10 ★ FT Weekend 9 November/10 November 2019
J O E M I L L E R —FRANKFURTThe new chief executive ofDaimler ash
outlined plans to cut 10 per cent of
managers in Germany and up to 1,
intotalworldwide,accordingtoaletter
circulated by leaders of the carmaker’s
workscouncil.An email sent by supervisory board
members Michael Brecht and Ergun
Lümali to 130,000 Daimler employees
yesterday claims that Ola Kallenius gave
a “concrete figure” on job cuts earlier
this week, for the first time since taking
over in May.
In the wake of several profit warnings,
Mr Kallenius had previously warned of
having to make savings in order to pay
for investment into electrification and
deal with the slowdown of the global car
market.
Last month the Mercedes-Benz owner
said that its earnings before tax in 2019
would be “significantly below” the
€11bn it posted last year.
The letter sent to Daimler staff stated:
“Management never misses an opportu-
nity to draw attention to the poor finan-
cial situation of our company.” It allegedthat executives had proposed a delay to
previously negotiated pay increases.
Messrs Brecht and Lümali sit on the
carmaker’s supervisory board and are
also members of the works council,
which represents the interests of
employees. They reiterated a pledge to
keep Daimler to an agreement reached
in 2017 that prohibits operational
redundancies — including some depart-
ment leaders — in Germany until 2030.
Daimler said it was in “constructive
dialogue” with the works council and
added that it “wouldn’t comment on
speculation”before a capital markets
day in London and New York next week.
Daimler’s management is expected to
outline a new strategy as it struggles to
transform its fleet in the face of forth-
coming EU emissions regulations and as
it deals with legal troubles over alleged
contraventions of diesel-emissions
regulations.
Despite strong recent Mercedes-Benz
sales in China, Mr Kallenius warned,
Daimler had to “increase our efforts
considerably”to “master the transfor-
mation in the next few years” in an unfa-
vourable economic environment.Automobiles
Daimler chief plans to shed
1,100 jobs, says works council
In the ring: Logan Paul, left, fights his fellow internet celebrity KSI in front of
thousands at the Manchester Arena in August last year— Kit Oates/ShutterstockOW E N WA L K E R— LONDON
A top UK fund manager and former pro-
tégé of Neil Woodford has been forced to
apologise to investors over his perform-
ance after a leading rating agency
flagged similar concerns to those that
brought down the fallen star investor.
Mark Barnett, Invesco’s senior fund
manager in the UK, was stung by the
downgrade of his £6.1bn High Income
and £2.7bn Income funds this week by
consultants Morningstar. The funds,
which include investments by thou-
sands of UK savers and pension funds,
were formerly managed by Mr Wood-
ford before he left to set up his own busi-
ness six years ago.
Morningstar cited concerns over the
funds’ exposure to smaller and illiquid
companies, as well as “an increasing
number of stock-selection issues”.
Mr Barnett, who worked with Mr
Woodford for more than a decade,
issued a statement to Invesco’s clients
andinvestment consultantsyesterday,
taking personal responsibility for prob-
lems at his funds. “Capital returns in my
portfolios since around the time of the
2016 referendum have been disappoint-
ing,” Mr Barnett wrote in the note.
“In actively managed, stock picker’s
portfolios, I have made some mistakes
and I am personally very disappointed
by those individual stock failures. But
while the funds have lagged the wider
market, I am pleased that income gen-
eration remains strong.”
Mr Woodford’s career imploded spec-
tacularly this year after his flagship
fund, Equity Income, was suspended in
June after failing to keep up with a flood
of withdrawals.Mr Barnett’s two main
funds have been haemorrhaging assets
for years and are downtwo-thirds since- At the time of Mr Woodford’s
departure, High Income had £13.1bn of
assets and Income had £8.3bn.
The Invesco High Income has lost 3.
per cent over the past 12 months, com-
pared with a 7.9 per cent positive return
for its peer group of funds, according to
FE Trustnet, the data provider. Over
three years, it is down 1.3 per cent, com-
pared with a 23.6 per cent positive
return for its peer group.
unquoted companies and reduced the
exposure of the funds to such invest-
ments.”
The statement said unquoted assets
made up about 5 per cent of his funds’
portfolio, below the 10 per cent regula-
tory limit. Mr Barnett said the total
unquoted investments in all his funds
was £493m, down from £994m when he
took them over.
Mr Barnett also addressed the com-
parisons made etween his fund andb
those of Mr Woodford, which have been
suspended because of their high alloca-
tion to illiquid assets.
