False incentives, fraud, debt: the side effects of the corona crisis

The Chancellor is in top form in times of corona crisis. Angela Merkel explains complicated population doubling rates and reproductive numbers. But she also knows everyday things. “They have to be washed or ironed regularly, put in the oven or in the microwave,” Merkel explains how to care for respiratory masks. “Even if that sounds a bit housewife, so to speak.”

The omniscient state – embodied in the chancellor. The subjects are explained life down to the smallest detail. With this self-image, Merkel takes “measures that have never existed in our country before”. Fundamental rights are restricted, the economy is pushed to the brink and then supported with unprecedented aid.

One of Merkel’s closest confidants, Peter Altmaier, is more than enthusiastic. “An uncle who brings something is better than an aunt who plays the piano”, the Federal Minister of Economics remembers of his childhood.

And what is brought along! If you add up everything the federal government now wants to offer to combat the corona crisis, you get a gigantic sum of at least 1.2 trillion euros. No other country in the world has raised so much money in relation to its economic strength.

Germany has a full 35 percent, far more than the EU average or the USA. Federal finance minister Olaf Scholz did not understate what he promised a few weeks ago: “It is not spilled, but padding.”


The increase in importance and power is unique. Never in the history of the Federal Republic has a government intervened so quickly and deeply in public life and thus in the economy. After the financial crisis, German government debt rose by 315 billion euros in one year. The value of the federal, state and local governments will be far exceeded in this crisis. “I am worried whether we will be able to return to normal economic policy,” says Lars Feld, Germany’s top economy.

The measures to protect health are understandable. But the question increasingly arises: what side effects do the multi-billion dollar rescue programs have? The free market is disturbed, competition is distorted, prices lose their signal strength.

“As much market as possible, as much state as necessary”, the famous words of former Federal Minister of Economics Karl Schiller lose their meaning every day.

There is a risk of higher prices, inefficient companies and loss of wealth. It is significant that more and more companies are turning to the Bundeskartellamt during the corona crisis in order to be exempted from cooperating with competitors. The new spirit of state economy speaks.

Spend as much as you can. The year 2020 will be disastrous. Kristalina Georgiewa (IMF chief)

Certainly, help for companies with no fault of their own must be provided. But with the flood of support funds, the risk of misallocation is high. Capital and labor are tied up in companies with below-average productivity, less investment and innovative strength.

A few weeks ago, after a parliamentary request from the FDP for possible support from zombie companies, the Federal Ministry of Finance had to admit that “necessary market processes of creative destruction are hindered”.

The concern is justified that the state is eating itself too deeply into the economy, throwing privacy and data protection partially overboard and that the influence on the market will not be reversed after the end of the crisis.

A look at history suggests little good. The federal government is still 25 years after the IPO Deutsche Telekom still the largest single shareholder.

Fundamentally, there is a problem that is known in the economy as moral hazard: companies and citizens behave irresponsibly or carelessly due to existing false incentives. The news of fraudsters sneaking up subsidies is increasing.

“The state is a lousy entrepreneur”

The appearances of Altmaier and Scholz are characterized by superlatives. At the federal press conference, they will be presenting the rescue packages worth billions to the public with great regularity. “This is the most comprehensive and effective guarantee that there has ever been in a crisis,” said Altmaier in mid-March. “This is the bazooka, we’ll look for small arms later,” the Federal Minister of Finance said at the appearance.

The small arms that have now been added are quite large-caliber. Scholz announced a debt-financed supplementary budget of 156 billion euros. This includes an emergency fund with a volume of 50 billion euros, which is aimed at the self-employed and small businesses with up to ten employees.

The federal guarantee for the state bank KfW is increased by up to 450 billion euros. And then there is an Economic Stabilization Fund (WSF) with a volume of 600 billion euros. The majority is earmarked for government guarantees to keep companies liquid.

100 billion euros are reserved for possible investments, i.e. partial nationalization of companies. The battered Lufthansa is already holding talks about state participation.

You can still hear Altmaier’s words: “The state is a lousy entrepreneur.” The Federal Minister of Economics at least dedicated the most beautiful hall in the ministry to Ludwig Erhard. But he is currently just as far away from Erhard’s mantra as the Germans are from summer leaves in Mallorca.

Minister of Economics Peter Altmaier (standing) and Minister of Finance Olaf Scholz (front)

The father of the “German economic miracle” throbbed to measure, he remembered sentences, the state should not be a player, but an arbitrator in the economy. Now the state is preparing to take over the entire football club.

No other industrial country is helping its economy with such large sums as the Federal Republic. This shows a new evaluation by the International Monetary Fund (IMF). He does not criticize Germany, on the contrary. “Spend as much as you can,” advises IMF chief Kristalina Georgiewa. The economic situation is too depressing.

The Council of Experts is now assuming that the economy will decline by more than 5.5 percent this year. This is the case that was previously treated as a worst-case scenario. The economic downturn would be worse than in the global financial crisis. 725,000 companies have registered financial difficulties and short-time work.

Including: hospitals. Health Minister Jens Spahn ordered them at the beginning of March to postpone all planned operations. For the hospital operator, this means severe revenue losses. More than a third of the intensive care beds are not occupied. With the Hospital Relief Act, the federal government created a regulation to compensate the clinics for the failures. But that’s far from enough.

This is the bazooka, we’ll look at small arms later. Olaf Scholz (Federal Minister of Finance)

Some private organizations have registered short-time work, including the Schön-Klinik group. The head of the German Hospital Society, Gerald Gaß, sees the time for a “careful, gradual resumption of regular care”.

Spahn also said last week that clinics could “gradually return to normal”. “We do not want to keep 40 percent of the intensive care ventilation beds in Germany permanently”, said the minister.

The pressure on the companies is huge, the need for help is great. This year alone, the federal government is raising 156 billion euros in new debt. The federal states are also preparing an extensive flood of money for pumps.

