YouSaid · the spoken record

Alison Rose

lines on the record: 26
first: 2023-08-08
most recent: 2023-08-08
sittings or episodes: 1
sources: podcast

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“So clearly, there's a lot of transition happening there. I would say a lot of that is being addressed on a micro level, but clearly the move to a more digitized economy, the move to a stronger service economy, the fact that we all will work differently and live differently in a digital age will wear particularly on this economy that is not only very manufacturing heavy, but also characterized by a lot of mid-sized companies that are privately owned. So you'll see a lot of transition there, adaption there. positive as to how companies deal with this. I think for politicians, the real challenge is to do all of this in a manner that keeps social cohesion and that keeps society together and offers perspective for all levels of society. And we obviously hope that this will work out. But clearly, given the stock of capital and experience and also technology in this country, I'm quite positive that Germany will master that transition.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“It's obviously a very interesting question that many of the larger economies, more mature economies are facing. And one aspect, apart from the many aspects we just discussed, is clearly the aging of the society. Germany has a relatively old society, and the aging of that society will pose a lot of problems to the countries and to Germany in particular. Also clearly Germany was heavily reliant on foreign workers to basically address the labor demand in the economy. Now you see also a lot of movement there, for example, a lot of workers from Eastern Europe going back to their strong growing home economies. Hence, there will be a challenge both from a skilled labor perspective, from the retiring of a large part of the productive population. And that's a pretty strong aspect for a country that has heavily relied on manufacturing compared to manufacturing industrial economy.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“To work on carve outs, spinoffs to reduce rent or the portfolio in order to generate the sources to advance their businesses. And that is irrespective of where the market currently is. Those are internal projects, but clearly they will also come to market to either sell, refinance, finance. So there is an undercurrent of restructuring that is going on in the economy. And I think we'll see that coming through when the markets are more receptive, as we all expect in the next half of the year.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I would say we are not separate from the global MA and financing markets in that the inflationary environment have been dampening activity all over the place, be it in M&A, be it in financing or IPOs, for example. So Germany is no different there. Having said that, as we go into a more balanced environment, peak rates, less inflation coming, we see a healthy backlog of financing activity that needs to be executed. And what that means is we will have a lot of flow that needs to be executed if we have a stronger normalization or better normalization of the environment. Having said that, the economy is at the businesses itself have been dealing with these topics and the current slowdown in some parts, the challenges we just discussed have led many companies to adjust, to invest more heavily in digitalization, to basically review the business portfolio.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Infrastructure in order to create new production methods. All of these topics on a company level have been advanced. And I think many of the companies we're talking about, and you see also many of the results they're generating are from the change to a digital manufacturing, digital economy. Now, again, the government is obviously is a more complex undertaking, in particular when you think about the public side of services and procurement, certainly other governments in Europe farther ahead in terms of digitalization of the government work. But clearly we also have a good pool of innovative companies, startups by now. For example, we have 30 unicorns in Germany alone that have pushed a lot digitalization, the use of AI in applications. And there also comes a positive pressure from that side to adjust and to adapt.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“I think in particular on the company level, the whole question of digitalization and moving to a digital economy has been front and center for many years. Companies have seen a lot of change, in particular from very innovative parts of the global economy, be it in the US, be it in Asia. And the adaption to that world in their production processes, in their manufacturing, in their go-to-market sales has been a key topic on every CEO's agenda. So that's ongoing. The government, on the other hand, has put out strategies, in particular for artificial intelligence and had put out programs in order to foster that. I would say that the private sector is certainly ahead given the necessity to adapt quickly. And part of it is coming back to some of the topics we discussed, energy on the one hand or the labor shortage, finding labor demand, being more efficient with production, near shoring versus digital.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“And clearly technology investment is key. What is Germany doing when we think about artificial intelligence that's so in focus, software investment? What actions are the government taking? What actions do you see companies taking?”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Given the amount of investment required to transition this economy, in particular its industrial base, into a more sustainable renewable energy world, it's massive. It's massive investment and its massive investment not only at the microsite, i.e. the company side, but also on the macro side, i.e. the whole infrastructure that is required. Germany has a particular issue here where most of the energy that you”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“For market share and customer attention. The competition from China is extremely strong, extremely successful, and very price conscious. And hence, in the consumer environment that we just discussed, they're gaining share. It's a multifaceted challenge. I would still say that given the technology base that the traditional producers from Germany have, we think ultimately to stand a very good chance to come out successful in this transition.