He said the overlap between his funds
and Mr Woodford’s was less than 15 per
cent of the holdings. In pointed com-
ments, he also emphasised the degree of
oversight at Invesco, which — as theFT
has reported —was lacking at Mr Wood-
ford’s own investment company.
“At Invesco I am not just accountable
to my investors,” Mr Barnett wrote. “I
am also accountable to teams of highly
experienced and qualified profession-
als, as well as layers of experienced sen-
ior management.”Invesco manager says sorry to
backers after fund downgrades
3 Unquoted assets worry Morningstar 3 Woodford ex-protégé admits ‘mistakes’
K AY E W I G G I N S— LONDON
J O E M I L L E R— FRANKFURTThe German industrial giant Thys-
senkrupp’s lifts business was set to
attract initial bids from at least four
would-be buyers in time for a deadline
yesterday in what is poised to be one of
Europe’sbiggestdeals.Bidders for the company’s most profita-
ble business include consortiums of
some of thelargest private equity
groups and rival Kone, in a deal that
couldbe worth as much as $20bn.
A consortium made up of the private
equity groups Blackstone and Carlyle
and the Canada Pension Plan Invest-
ment Board, one of the world’s largest
retirement funds, is preparing a bid, as
is a rival group made up of Advent Inter-
national, Cinven and the Abu Dhabi
Investment Authority, according to peo-
ple familiar with the matter.
A partnership between Finnish engi-
neering group Kone and the private
equity group CVC Capital Partners is
also preparing to bid, people familiar
with the matter said, as isBrookfield
Asset Management.
The companies declined to comment.
Earlier in the process, Hitachi, with its
aggressivemergers and acquisitions
strategy, was considered a strong candi-
date as a buyer for the lifts business, but
people close to the situation said the
Japanese company may not proceed.Hitachi said no decision had been made.
Bidders are attracted to the company
in part because of the steady evenues itr
generates from the maintenance and
servicing of lifts. That makes it “hyper-
resilient” and a “quality asset”, one said.
Thyssenkrupp s examining optionsi
for the unit amid pressure from activist
investors. The company has been run-
ning a dual-track process since Septem-
ber, which includes the option for a par-
tial initial public offering.
However, activists Cevian and Elliotthave been pushing for a break-up of the
business after several profit warnings.
Martina Merz, Thyssenkrupp’s new
chief executive, would not stand in the
way of a full sale of the lifts division,
according to people close to the com-
pany.
The Krupp Foundation, Thyssenk-
rupp’s largest shareholder with close to
21 per cent, which relies on dividends
from the company to fund hospitals and
scholarships, has said it would prefer to
maintain a stake in the elevator unit.
Additional reporting by Kana Inagaki and
Michael PoolerThyssenkrupp’s lifts unit
attracts would-be buyers
Morningstar expressed fears over the Invesco funds’ exposure to smaller and illiquid companies as well as ‘stock-selection issues’ —Kristoffer Tripplaar/Alamy
Morningstar downgrades often spark
heavy outflows as retail investors typi-
cally respond by pulling out their
money. When Morningstar downgraded
Mr Woodford’s Equity Income fund in
May it led to a spike in outflows, which
ultimately caused the fund’s suspension
two weeks later.
Morningstar downgraded its rating on
the Invesco funds from “bronze” to
“neutral”, the second-lowest of its five
rankings. Mr Barnett told clientsyester-
day that liquidity in his funds “remains
strong” despite Morningstar’s concerns.
“One area of the portfolio that under-
standably draws attention is investment
in unquoted companies,” he wrote.
“Since I took over management of the
portfolios some five years ago, I have
materially changed the way we invest inMartina Merz,
Thyssenkrupp’s
chief executive, is
said to be open
to a full sale of
the divisionHuman touchFacebook’s struggle to do
without people in its AI policing— ANALYSIS, PAGE 12
Desk slavesTrading groups attempt to
tackle long-hours culture— MARKETS, PAGE 13
A L I C E H E A R I N G— LONDON
When two men square up in a Los Ange-
les boxing ringtoday it promises to be
one of the year’s biggest fights. With
ticket prices of up to $725 at the 21,000-
capacity Staples Center and a home
audience of millions via media outlets
such as Sky Sports, it will also be among
the most lucrative.
But this is no prize fight. The competi-
tors are not even known for their box-
ing. Logan Paul, a 24-year-old LA resi-
dent, and KSI, who hails from the Eng-
lish town of Watford, are “YouTubers”
whose gaming, songs and antics have
won them more than 40m subscribers
on Google’s video-sharing platform
alone.