According to a survey by the Handelsblatt newspaper among the 16 state finance ministries, they are currently planning 65 billion euros in new debt to fight the crisis. In addition to the federal government’s huge € 1.2 trillion rescue package, the federal states are also helping their companies and the self-employed. Bavaria alone has launched a fund with 60 billion euros.

The IMF chief not only welcomes the gigantic aid package in Germany, the monetary fund also calls for thorough control. “Keep the bills,” said Georgiewa. Transparency and accountability should not be put off in the face of the crisis. Whether Germany is world champion in this discipline, doubts are increasing.

Risk zombie company

The financial crisis shaped a saying by the former head of central bank in Europe, Mario Draghi: “What ever it takes”. In this crisis, it becomes a “Whatever, take it!” Aid is mostly spent without checking, the money cannot be distributed quickly enough.

According to an overview by the Ministry of Finance and the Ministry of Economics, over 26 billion euros were applied for by KfW Hilfen. Almost 13,000 of the more than 13,200 applications were approved. In other words, almost anyone who wants help gets it, most likely companies that didn’t have a working business model before the pandemic.

This easily creates zombie companies that are only alive because of generous state aid. After all: With the large sums, the KfW steering committee seems to be examining it more closely. So far, around 8.5 billion euros have been approved. So it takes a little longer for the large-volume applications.

In contrast, the self-employed and small businesses with up to ten employees are suspiciously fast. So far, according to the overview of 1.65 million applications, around 1.1 million have been approved and more than nine billion euros paid out. These are not loans, but aid that does not have to be repaid.

“Speed ​​and thoroughness go hand in hand: it is carefully checked who receives the money,” Finance Minister Scholz promised. But is that true? North Rhine-Westphalia and Berlin were even recently forced to suspend immediate payments because large-scale fraudsters wanted to get to the pots.

There are also problems with honest entrepreneurs. In North Rhine-Westphalia, for example, the self-employed and small businesses are always granted the maximum amounts of EUR 9,000 and EUR 15,000 – regardless of need. This practice is not well understood in the Federal Ministry of Economics. Because a flat-rate payment of maximum amounts was actually not intended.

The aid should amount to up to 9,000 euros for companies with up to five employees and up to 15,000 euros for up to ten employees. The emphasis here is on the “up to”. According to the Ministry of Economic Affairs, the actual amount should be based on sales and operating expenses for the next three months. An entrepreneur with zero euros turnover and 1000 euros costs would be entitled to 3000 euros in emergency aid.

But these details were lost somewhere in the confusion between the federal states and the federal states. The up to 50 billion euros are provided by the federal government. Although federal money is at stake, it is up to the federal states how much they scrutinize companies. In Hamburg, for example, a liquidity check is required. Other countries are significantly less strict so that aid can flow as quickly as possible.

In Berlin, more than a billion euros were paid out to solo and small entrepreneurs within days. And the Berlin Senate also admits behind the scenes that surely there are also deadweight effects. Since no examination was carried out, almost everyone received 14,000 euros in a combination of federal and state funds. These include the self-employed, who normally have annual sales that are significantly lower, they say.

Some recipients are now voluntarily repaying the aid for fear of sanctions. But whether a subsequent thorough examination is possible to convince fraudsters is skeptical in financial management.

Dangerous false incentives

The economic nonsense, which is operated partly in the name of Corona, is great. Governments in the federal and state governments are increasingly creating the illusion that they can regulate everything with state trillions. And more and more, government intervention and expansion is creating false incentives in all areas of the economy, which can be revenged bitterly.

Take the housing market as an example: the Federal Minister of Justice, a woman from the SPD, wanted to protect the tenants. The result is a half-baked law that gets small landlords into trouble. The law was so badly made that solvent companies like Adidas or Deichmann used the gaps and simply suspended the rent payments. Only after a storm of indignation did Adidas row back.

Take the example of KfW loans: After the institutes hesitated to pass on the subsidized loans from the Staatsbank KfW to companies because they still had to bear ten percent of the default risk, the state assumed full liability. With the danger that house banks will now be able to provide loans to companies that have long been bankrupt.

The banks don’t care, they are released from any liability, but of course they still make good money from their business. The fool is the taxpayer who has to answer for the defaults.

Example of short-time work: Short-time work allowance is a tried and tested crisis instrument. The state replaces up to 67 percent of net wages. However, the SPD was not enough. In the coalition committee on Wednesday, she pushed for an increase to 80 percent.

It is the most comprehensive and effective guarantee that there has ever been in a crisis. Peter Altmaier (Federal Minister of Economics)

However, a general increase would have significant deadweight effects: Many companies are already increasing short-time benefits from their own resources. Apart from that, the short-time work allowance is not meant to secure the standard of living, but rather to ensure the survival of companies and thus avoid unemployment.

In other areas, the federal corona strategy is rather arbitrary. The craft complained that the vehicle registration offices were closed. There is also much discussion about opening shops up to the limit of 800 square meters. This border was communicated at least improperly and caused confusion and indignation among the shopkeepers.

Now a Hamburg administrative court has declared the 800 square meter rule to be illegal. The court could not understand why opening larger sales areas alone should attract more people to the city center. Necessary infection protection measures could be followed at least as well in larger stores as in smaller facilities.

Whimsical and impractical was initially the requirement that repair shops were allowed to remain open, but the sales rooms had to be closed. Many craftsmen wondered if they could lead the customers through the sales room into the workshop. Another detail from this series of undesirable side effects of the rescue policy.

The border closures, for example with the Czech Republic, mean that the bricklayers are missing in the construction industry and the harvest workers in agriculture from Romania. The state decides a lot, but the consequences are borne by the entrepreneurs and their employees.

The argument for the state’s rapid generosity in the crisis is: rather spend more now to prevent the economy from crashing and millions of jobs be lost than have to finance mass unemployment for a long time. This approach is absolutely correct. But it also remains true: somehow the state rescue billions have to be financed at least in the medium term if the next generations are not to be overwhelmed.

