The Wall Street Journal - 16.08.2019

A8| Friday, August 16, 2019 THE WALL STREET JOURNAL.

STUTTGART, Germany—

Concern is rising in Europe’s

automobile heartland about the

economic impact of the indus-

try’s move to electric vehicles

from gasoline-powered cars.

Officials and executives in

Germany fear the country’s big

car companies and rich eco-

system of suppliers and ser-

vice providers are insuffi-

ciently prepared for the

transition, and that their lead-

ership may not be ensured in

an electric-car world, threat-

ening jobs, tax revenue and

even growth.

Assembling electric cars

isn’t as complex or labor in-

tensive as making traditional

vehicles and relies partly on

imported technology. At the

same time, China has made

rapid forays in electrification

and is shaping up as a poten-

tially formidable competitor.

The trepidation is particu-

larly acute in Stuttgart, hub to

one of the country’s biggest

automotive clusters at the

heart of the dynamic south. It

comes as Europe’s largest

economy is showing signs of

weakness amid a chill in

global trade.

“We are very concerned,” Ni-

cole Hoffmeister-Kraut, Baden-

Württemberg state’s economics

minister, told The Wall Street

Journal. “The competition with

the U.S. and China is getting

harder all the time. Our goal

must be to keep production and

jobs in Baden-Württemberg.”

In a Stuttgart garage 136

years ago, Gottlieb Daimler

and Wilhelm Maybach in-

vented the internal combus-

tion engine that has powered

the global auto industry. But

the likes of Daimler AG,

VolkswagenAG, andBMWAG

are now busy ditching this

ForwardPlanning

U.K.drugimportsfromtheEU

jumpedbeforetheoriginal

Brexitdeadline,ascompanies

stockpiledmedicinesamidfear

ofdisruptions.

Medicineandpharmaceutical

importsintotheU.K.

Source: U.K. Office for National Statistics

Note:£1=$1.

£.

0

0.

1.

1.

.

billion

000 ’05 ’10 ’15 ’1

EU Non-EU

March29deadline

facturers report slumping

sales and earnings in the wake

of global economic turbulence

and the fear of job cuts is pal-

pable.

“The mood is bad. It is a

combination of market devel-

opments, China, and the con-

sequences of Trump’s trade

policies,” said Stefan Wolf,

chief executive of Elring-

KlingerAG, a small, publicly

listed supplier of engine-insu-

lation materials.

ElringKlinger generated

€1.7 billion in sales last year

and employs around 10,

people. It is betting on fuel-

cell vehicles. But Mr. Wolf

complains that the German

manufacturers are dragging

their feet while Asian produc-

ers such asToyota MotorCo.

are taking the lead.

Late last year, when auto

makers had to ramp down pro-

duction because of difficulties

in implementing new green-

house-gas emission require-

ments, the loss of revenue was

a sizable contributor to a con-

heritage, working toward the

mass-production of electric

models.

Porsche in September will

begin production of the Tay-

can, its first all-electric se-

dan. Weeks later, Porsche’s

parent, Volkswagen, will start

churning out its ID model.

Daimler and BMW are revving

up their own electric offer-

ings.

Industry consultants Alix-

Partners predicts fuel-powered

cars will make up just 56% of

new cars sold by 2030, down

from 95% now. The biggest

shift will be in Europe, where

regulators are pushing tough

restrictions on greenhouse-gas

emissions.

The German government’s

Institute for Employment Re-

search predicts that if electric

vehicles were to account for

just 23% of all new cars sold

by 2035, the country would

lose €20 billion ($22.4 billion)

in output, or 0.6 percentage

point of GDP, and 13% of its

current auto-industry work-

force.

This industry now employs

some 870,000 people nation-

wide, almost half of them in

Stuttgart. They work at com-

panies includingRobert Bosch

GmbH, piston-maker Mahle

AG, and hundreds of smaller

businesses that form the re-

gion’s automobile cluster.