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“The marquee and the brand will help this industry to catch up, let's put it this way. An interesting point is still that most of the profits of that industry is generated by traditional technology and there are huge profit pools all over the world that this industry is tapping or is basically benefiting from, that pays for all the investment in battery electric and technology. Having said that, it's a complex transition. It doesn't only involve a propulsion technology, it involves connectivity on the digital side. It involves new distribution, go-to-market models, and clearly they are facing at this particular point heavy competition from not only Tesla in the US, but massively from Chinese producers, especially in the volume segment, which is small cars, compact cars that are usually attracting much higher demand, much higher volumes globally. And I think if you watch the battle, so to say, in the volume segment,”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“I think the auto industry is obviously a case in point of what we just discussed. Very successful in the traditional technology with the combustion engines globally well recognized and now facing the transition to e-mobility. And I'd say that the auto industry has had a slow start in adapting. But now you see on the street the battery electric vehicles of that industry, of their large auto companies, those models have been designed 2016-17. We are in the process of designing the real battery electric vehicles right now that will come to the customer in four or five years. And hence, there was a slower start. Having said that, given the technology strength and also the brands that have been established over many years, the trust with the customers, this industry isn't a catch-up mode. So while you had first movers, let's say Tesla in the US, and obviously increasingly the Chinese producers, the trust.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Et cetera, have to be overhauled, have to be streamlined in order to get that investment executed. And then secondly, clearly the capital companies are spending a lot of money in their CapEx plans to do it. The government is willing to spend a lot of money. Private investment will be needed. But you've got to build the funnels for that money to flow. And you got to build the infrastructure of permits, permissions, et cetera, to get that money to be invested quickly. And I think we are in a race there in order to get to these very ambitious targets.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think you definitely see that. You definitely see companies thinking very hard how can I greenify my energy sources, simple examples. I buy a stake in the offshore wind park so that gives me an amount of green energy I can work with in order to, when I procure my own energy, swapping agreements. But I think, again, to get to the targets of the economy that says economy-wide emissions have to be reduced 65% compared to 1990, 65% in 2030 or by 2030, and 88% by 2040. A lot of more measures will have to be taken. And I think what you see there is that the build-out of the renewable energy sources is slow. And it's slow because the whole permit bureaucracy red tape that's required to get it done is still from a time that actually hasn't felt the urgency that we're now feeling today. So hold bureaucracy processes, permits.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Of the economy in that other businesses in the transition. But clearly there's a lot of awareness that this needs now to happen and that government and the industry will have to work together to achieve the next step in order to reach the ambitious government targets, the 2030 targets that clearly will be from today's point of view a major challenge, not necessarily technologically, but also in order to get it done and get the permits and get it executed.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think what you have seen, especially when you look at the end of 2022, 23 beginning and the concerns of many observers as to how quickly the economy can adapt. In the wake of the war, the consumption of hydrocarbons in particular gas has been reduced drastically. The gas consumption of the German industry has gone down by approximately 30%. Now, having said that, you got by production cuts and easy to fix measures. To go further in transitioning into green energy sources will require much more investment. So I'd say the easy part of that is done. The more complex part is coming, which is associated with a lot more capex and investment. And clearly there, you need to have government stimulus, which is there, but needs to actually flow through to basically foster that investment. And then bureaucracy, i.e. permits and what have you to allow these companies to quickly readjust. So you see the hard innings are ahead.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. It's clearly a key point for the economy. It has been talked a lot about the inflexibility of the labor market due to a lot of regulation and red tape is clearly a factor in this adjustment. It has also basically stalled a low-wage sector from a very flexible element of labor economy, really fully developing. And it's still also a problem within the European Union that the shift of labor within the Union isn't as fluid as you would hope. Hence all those phenomenons make the economy less adaptive. And again, I would say ultimately will force companies to look more for automation or for again going outside Germany or even the EU to source cheap labor. And that can't be in the interest of policy. So something has to give there and clearly the more flexible labor sector is a key point on the reform agenda.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a very interesting phenomenon, which we also see elsewhere, but in the German economy, clearly there still has been a gap in terms of a labor shortage, given the ramp up that we have experienced throughout the economy post-COVID. Having said that, that gap is narrowing. So we see that there is less openings and clearly a softening. Now, the interesting thing is the softening is happening in the manufacturing sector. We've seen more growth in the services sector, and that's interesting for an economy that traditionally is very much tilted towards where the weight of the manufacturing sector has been quite strong and prominent compared to other European economies. So there's a shift going on to the services part of the economy, wage growth in the services part of the economy has been stronger also. But having all said that, we're seeing a softening there. And so you have to watch this time lag that we're experiencing from the manufacturing sector coming down to the wages.