Currently this is done through the use of reserves and debts. Germany certainly has scope. The Federal Republic had just pushed the debt level to below 60 percent, thereby meeting the Maastricht criteria for the first time in many years in 2019. But that will be the last time for a long time.

As a result of the corona crisis, the federal government expects a general government deficit of 7.25 percent of gross domestic product (GDP) this year. The debt ratio as a share of all debts in GDP is estimated at 75.25 percent, as can be seen from the German Stability Program 2020.

“The projection is currently subject to very high levels of uncertainty,” says the current report. In other words, the debt level could be even higher. This mainly depends on how high the losses are that the federal government will incur from its guarantees and sureties.

Given the huge commitments, some in the grand coalition are trying to put the brakes on. “I don’t like the fact that we almost always get new suggestions every hour, what else can you do,” said Union leader Ralph Brinkhaus. “All of this must also be paid for.”

In a crisis, the state’s money is loose. Some sense their chance to finally implement long-held plans.


German companies are more positive about the future

Dusseldorf Siemens boss Joe Kaeser is confident. The CEO assumes that the Munich group will weather the corona crisis well: because the group’s products are needed and there is sufficient liquidity. Kaeser is expecting a few difficult quarters, but he is now thinking more about how to shape the upswing after the corona crisis.

For the 387,000 employees, he wants to organize a “party” all over the world, as the manager recently told the “Passauer Neue Presse” – at which one could then possibly “drink a Corona beer together”. These are easy-going words that bosses of companies that are currently badly stricken would hardly choose.

But not only with Siemens, but also in many other large companies, there is now a little more optimism that they can cope with the corona crisis. An indication of this is provided by a current survey by the auditing and consulting company PwC among CFOs of German groups from all DAX segments. According to the study, which is exclusively available to the Handelsblatt, the companies are slowly moving out of the crisis.

56 percent of respondents said that Covid-19 would bring significant burdens to the business. What is interesting, however, is the comparison to the first PwC survey of the same top managers in mid-March.

Back then, 79 percent of those surveyed feared that the virus would have a strong negative impact. More than half of the CFOs currently expect the crisis to lead to a decline in sales and profits. But this value has also decreased somewhat compared to the last survey.

Lessons from the financial crisis

State security and protection regulations, with which the federal and state governments want to contain the pandemic, are likely to have contributed to growing optimism. “In comparison to other countries, for example the USA, the UK or Japan, we acted quickly, consistently and transparently,” says Ulrich Störk, head of Germany at PwC.

This is supported by the international sentiment comparison in the PwC study: According to this, the CFOs of American companies are currently much more pessimistic. 74 percent of US CFOs expect strong negative effects, 13 percentage points more than in March. This value also corresponds to the global average in the current study.

The more relaxed mood among German companies is not only due to government regulations, but also due to their own crisis management. For example, almost all larger companies deployed crisis teams very early on, which took care of the safety of employees and production – provided the latter was maintained. Chemical companies, mechanical engineers and steel producers were able to keep their plants running without major problems thanks to detailed protection concepts.

From the perspective of business consultants, many companies are currently benefiting from the fact that they have learned lessons from the first major crisis in the new millennium – the financial crisis in 2009. These include flexible processes, emergency scenarios in the drawer and good liquidity planning.

Many companies are surprised that the work processes work largely without problems from the home office. While the abrupt changeover initially caused discomfort and skepticism, many companies have now gotten used to it. Störks believes that overnight millions of people can work from home with few restrictions: “The much criticized infrastructure in Germany is better than its reputation, even if there is room for improvement.”

New supply chains

The slightly improved mood also means that the companies are heading a little less internally towards the crisis. In 64 percent of the companies surveyed by PwC, investments are checked, postponed or even canceled if necessary. However, this does not affect future-oriented projects such as digital transformation.

A recent study by the Federal Association of German Management Consultants shows that companies are sticking to core investments, for example in digitization, if this is financially feasible for them. In difficult sectors like tourism and aviation, the scope of managers is much less.

New austerity programs with major job cuts are not yet in sight in the economy. Many troubled companies want to keep their employees and rely on government aid such as short-time work. Siemens boss Kaeser also refuses to resign. “Because of a temporary fluctuation in employment, nobody will leave Siemens at home,” he says.

But the cost pressure would increase significantly if the global economy fell into a longer period of weakness. 69 percent of the CFOs surveyed by PwC fear that this will happen.

Almost half assume that their supply chains are permanently disrupted and have to be reorganized. Very few were prepared for disturbances in a dimension such as that caused by Corona.

Complexity management

Another study that the Cologne-based purchasing consultancy Inverto carried out at the end of March with European and American participants shows how companies are now changing direction. They want to make their supply chain to Corona more crisis-proof and transparent and rely on closer and partner-like cooperation with the most important suppliers. The companies also want to increasingly look for local suppliers at their global locations.
The supply chains will remain complex even after the corona crisis. Hardly any management consultant assumes that global networking will change fundamentally.

It will be more about managing this complexity better. HR consultants like Egon Zehnder assume that the role and responsibility of supply chain managers in companies will increase significantly.

High demands are placed on them: “The leaders have to shape a culture that can deal with uncertainty and constant change,” says Egon Zehnder consultant Benjamin Lüpschen.

Mehr: Corona crisis is shrinking the consultant market.


Despite surge in medical technology: Philips cancels annual targets

Frankfurt A sharp decline in the business with household appliances and consumer products due to the corona crisis has occurred in the Dutch PhilipsGroup slump in profit in the first quarter. In medical technology, however, the pandemic led to higher sales of ventilators and monitoring monitors for patients and ventilators, among other things. The demand for IT solutions for the healthcare industry and telemedical offerings also increased.

CEO Frans van Houten withdrew the annual targets still issued at the end of January, according to which sales should increase between four and six percent. Now the Philips CEO only expects a modest increase in sales and a similar improvement in the margin.