And it isn’t just Germany.

There are 309 automotive

production and assembly

plants across Europe. Alto-

gether, the sector supports

13.8 million jobs in Europe, or

6.1% of total European Union

workforce and 11.4% of all

manufacturing jobs.

That is around twice the

number of U.S. jobs that de-

pend on car makers.

In Stuttgart, the mood is

dark as suppliers and manu-

traction in the German econ-

omy, by far Europe’s largest.

The government this week

said it shrank again in the sec-

ond quarter.

Now, the auto suppliers in

Stuttgart and around the

country are trying to remain

relevant.

Gehring Technologies

GmbH began 90 years ago pro-

ducing drilling machines and

later developed honing ma-

chines that help make engines

lighter and more efficient.

Three years ago, the company

spent months studying the

electric car, looking for its

niche. In 2018, it merged with

CopperINGGmbH, a German-

Italian maker of technology

used to make electric motors.

Combining Gehring’s cylin-

der expertise with Copper-

ING’s technology, the compa-

nies have developed machines

to build a crucial hairpin-

shaped part in electric motors

called the Stator. They now

build the machines to make

the parts and sell them to

larger auto suppliers.

“We are now starting to

take orders,” said Gehring CEO

Sebastian Schöning. He is op-

timistic, but success for Ger-

many and Europe’s automotive

industry is anything but cer-

tain.

One problem, said Roman

Zitzelsberger, head of the

state chapter of the IG Metall

trade union, is that too few

auto suppliers are taking steps

to prepare for the huge

changes that will come as the

industry’s focus shifts even

more toward electric vehicles.

“The greatest catastrophe

would be if the industry fell

asleep at the wheel,” he said.

“It is crucial for jobs that com-

panies like Daimler make a

massive push into this tech-

nology and build locally.”

BYWILLIAMBOSTON

Electric Cars Drive German Worry

than sequencing various mea-

sures over time,” due to syner-

gies among different policy

tools, Mr. Rehn said.

To provide room for fresh

bond purchases, the ECB could

adjust the rules of its pro-

gram, which currently prohibit

the bank from buying more

than 33% of the debt of any in-

dividual eurozone government,

he added.

Mr. Rehn said he didn’t rule

out a move to purchase equi-

ties under the QE program,

but that would depend on the

assessment of ECB staff.

Eurozone government bond

yields fell shortly after Mr.

Rehn made his comments. The

10-year German bund yield fell

to a new low of minus

0.688%, while 10-year Italian

BTP yields slid to 1.375%, a

level last seen in October

2016, according to Tradeweb.

The ECB could also sweeten

terms of a new batch of long-

term loans for banks by lower-

ing their interest rate or ex-

tending their maturity, Mr.

Rehn said.

A package of several mea-

sures “has a stronger impact

By raising market expecta-

tions for the ECB’s September

meeting, Mr Rehn’s comments

could put pressure on any ECB

policy makers critical of a

large stimulus package to fall

into line, said Frederik Du-

crozet, an economist with Pic-

tet Wealth Management in Ge-

neva.

The comments suggest the

ECB might cut interest rates

by more than expected in Sep-

tember, perhaps by 0.2 per-

centage point, and could start

to purchase new types of as-

sets, Mr. Ducrozet said.

disorderly Brexit.

ECB President Mario Draghi

last month raised the prospect

of fresh ECB action in Septem-

ber, but Mr. Rehn’s comments

indicate that the level of stim-

ulus is likely to be at the up-

per end of expectations.

Analysts expect the ECB

will announce next month a

0.1 percentage-point cut to its

key interest rate, currently set

at minus 0.4%, as well as

around €50 billion ($56 bil-

lion) a month of fresh bond

purchases under its quantita-

tive easing program.

He pointed to a range of

risks threatening Europe’s

economy, including the unsta-

ble political situation in Italy,

China’s economic slowdown,

uncertainties in the global

economy caused by trade ten-

sions between the U.S. and

China, and the possibility of a

hard Brexit.

