the short-time work allowance – staggered according to the duration of benefits.

It is currently 60 percent of net income and 67 percent for employees with children. From the fourth month in Corona short-time work, employees whose working hours are reduced by at least half are now to receive 70 or 77 percent. From the seventh month, the rates increase to 80 to 87 percent.

In addition, short-time workers who take up another job can earn up to the amount of their previous monthly income. So far, this was only true for “systemically relevant” activities such as care or agriculture.

graphic

The gradual increase in short-time work benefits has met with criticism: “I would have preferred a faster increase, especially for low-wage earners,” said Sebastian Dullien, head of the Institute for Macroeconomics and Business Cycle Research (IMK). In a survey, 40 percent of employees who were on short-time work said that they would get by with the money for a maximum of three months.

Employers see “contribution club”

The decision met with a mixed response among the unions, which had hoped for a general increase to 80 or 87 percent from the start. “This protects many employees from existential hardships,” praised IG Metall boss Jörg Hofmann. On the other hand, the chairman of the Food, Beverage and Catering trade union (NGG), Guido Zeitler, declared that the increase was correct, but was too small and too late.

In the hospitality industry, employees could probably only expect 80 percent of normal net wages in October 2020. According to the NGG calculations, according to the new plans, a cook in Berlin will have around 1,070 euros instead of around 920 euros and short-time work from around 1,220 euros from the seventh month. “For hundreds of thousands of people with low incomes, the only thing left to do is to apply for Hartz IV,” said Zeitler.

IAB labor market expert Weber also criticizes the fact that the planned changes will not benefit employees in the low-wage industries in a very targeted manner. “In the end, industrial sectors that have long been in recession could benefit in particular.”

For Holger Schäfer from the employers’ institute of the German economy (IW), it is not at all clear which problem the government wants to solve with the compromise: “In the end, a lot of money is spent on a purpose that is not clearly defined.” According to Schäfer’s calculations, the BA would need 24 billion euros to send 4.5 million full-time average earners without children on short-time work for three months. The employment agency’s reserve is just under 26 billion euros.

The criticism from business was correspondingly harsh. Employer President Ingo Kramer praised coalition decisions such as help for restaurants and the easier return of losses for companies. But they would be overlaid by “spending money with a watering can”.

The employers’ association Gesamtmetall criticized that the decisions on short-time work were expensive and caused an enormous additional administrative effort at the BA: “There is great concern that when the economy restarts, the tax and contribution club will fall on the employees and companies,” said CEO Oliver Zander the Handelsblatt. BA boss Scheele said that he would have liked a “simpler regulation”.

Monika Schnitzer, a new member of the Council of Experts, told Handelsblatt that she could understand that the government wanted to expand short-time work benefits. “But I think the chosen way of increasing is problematic.” After all, many employers voluntarily increased to keep their employees. I am afraid that it will have a high share of deadweight effects. ”

Ifo President Clemens Fuest believes the decisions will stabilize consumer demand. They are therefore also “a suitable economic policy measure”. The same applies to the extension of the period of unemployment benefit

More: Tax cuts, premiums, aid: Germany’s economists argue about state aid

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Despite security gaps, Zoom grows to 300 million users

Zoom conference

Millions of people use Zoom for meetings – or yoga classes.

(Photo: AFP)

Bangalore, Berlin Of the Video service zoom wins in droves in the crisis despite security concerns. Today, more than 300 million people make calls via the platform every day, as Zoom announced. Before the trend towards the home office caused by the outbreak of the corona virus, the US group had a maximum of ten million users a day.

The number of voices that speak against zoom due to security gaps is increasing. The car company recently issued Daimler the service for business use a cancellation. Zoom competes with teams from Microsoft and Cisco’s Webex.

Zoom tries to take the wind out of the sails of critics. The company announced that it would revise the encryption. Users had repeatedly complained that the service was not fully encrypted. In this regard, there is also a class action lawsuit against the group in the United States.

In addition, there are problems with so-called zoom bombing, in which unauthorized persons dial into a session. A new version for the app, which is about to be released, should prevent this in the future. In addition, the organizer of the video call can now decide which data centers are used in which region.

More: CDU and FDP politicians fear China’s access to zoom data

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