“Given the uncertainties and volatility, we cannot give a more specific outlook for 2020 at this point,” said van Houten. The company anticipates a further decline in business in the second quarter as the pandemic has spread worldwide since March. The company boss hopes for a recovery in the second half of the year.

The bottom line, the Philips boss sees the corona crisis as a confirmation of the corporate strategy of the past few years, in which the company has focused heavily on digital technologies. “We have always said that health IT and cloud-based solutions have to play a greater role in order to network providers with each other and with the patient.

The demand for such offers is now accelerating due to this crisis, ”said van Houten in an interview with the Handelsblatt. Among other things, Philips has developed a smartphone app that makes it easier for doctors to remotely care for Covid patients.

Nevertheless, medical technology was unable to compensate for the weak business with consumer products at Philips: Overall, sales in the first quarter remained almost stable at 4.2 billion euros. Calculated on a comparable basis – i.e. without currency effects and purchases and sales – sales shrank by two percent. Net profit decreased from € 162 million in the prior-year quarter to € 39 million.

Order intake increases by 23 percent

The first quarter results were below analysts’ expectations. Still, many stuck to their recommendations. Philips’ position as a manufacturer of urgently needed medical products will help the company to survive the crisis without major damage, say the analysts of the Commerzbank.

Positive news from Philips includes that order intake rose 23 percent in the first quarter. The company also adheres to the planned dividend payment of 0.85 cents, which is now to be paid out in shares.


At the Euronext in Paris, Philips’ shares temporarily rose by more than seven percent. The titles of other medical technology companies such as Drägerwerk and Siemens Healthineers won.

The fact that the corona crisis brings medical technology companies an order boost does not apply to all companies in the industry. Because the pandemic is delaying some predictable operations, which has negative effects on manufacturers of artificial joints and surgical equipment.

The US company, for example, had last week Johnson & Johnson significantly reduced its sales forecast for the medical technology division. The family-owned company B. Braun, whose subsidiary Aesculap manufactures artificial joints and surgical devices, also expects demand in this business area to decline temporarily in the regions affected by the Corona crisis.

Philips also feels that these predictable, so-called elective interventions are being postponed. Especially in the cardiovascular area. Many cardiovascular surgeries that are supported with Philips imaging technology are being put on hold.

Frans Van Houten believes the impact on imaging techniques is quite large. For this reason, Philips expects sales in the Diagnostics & Treatment business areas to decline overall. “We expect these patients to come back in the third quarter when the situation normalizes,” says van Houten.

Production capacity is greatly expanded

In order to meet the significantly increased need for ventilators and patient monitoring systems, Philips is investing more than 100 million euros in expanding production capacities in the USA and also at the German location in Böblingen.

For example, the production of clinical ventilators is expected to increase fourfold by the third quarter. Among other things, Philips wants to serve a major order from the US government for 43,000 respiratory advisors and at the same time supply other regions with the urgently needed medical equipment.

Despite its corona crisis, Philips is sticking to its plan to split off the household appliances division. The company announced in January that it was parting from the 2.3 billion euro business with coffee machines, deep fryers and vacuum cleaners because it does not fit the company’s medical technology focus.

“We are making progress with the preparations to split off the household appliances division. We said the process takes 12 to 18 months. We are on target. ”Although the division saw double-digit sales losses in the first quarter, Houten does not believe that this will have a negative impact on price negotiations in a possible sales process.

“The household products business is a strong business. We know from previous crises like the SARS pandemic or the economic crisis how quickly business is recovering. We have a strong brand, ”the Philips boss is confident.

More: Philips CEO: “There will be no Google model in the health sector”


Fresh capital for healthcare software start-up Smart Reporting

Cologne The increasing number of corona infected is also a problem for radiologists. Because Covid-19 patients with severe breathing difficulties or even lung failure are viewed by doctors using computed tomography (CT). With this special x-ray, the doctors want to better assess the course of the respiratory disease. However, radiologists in particular, who have not yet come into contact with the virus, are often uncertain when assessing the largely unknown clinical picture.

Wieland Sommer knows the complexity of creating such findings from his own experience and has therefore developed a way to support doctors. The radiologist is the founder of the start-up Smart Reporting and offers software that, among other things, allows radiologists to document their CT findings. Part of the software is now a report template especially for Covid 19 patients, which Sommer is currently making available free of charge.

When radiologists evaluate the CT images, they can use the Smart Reporting report template on their own computer. They are guided step by step through the application and receive clinical background information, reference images, common classifications and current recommendations from the international radiology societies on Covid-19. In addition, radiologists no longer write the findings in free text, but can use pre-made text modules.

The template for Covid 19 patients is one of many templates that Sommer developed together with doctors and IT specialists from his company Smart Reporting. “I am convinced that the medicine of the future is also a data science,” says Sommer. According to the company, more than 10,000 radiologists from over 90 countries worldwide use the smart reporting templates.

And it shouldn’t stop there: Smart Reporting has now collected 15 million euros for the further growth plans. This emerges from a communication that is available to the Handelsblatt. The Munich venture capitalist Yabeo is the lead investor. In the past, Smart Reporting already secured growth capital of 6.5 million euros as part of a first round of financing.

Basis for algorithms

In addition to the technological approach, Yabeo investor Matthias Sohler also won over the sales concept of Smart Reporting. “The great thing about smart reporting – in addition to the technology platform and medical expertise – is the pronounced diversification of the sales channel: that large companies like Agfa, General Electric or Siemens takes a B2B2C approach. ”If a hospital purchases a new CT device from one of the medical technology manufacturers mentioned, the Smart Reporting template can be included in the delivery.

With the fresh capital, Smart Reporting now wants to grow quickly. An expansion to the US market is planned, and reports for oncologists and cardiologists will soon be available. “In 2025, we calculate sales of more than 100 million euros,” says Sohler. In addition to radiologists, the company already offers its services to pathologists.