“Inmyview,thereisacer-

tain weakening of the eco-

nomic outlook for Europe in

the last couple of months,” Mr.

Rehn said. That worsening

economic backdrop “justifies

taking further action in mone-

tary policy, as we intend to do

in September,” he said.

A strong majority in the

ECB’s rate-setting committee

will likely favor an aggressive

stimulus package, according to

officials.

Investors currently expect

the ECB to cut its key interest

rate to minus 0.7% and to hold

rates below their current level

through 2024, according to fu-

tures markets. Mr. Rehn said

those market expectations

showed that investors had un-

derstood the ECB’s guidance.

To offset the impact on eu-

rozone banks of a longer pe-

riod of negative interest rates,

the ECB could introduce a

tiered-deposit system, under

which only a portion of bank

deposits might be subject to

negative rates, Mr. Rehn said.

The ECB could also alleviate

the stress on banks by sweet-

ening terms of new long-term

loans, known as targeted lon-

ger-term refinancing opera-

tions, he said.

WORLD NEWS

HELSINKI—The European

Central Bank will announce a

package of stimulus measures

at its next policy meeting in

September that should exceed

investors’ expectations, a top

official at the central bank

said.

Speaking in his offices in

Finland’s capital on Thursday,

Olli Rehn said the slowing

global economy would see the

ECB rolling out fresh stimulus

measures that should include

“substantial and sufficient”

bond purchases as well as cuts

to the bank’s key interest rate.

“It’s important that we

come up with a significant and

impactful policy package in

September,” said Mr. Rehn,

who sits on the ECB’s rate-set-

ting committee as governor of

Finland’s central bank.

“When you’re working with

financial markets, it’s often

better to overshoot than un-

dershoot, and better to have a

very strong package of policy

measures than to tinker,” Mr.

Rehn said.

Data from Germany and

China on Wednesday showed

two of the world’s economic

powerhouses flagging amid

headwinds in the global econ-

omy that range from trade

tensions to the possibility of a

BYTOMFAIRLESS

ECB Set to Intensify Stimulus Measures

Finnish central banker

says a ‘significant and

impactful’ package is

crucial for eurozone

Olli Rehn, Finland’s central-bank head and an ECB policy maker.

HANNAH MCKAY/REUTERS

Workers assemble sports cars at a Porsche factory in Stuttgart-Zuffenhausen, Germany.

RALPH ORLOWSKI/REUTERS

ChargingUp

InEurope,electricvehiclesare

gainingoncarsfueledby

conventionalmeans.

Shareofnewcarsbyfueltype

Source: AlixPartners

Note: 2018 is an estimate, 2025 and ’30 are

projections

60

0

20

40

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2 018 ’ 2 0’ 22 ’ 2 4’ 2 6’ 2 8 ’

Gasoline Diesel Electric

ment on Wednesday said it was

seeking bidders for a £25 mil-

lion express freight contract to

bring in small batches of drugs

within 24 hours.

“Our priority is for all pa-

tients to continue to have ac-

cess to medicines and medical

products when we leave the

EU,” she said.

Drugmakers are also seeking

to reassure patients.Novartis

AG, which manufactures the ep-

ilepsy drug Tegretol used by Mr.

Foster, said its contingency

plans include building extra

stocks within the U.K., alterna-

tive air-and-sea supply routes

and using simplified customs

procedures where possible.

But a Novartis spokesman

said “there are many things that

are beyond our control and we

are therefore unable to provide

absolute certainty surrounding

possible scenarios resulting

from a no-deal Brexit.” He urged

the British government to seek

a negotiated withdrawal to pre-

vent any disruption.

Three-quarters of medicines

consumed in the U.K. arrive

through the narrow crossing to

Dover and Folkestone in south-

ern England from ports in

northern France, according to

the British government. This

means any bottlenecks could

quickly squeeze the stocks es-

sential to keeping Britons

healthy.