They are among a new wave of social
media celebrities who have gained mass
global followings among“Generation Z”
— the cohort born since the mid-1990s
that followed the millennials —yet are
virtually unknown to anyone older. “A
year and a half ago I had no idea who
Logan Paul and KSI were,” said Adam
Smith, head of boxing at Sky Sports.
The fight, for which they have been
certified as professional boxers, is a
rematch of a tied amateur contest in the
UK last year that sold out the 15,000-
seat Manchester Arena. More than a
million fans paid £7.50 to watch the offi-
cial live stream on YouTube, with many
more accessing it via illegal streams.
That was with limited coverage in tra-
ditional media, and with the boxing
world paying more attention to a con-
test the same night at London’s O
Arena. “I asked my 12-year-old son
who’s going to win,” said Mr Smith. “He
said KSI, and I didn’t know what he was
talking about.”
This year more media groups have got
in on the action and the fight has been
hyped with a torrent of media coverage.
Saturday’s face-off will be broadcast on
Sky Sports Box Office as well as sports
streaming sites DAZN and Matchroom.
“Its probably going to be the biggest
fight of the year” said Tim Crow, a sports
marketing consultant. “It’s guaranteed
to have a very big audience and a lot ofthe people who watch won’t tradition-
ally watch boxing.”
While last year’s event was pay-per-
view only, the YouTubers’ management
have opted for a different model in some
markets, withtoday’s fight to be aired
by subscription services DAZN in the US
and FITE TV in 75 countries including
its biggest market, Japan.
“We hope that executives and majorprofessionals see that these guys are
here to stay,” said Jeffrey Levin, Mr
Paul’s manager. “Big boxing promoters
are actually giving them the time that
they deserve.”
Sky Sports, DAZN, FITE, Matchroom
and representatives for Mr Paul and KSI
declined to discuss financial details.
DAZN, the sports media group owned
by billionaire Len Blavatnik’s AccessIndustries, believes that the fight can
boost its subscriber base, which stands
at roughly 4m.
“The beauty of it is that it’s a com-
pletely brand new audience... this
could be a significant moment of sub-
scription growth for us,” said Joe
Markowski, DAZN’s executive vice-
president for North America.
DAZN is pushing to become the
world’s dominant platform for boxing.
Last year it struck an eight-year, $1bn
deal with promoter Eddie Hearn’s
Matchroom to stream 16 fights a year as
well as a $365m agreement to screen
Mexican boxer Saul “Canelo” Alvarez’s
next 11 fights, one of the biggest deals for
a single athlete in sports history.
Sky Sports is charging £9.95 for
today’s fight, a discount to the usual
£19.95 for blockbuster bouts as it seeks
to showcase its service to a new group of
consumers.
“It’s a very different world for us to be
getting involved in,” said Mr Smith.
“This is a real opportunity for us to
engage an audience that may not know
much about boxing.”
The first match had 1.1m paid views
despite high levels of piracy and hack-ing. Liam Chivers, founder of the digital
talent management group OP that rep-
resents KSI and the mastermind behind
the broadcast deals, believes this year’s
contest will generate “millions” more
than the first one because of the involve-
ment of groups such as DAZN and Sky
Sports, which have expertise in combat-
ing pirate sports streaming.
Paul and KSI — real name Olajide Wil-
liam “JJ” Olatunji — are in line for a
windfall from the fight, which they have
been promoting heavily on their social
media channels.
Both are already wealthy, cashing in
on ad revenues from their billions of
YouTube views while also selling their
own clothing lines. Paul earned an esti-
mated $14.5m before taxes and fees in
the year to June 2018, according to
Forbes, which estimated KSI’s net worth
at $5m even before the pair’s first bout
in August last year.
“It’s bringing a lot of new fans into
boxing because the power of these
YouTubers with their millions of fans
means that they bring an audience with
them,” said Mr Crow. “This isn't the sort
of gimmick that a lot of people claimed
it was after the first fight.”Media. ive streamingL
YouTubers’ second face-off promises a broadcasters bonanza
DAZN and SkySports see a big
opportunity to reach audience
who know little about boxing
‘In actively managed,
stock picker’s portfolios, I
have made some mistakes’Mike Barnett, InvescoNOVEMBER 9 2019 Section:Companies Time: 11/20198/ - 18:58 User:jon.wright Page Name:CONEWS1, Part,Page,Edition:USA, 10, 1