Prior to founding his company, Sommer had acquired expertise abroad: studied medicine in Heidelberg, Madrid and Berlin; Assistant doctor positions in radiology in Lausanne and Munich; Master’s degree in public health from Harvard University. Shortly before he founded Smart Reporting as a spin-off from a research project in December 2014, he was appointed professor of radiology at the Ludwig Maximilians University in Munich.

Back then, he was surprised that “big data” was spoken of everywhere. The basis for this – standardized documentation – was not given at all. The 40-year-old has a bold goal: Findings should become the standard for all medical documentation. Not only do other doctors benefit from this because they can understand the entries made by colleagues directly.

Wieland summer

The radiologist is the founder of the start-up Smart Reporting.

(Photo: Smart Reporting GmbH / Oliver Bellen)

Standardized data is also machine-readable and can train artificial intelligence. “We work with a large university hospital to develop algorithms, but that is currently not our core business. We offer the infrastructure, others train the algorithms, ”says Sommer.

The business area is therefore also attractive for other companies, such as the Heidelberg company Mint Medical, a spin-off from the German Cancer Research Center (DKFZ), or the French company Keydiag, which was founded in 2018.

“With the increasingly complex radiological imaging and increasing number of examinations in the daily workflow, the structured diagnosis will become even more important,” says Jens Vogel-Claussen. He is a senior physician at the Institute of Radiology at the Hannover Medical School and has chaired the “Thorax Diagnostics” working group at the German X-ray Society.

Smart Reporting founder Sommer has some supporters in his vision: In addition to co-managing director Johannes Huber, there are around 30 investors, including Wolfgang Reitzle, chairman of the supervisory board the DaxCorporations Linde and Continental. Sommer’s father is also a partner in the company, and he is also a radiologist.

More: A spray against Corona – biotech companies form new alliances.


How the corona virus de-globalizes the global economy

Brussels, Paris, Dusseldorf When Joe Kaeser returned from China together with Chancellor Angela Merkel in September 2019, he had a warning in his luggage: “The United States and China are decoupling from one another,” he suspected Siemens boss back then with a view to the trade war of the two largest economies. The pandemic makes Kaeser’s cash register call a reality faster than feared: companies cut supply chains and relocate factories. Governments isolate their economies from each other and hoard vital products. This affects not only the United States and China, the entire world economy is distancing itself from one another.

This can already be seen in world trade. According to the latest forecast by the World Trade Organization (WTO), global trade in goods could collapse by up to a third in the current year due to the pandemic. What the WTO economists see in their early warning systems are the immediate consequences of a worldwide economic shutdown that started in China and then spread with the virus from Europe to America in no time.

Such business interruptions are the horror scenario for many companies. In the “Allianz Risk Barometer”, such abrupt forced breaks in production have topped the list of the greatest managerial fears since 2013. However, the WTO experts can only guess what medium and long-term consequences the corona crisis will have for the global economy, which is closely linked by global value chains.

Keeping distance is not only the order of the day for people, but also for companies. The balance between efficiency and security is being readjusted in the economy. Almost overnight, companies that have been trimmed to “just in time” have to rethink “just in case”.

In concrete terms, this means: managing more suppliers, redirecting supply chains, increasing inventories and, if necessary, even relocating entire locations. Just as the banks had to create capital buffers after the 2008 financial crisis, industrial companies in particular are now creating security cushions for their production.


Companies are helped by new digital technologies such as big data and 3D printers, which enable them to use the data to also redirect the flow of goods so that they are no longer dependent on just one production location. “The current crisis will have an impact on globalization,” EU Industry Commissioner Thierry Breton told Handelsblatt. Even before the outbreak, many companies had started to check their supply chains and production sites in order to take CO2 emissions, dependence on digital technologies and proximity to customers more into account.

The dependence on individual countries outside Europe is now being questioned, predicts the former head of the IT group Atos. “This crisis is accelerating developments that we have observed before,” said Breton. EU Commission President Ursula von der Leyen speaks of “mindful globalization”: You can no longer see trade flows and supply chains exclusively economically, she told Die Zeit.

A change in mood is also noticeable in China

China, which has become a factory for the world since it joined the WTO in 2001, is particularly affected by the new precautionary principle. The McKinsey Global Institute (MGI) has calculated that the global economy – measured in terms of trade, technology and capital flows – was three times more dependent on China in 2017 than in 2000. Over a third of all industrial products produced worldwide now come from Chinese factories.

More than 50,000 companies worldwide have, according to a business consultancy study Dun & Bradstreet a system supplier (Tier 1) in the region around Wuhan. “Many countries and companies are now increasingly thinking about whether they rely too heavily on deliveries from China,” says Max Zenglein, chief economist at the Mercator Institute for China Studies (Merics) in Berlin.

The change in mood is already noticeable in China itself: “When the country went down under the pandemic in January and February, the rest of the world felt how dependent everyone is on supply chains from China. The changes that are now emerging are not just temporary, but permanent, ”reports Jörg Wuttke, head of the EU Chamber of Commerce in China.

Even before the crisis, companies would have oriented themselves differently for cost reasons. Trump’s trade war then showed everyone how vulnerable global value chains are today. “The supply chains will look different after the crisis than before,” predicts Wuttke.


This applies not only to medical products such as respiratory masks or respirators, which have become national security goods in almost all countries due to the delivery bottlenecks during the corona crisis. Chancellor Merkel speaks of “existential value chains” that many politicians prefer to see in European hands. “Industry is concerned that the Federal Government has gained extensive powers to intervene in the production, price and trade of corona protective goods in the past few weeks,” warns the Federation of German Industries.

However, the national need for protection goes further: the crisis has weakened many companies so much that they could now be easy prey for foreign takeovers. And indeed, the financial information service Bloomberg reports increased interest from Chinese state investors in particular in European companies. Italy, Spain, France and Germany have therefore also increased their investment protection.

In France, the government has indicated that it is working with the Chancellery on a Franco-German initiative to secure strategically important economic areas. This also involves the return of certain production capacities for pharmaceuticals from abroad, especially China, to Europe and finally the prevention of the sale of technology companies in the wake of the economic crisis.