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“And in fact, labor still very much has the upper hand in the economy. As you said, wages are rising. Unemployment is near historically low levels. Why has the labor market been so resilient in the face of these macro headwinds”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Double digit wage growth demands. And while that would obviously help to increase real income in the household pockets, it will add to further inflationary pressure in the economy. There's certainly a mixed picture there, but we are more constructive as to the coming months in terms of consumer holding up. We have seen some weaknesses, as you rightly say, in the recent months, and that we need to obviously watch.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“In that regard, we have seen a softening of the consumer demand and mainly due to, as you say, the inflationary pressures that we are seeing, no exception in Germany in that regard. I think interesting, though, there's still a lot of savings that the consumer has from the pandemic area, so that is cushioning a bit the fall in demand there or the reluctance to spend. The other thing we are seeing is that wage growth is still there and is still happening. Hence, if you now look at more abating inflation pressure, if you look forward and wage growth and the savings cushion that's there, we feel quite positive about consumer momentum going forward, despite the softening we see now. Now, having said that, there are clearly a lot of demands as well to raise wages. There are wage rounds for many of the industrial employees coming in the second half, and the demands are very high, many cases.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“That a lot of the margins are made in this market, and that there's a tendency as well in China to look at what these companies are doing. So we're seeing a lot of strategies being developed. But I would say emerging, you could see China for China as a strategy, i.e. produced locally for the local demand, but less reliance on China as a production hub for elsewhere. And then on the other hand, reduce exports from Europe into China, i.e. go local in order to basically better control the growth and the market activity you have there. Just two examples as to the micro level and the macro level, as I just said, more government push towards diversification.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“On the other hand, it has let the government to come out and say companies need to reduce dependency on China. Now, that's all easier said than done. It's a long process, but science of diversification in Asia itself, where companies, for example, go to Vietnam, go to other states, build up presences elsewhere to reduce dependency. But also you see it in Europe itself where there's an ample discussion about what needs to be short back to Europe, what needs to be produced in Europe rather than in China. Now, having said that, all comes with a lot of cost and obviously skilled labor, regulation, and other issues. So it's a slow process, but clearly the problem has been, let's say, recognized. And there's not a single company that doesn't actively ask in their boardrooms today, okay, how dependent are we and what can we do to reduce dependency in a sensible manner, recognizing that a lot of their products still go there, recognize”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think it's well documented how dependent the German economy as such, and in particular also the manufacturing economy is depending on China. And it has been, frankly, one of the success stories, I'd say, over the last, let's say, 30 years. And what you're seeing now is that both on the export side, where China is the second largest destination of the US, and particularly also on the import side, the country's manufacturing economy is highly dependent on China. Now, clearly COVID has seen some of the limits of that partnership already with the disruption in the supply chains and the questions about near shoring and a higher resilience in supply chains. The bumpy reopening now of China that I mentioned is another one where the German economy faces direct consequences of the issues that China faces itself. So that all has led companies to rethink their dependency on China, both on the sales and the distribution side, but also on the manufacturer.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“And as you said, China is Germany's largest trading partner. It is also having a very disappointing performance this year. But Germany is taking steps to reduce that reliance on China. Talk to us about what you're seeing companies doing in that regard.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, Alison, I think part is what we experience in globally, the inflationary pressures that are weighing on the economy and on the consumer. Also, as we come out of COVID, there are very mixed signals that we are seeing also in the German economy. In particular, if you think about the destocking that was going on post-COVID restocking, and that is giving us a lot of mixed signals as to how much the producing economy is really producing in the wake of a rapid destocking going on. There is the big topic of energy transition, which is weighing on those companies. And clearly another big topic, the dependency of the economy on exports, and in particular on exports to China, which has been experiencing a very bumpy reopening itself. So all of these factors are weighing on the economy in different forms. Hence, you see the overall picture, which is sluggish or even recessionary.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT
“Given the amount of investment required to transition, this economy, in particular its industrial base, into a more sustainable renewable energy world, it's massive. It's massive investment and its massive investment not only at the microsite, i.e. the company side, but also on the macro side, i.e. the whole infrastructure that is required.”
2023-08-08 · Goldman Sachs Exchanges · Germany: a country at the crossroads · IDENTIFIED FROM THE TRANSCRIPT