“We have to put ourselves in a position to guarantee national or European productions that are essential for our populations,” says an adviser to French President Emmanuel Macron. The EU had already agreed in 2019 to take a closer look at foreign direct investment.

Japan wants to bring productions home

According to the United Nations Conference on Trade and Development (Unctad), foreign direct investment will decline 40 percent worldwide this year. This threatens to sustainably damage global production networks and supply chains, said Unctad director James Zhan.

Globalization is also being resorted to elsewhere: Japan even wants to help companies with the equivalent of around 1.7 billion euros to bring production plants back from China to Japan or to relocate them to other Southeast Asian countries. Microsoft and Google are planning to relocate production facilities from China to Vietnam and Thailand, according to a report by the Nikkei Asian Review. “Anyone who has had delivery problems due to the production stop in individual regions such as the province of Hubei should also look for alternative suppliers in other parts of the world,” says Guntram Wolff, head of the Brussels research institute Bruegel.


Jacques Aschenbroich, boss of the French automotive supplier Valeo, pointed out the fragility of the supply chains at the beginning of the crisis: “Each of our customers tries not to be dependent on us alone. If this is the case, he demands from us the guarantee that we can procure each component from at least two if not three different regions of the world. ”

German carmakers think similarly. Cover every day BMW, Daimler and the VW-Group several million components from their suppliers. This chain, however, has stalled due to the corona pandemic. Particularly important and therefore critical for production are the southern countries Italy and Spain, who have partially stopped their production on instructions from the authorities.

In response to previous bottlenecks, car companies in particular have created extensive databases in order to find alternative suppliers for each individual part. Daimler now sees itself prepared for the start-up of its plants. For almost every component, there are substitute suppliers in the databases if the original partner should fail.

More: Grimm economy – “We will trust international supply chains less”


Trading on the German stock exchange stands still for over four hours

Bull and bear in front of the Frankfurt stock exchange

A bug in the T7 electronic trading system led to the longest trading failure in many years on Tuesday.

(Photo: dpa)

Frankfurt, Dusseldorf The stability of their trading systems is for that German Stock Exchange essential. “Our capital is the trust of the market participants in us and our systems,” says CEO Theodor Weimer.

But it was precisely in the hectic times of the corona crisis that Germany’s largest stock exchange operator suffered the biggest breakdown in years on Tuesday. On Tuesday, a large part of the trade stopped for more than four hours from 9.25 a.m. The reason for the interruption was a technical problem with the electronic trading system T7, said a spokesman for the German stock exchange. “An error in the internal communication of the trading system triggered the problem.”

The default affected both equity trading via Xetra and derivatives trading in the most important division, Eurex. In addition, electronic trading did not work on many other stock exchanges that use the Hessen system. These include the trading centers in Vienna, Prague, Budapest, Zagreb, Ljubljana, Sofia and Malta.

In Frankfurt, the floor trading was not affected by the breakdown. However, it has only played a subordinate role for years. More than 90 percent of German stock trading is done electronically.

According to the German stock exchange, trading on the Eurex started again at 1.45 p.m., electronic stock trading on Xetra at 1:50 p.m.

For the company from Eschborn near Frankfurt, it is the worst breakdown in years. Compared to breakdowns at banks, failures at Deutsche Börse are rare. System availability at Eurex was 99.97 percent in the past twelve months.

Weimer hates failures “like the plague”

Most recently, there were two failures in the public eye, which were shorter than the current breakdown. On October 15, Xetra trading began an hour later due to technical problems, and on March 16, 40 minutes late.

The latter breakdown was particularly annoying for Deutsche Börse, after all, the group had proclaimed “Share Day” this Friday in March, where private investors could buy Dax shares and index funds free of charge. In addition, the IPO scheduled for that day was delayed due to the breakdown Siemens-Medical technology daughter Healthineers.

The head of Deutsche Börse Weimer was visibly uncomfortable. “A stock exchange boss hates it like the plague when there are network problems or software problems,” said Weimer a little later in the Handelsblatt interview.

The breakdown in March 2018, according to Weimer, was due to the fact that logging in of several customers’ trading applications to the system resulted in a blockage for all customers. “Such incidents are ugly, but not really worrying,” said Weimer. “What really worries me is massive cyberattacks on all corporate systems, including ours.”

However, the trading failure on Tuesday was not due to a hacker attack, said a spokesman for the Deutsche Börse Group – and thus rejected corresponding speculation on dealer platforms.

Many investors were annoyed by the failure. An hour-long disruption “is unfortunately not acceptable for an exchange,” wrote a user on Twitter. Another took it with humor and asked chief engineer Scotty from the Star Trek science fiction series for help.

More: Private investors are particularly affected by breakdowns in the certificate trade.


“Start up again as soon as possible”

Munich OsramChief Olaf Berlien has spoken out for the shutdown to end as soon as possible. “It is clear that we cannot keep the stores and factories closed for three months,” he told the Handelsblatt. “We have to start up again as soon as possible.” The Federal Government has so far done an excellent job. But it also had to take into account the experiences of other countries. “The obligation to wear a mouthguard could help us.”

The Osram boss recommended the companies to prepare for the time after the corona crisis. “If you are ready when the market starts, you will gain market share in the long term,” he said. In a crisis, the strong become stronger and the weak become weaker. “There are some who are already shaking in terms of liquidity.”

The ex-Siemens subsidiary Osram is currently about to be taken over by AMS. The Austrian sensor specialist had difficulty in getting a capital increase through which the acquisition was partially financed.

The corona crisis had no impact on the takeover process itself, said Berlien. “If there are no sales every eight months, it will of course also have consequences for the two companies.” “Together we have a much better balanced portfolio.”

Read the complete interview here:

Mr. Berlien, have you ever experienced such a crisis?
I have experienced exceptional situations in my managerial career several times. It all started with the stock market crash in 1987 and the Asian crisis ten years later. The terrorist attacks in 2001 and the financial crisis, which had a massive impact on our economy after 2008, were also drastic. Especially the latter is now a déjà-vu for me.

But such a crisis, which affects the whole world at the same time, is new.
Fortunately, the situation is not like this. While the economy in Europe and North America is at a standstill, the wheel in Asia is already turning again. Our Chinese factories are 100 percent full, we cannot meet the demand. I need a crisis kit.

What’s in there
Every manager receives a checklist from us. There are topics like hiring freezes, checking outstanding invoices and shutting down temporary workers. He should also call the customer every day and ask what orders still exist. I know from the previous crises that the books can be full of orders, but they will no longer turn into sales.

So you were well prepared.
Due to the developments in China, we were warned and were able to prepare for the crisis early on. On March 6, we therefore concluded a “Group Pandemic Works Agreement” with the employees, in which we regulated the use of all the tools. We were early.

And is the agreement already being used?
We stopped work in six out of 26 factories worldwide. In Germany, we can compensate for the failures by reducing overtime accounts. We have not yet applied for short-time work here, but we are preparing for it in agreement with the employee representatives. It is important that we remain flexible.

This means?
In such crises there are the unreasonable who continue to work at full throttle, and there are the fearful who brake too early out of concern. The brave are prepared to step on the gas again at the right moment.

Not everyone will survive this crisis.
The companies that were previously not well positioned will tip over. Anyone who has done their homework properly will hold out longer. We have a 50 percent equity ratio, and we are well prepared for short-term crises.

Work continues in many of your factories. How do you protect your employees?
We rely on a whole range of measures. Consistent hygiene is a matter of course. In addition, we sometimes work in two strictly separate shifts in the factories – the workers don’t even meet in the parking lot. In between everything is disinfected.

What is the relationship with the car manufacturers like at the moment? Do they take their suppliers into consideration, or is everyone the next person?
We try to call everyone every day. The situation of the manufacturers is not easy: in Spain, France or Italy, no one goes to the dealership now. We try to coordinate. In the financial crisis in 2008, one or the other was even more selfish – since then everyone has learned. Now we are seeing that by the end of April we are ready to start up our plants.

Then is it that far?
Nobody can make a reliable forecast there, everyone drives on sight.

But you hope for a quick recovery?
The economy had recovered faster and faster in the last four major pandemics.

To do this, the restrictions must first be lifted. How do you assess the measures taken by the authorities so far? Must be opened quickly?
First of all: the safety of people has top priority. The federal government has to do everything it can to save lives, and it has done an excellent job so far. From today’s perspective, the measures are appropriate.

The federal government should take into account the experience of other countries. For me, this includes wearing a face mask. Where this happens, the curve is flatter. Examples such as Japan and South Korea show that businesses can remain open with the default. The duty to wear a mouthguard could help us. It is clear, however, that we cannot keep the stores and factories closed for three months. We have to start up again as soon as possible.

When the shutdown ends, how quickly can you start up again? From one day to another?
No, it doesn’t help if we’re ready, but our suppliers don’t. I consider three to five days for a realistic period. The situation is similar in the auto industry. The longer the shutdown takes, the more difficult it will be to start up the car factories. Because some suppliers will then no longer be there.

For which parts do you expect bottlenecks?
For us, electronic parts are the critical components that must be available. Bottlenecks also arise at a very unexpected point. In Malaysia, we are allowed to continue producing with a small number of employees because we are considered a systemically important supplier to the automotive industry. We currently have the problem that cardboard boxes are missing – their manufacturers are not considered systemically important and are therefore leakproof.

How do you steer through the crisis? Is there a task force?
I am the top crisis manager. Of course, we also have a task force that discusses the situation on a daily basis. But the CEO has to be the driver. It is important that there is clear leadership in the crisis.

How will the crisis change your industry? Do Asian competitors have an advantage because the economy is already starting up again?
Osram is the market leader in China, so we have no disadvantage there. However, the old rule applies to everyone: in the crisis, the strong become stronger and the weak become weaker. There are some that are already shaking in terms of liquidity.

And the strong ones?
If you are ready at the moment the market starts, you will gain market share sustainably. I swear by my sales team now. You have to be prepared for the “Day after Corona”.

Osram is just being taken over by the Austrian sensor specialist AMS. What are the effects of the corona crisis?
It has no impact on the takeover process itself. If no sales are made every eight months, it will of course also have consequences for the two companies.

Don’t you see the chance to get rid of a new owner who might not be loved yet?
No, there was an offer to our shareholders, and they accepted it. Incidentally, we are better positioned together: AMS is strong in cell phones, so Osram always wanted to go there. We are good in the auto industry, so AMS wanted to get in there. Together we have a much better balanced portfolio.
Thank you for the interview.

More: Zero hour – how a responsible restart of the economy succeeds


“CEOs mustn’t duck away”

Office staff

Communication is now an important task for managers.

(Photo: Imago)

Munich In times of Corona, signs of solidarity are required. Siemens boss Joe Kaeser recently visited the generator plant in Erfurt with a face mask. After all, the workers couldn’t stay in their home office in their service to companies and society, he tweeted.

Despite all the rules on distance, it is important for CEOs to show closeness now. “Managers can now prove whether they actually live, what is promised everywhere: that the employee is at the center,” says Jörg Schleburg, founder of the VonVorteil consultancy. The employees are insecure and fear for their jobs. You need a hold and a perspective.

Managers currently have many tasks at the same time. For example, you need to secure liquidity and maintain supply chains. But according to experts, they should also fly the flag. “Overall, one has heard far too little from the corporate leaders,” said Stephanie Schorp, psychologist and managing director of Comites personnel and management consultancy.

They would have to speak out more about social and global political crises. “In our opinion, corporate executives cannot duck or dive. Even internally, managers should not be silent or communicate insensitively.

Schleburg, who specializes in employer branding, among other things, considers communication to be the top priority. “Open, regular and transparent.” Employees felt safe when their boss exudes security.

Video message from the canteen

For example, many CEOs are currently digitally turning to the workforce. OsramChief Olaf Berlien, for example, usually makes a video once a week. For example, he recently stood in front of the camera in the empty canteen and reported on solidarity actions by Osram employees.

For example, employees in China donated 500 UV lights for disinfection to hospitals in Wuhan at the height of the crisis. “With such great employees, we will also be able to overcome this crisis,” concluded Berlien. Encouragement is important for the Osramites, because of the upcoming takeover by AMS there is already uncertainty among the workforce.

According to the experts, strong leadership is of course required in times of crisis. “Confident and determined,” says Comites founder Andreas Föller. It was important to work out the appropriate concept for the company based on various disciplines. Pragmatic facilitation and savings should be decided and implemented quickly.

Otherwise, panicked decisions would have to be avoided. The CEO must not indulge in omnipotence fantasies. “He has to understand that there are things that are too big for you alone and even for a small group. The collective has to cope with that. ”

Schleburg sees the managers as being challenged twice. You would not only have to show how to meet the current challenge – from home office to short-time work. You would also have to develop a strategy where the company will steer in the medium and long term under the changed circumstances. They would also have to show how they want to act in a world in which nothing seems to be safe anymore. “Openness, networking and agility are the order of the day.”

Dealing with the crisis is not only decisive for the short-term economic well-being of the company – it also has an impact on the image in public, among employees and sought after talents after the crisis. “Employees will be proud when their company behaved professionally in the crisis and gets away with it with a black eye,” says management consultant Schorp.

Schleburg is also convinced: “Companies that emerge from the crisis stronger than before will become particularly attractive for talented people.” They have proven that they are prepared for a very dynamic future. In this respect, the crisis is an opportunity: “Those who may not have been known before can now strengthen their image by acting intelligently.” Conversely, a company that previously had a good reputation could also quickly lose reputation.

More: Commentary – The crisis shows which boss has true leadership skills.


Hydrogen could save heavy industry

Es is a simple experiment that guarantees attention to every chemistry teacher. A balloon is filled with gaseous hydrogen. Upon contact with fire, the balloon bursts with a loud bang. The hydrogen reacts with the oxygen in the air. Only a wet stain remains on the wall. It is precisely this reaction that makes hydrogen so interesting for German heavy industry: the waste product of this reaction is not carbon dioxide. It’s water. The bang is created without climate-damaging emissions. Wouldn’t it be a dream to do the same in heavy industry?

Anna Steiner

The good news is: Production using hydrogen has long been technically possible. The steel group Salzgitter, for example, recently placed an order with Siemens to build wind turbines on the company’s premises. The green electricity generated in this way is to be used to produce hydrogen in an in-house hydrolysis plant. Instead of coke, it is used to break down ore into sponge iron, which in turn melts into liquid iron in the furnace.


Listed companies benefit significantly from participation

Participation and participation

The involvement of employees in corporate decisions has a positive effect on the economic return.

(Photo: E + / Getty Images)

Berlin Co-determination is “a pound that we can use to proliferate,” said Chancellor Angela Merkel. Especially in times of crisis, it is “the essential foundation of the social market economy”, adds Birgit Steinborn, head of the general works council and deputy chairman of the supervisory board Siemens. “Especially now that we are facing massive and unprecedented challenges, we will use all means of co-determination for health and jobs for employees,” Steinborn told Handelsblatt.

Employers and works councils, management and supervisors are currently doing everything they can to prevent permanent economic damage from the corona pandemic. At Siemens, for example, with short-time work, solidarity grants and an employment agreement that excludes redundancies.

The value of participation is also evident outside of times of crisis. For example, listed companies with strong employee presence on the supervisory board often do better than companies without a significant level of participation. And they are more often pursuing a company strategy in which it is not low prices that bring competitive advantage, but innovative and research-driven products and services.

The focus is on costs

This is shown by a study by the Institute for Codetermination and Corporate Management (IMU) of the Hans Böckler Foundation, which is close to the trade union, the Berlin Science Center for Social Research (WZB) and the University of Duisburg-Essen. In the study available to the Handelsblatt, the researchers included 172 companies that were listed in the Composite Dax (CDax) stock exchange index between 2006 and 2017.

The companies were differentiated according to the degree of participation, which is based on six criteria such as the composition and internal structure of the Supervisory Board. The researchers also analyzed which strategy a company is following.

As a “cost leader”, does it focus on the lowest possible sales prices? Or is it trying to set itself apart from the competition with special product features or services – for example with high quality, a special design or exceptionally good service? This “differentiation strategy” usually goes hand in hand with higher investments in research and development and a tendency towards higher employee qualifications.

Unsurprisingly for the high-wage country Germany, it can be seen that the proportion of companies that primarily focus on the lowest possible costs decreased from 24 to 15 percent in the study period. In return, the proportion of companies with a differentiation strategy increased from 16 to 26 percent. The other companies follow a mixed or no dominant strategy.

Operating profit is higher

The likelihood of a company relying solely on cost leadership decreases with the degree of participation. The authors also attribute this to the fact that, as far as possible, strong employee representatives are committed to business models that focus on high technology intensity and innovation. Because both can only be achieved with “well-trained and therefore generally higher paid employees”, says the study.

The authors, who are often put forward by critics, that strong co-determination restricts company development so that the shareholders damage and consequently represent a disadvantage, do not apply to the companies examined. The total return on capital – i.e. the profit as a percentage of the balance sheet total – is around 65 percent higher for companies with above-average participation than for companies with weak or no participation.

The operating profit (EBIT margin) for companies with greater participation is on average around 11 percent higher. The profit after taxes plus depreciation per share, which is particularly relevant for shareholders, is even more than three times as high as in companies with little participation. Co-determination is not only a guarantee of location and employment security, but also “a factor for economic stability and prosperity – not only in times of crisis,” the authors write.

More: According to the study, employee participation leads to more investments.