Thousands of trucks con-

verge on these ports daily and

undergo minimal checks before

crossing. Port officials say a

host of new formalities after a

no-deal Brexit would likely cre-

ate significant delays in both di-

rections.

With almost all patients’

treatments funneled through

the state-run National Health

Service to doctors who pre-

scribe only required amounts of

medicines, patients have few

ways to stockpile extra supplies

themselves.

“If we don’t have insulin, we

don’t survive, it’s as simple as

that,” said Elizabeth Pfiester, 31,

a Type 1 diabetic who leads a

diabetes charity called

T1International.

Alex Sparrowhawk, chairman

of a U.K. network of people liv-

ing with HIV and health work-

ers in the field, said that at-

tempts to stockpile could even

exacerbate any shortages that

may arise.

For patients such as Chris-

tine Lowe, a retired facilities

manager from Oldham in north-

ern England, the worry is that

not all drugs will be assigned

the same priority in the no-deal

plans. The 58-year-old said she

sometimes needs to take up to

40 medicines a day to treat her

rheumatoid arthritis and related

conditions.

“It’s bad enough being in this

condition. The worry about the

meds is quite scary,” she said.

LONDON—As the U.K. pre-

pared to leave the European

Union this spring, Carl Foster

worried that an abrupt split

would snarl British ports, pre-

venting him from getting the

imported epilepsy drug he

needs.

So the events manager

rushed to get a prescription for

an extra month’s worth of tab-

lets, as a buffer. “That was a

huge relief at the time,” he said.

Britain’s departure from the

EU, later postponed, is back on

track as Prime Minister Boris

Johnson pushes the country to

leave the EU on Oct. 31 whether

a negotiated pact with the bloc

is settled or not, bringing fresh

urgency to concerns about me-

dicinal shortages.

Economists, policy makers

and business executives warn

that such a no-deal departure

risks severe economic disrup-

tion in the U.K. as customs

checks and other trade barriers

are erected between Britain and

the EU.

Mr. Johnson argues the U.K.

can manage any problems aris-

ing from a no-deal split with

contingency plans and a stiff

upper lip. His gamble is that the

EU will reverse its opposition to

renegotiating the pact and offer

Britain a better deal when faced

with the threat of economic dis-

ruption.

For those in the U.K. who de-

pend on a steady supply of

medicine arriving from the EU

to manage conditions such as

diabetes, hemophilia or autoim-

mune disorders, a no-deal split

conjures the alarming possibil-

ity of drug shortages.

A spokeswoman for the U.K.

Department of Health and So-

cial Care said the government

was doing everything appropri-

ate to prepare for no deal, with

the Treasury earmarking £

million ($524 million) to pay for

shipping and warehousing for

essential medicines. The depart-

BYJASONDOUGLAS

ANDDENISEROLAND

Britons Worry Brexit

Will Cut Drug Supply

Central Bank Takes

Hacked Website

Offline Temporarily

The European Central Bank,

which supervises data protec-

tion at Europe’s largest banks,

said on Thursday that it tem-

porarily shut down one of its

websites after it was hacked

and injected with malicious

software.

The site, called BIRD, which

provides the banking industry

with information on how to

produce statistical and supervi-

sory reports, is hosted by an

external provider. The central

bank said that neither its inter-

nal systems nor market-sensi-

tive data were affected. In-

stead, contact information of

481 subscribers of the site’s

newsletter may have been ob-

tained, the ECB said.

The breach, while minor,

underscores challenges institu-

tions face in protecting infor-

mation.

Last month, a formerAma-

zon.comInc. employee was ar-

rested in the U.S. and charged

with hacking into millions of

Capital One FinancialCorp. re-

cords in one of the largest-ever

bank-data thefts.

The ECB’s banking-supervi-

sion arm, which oversees large

eurozone institutions, has re-

peatedly stressed the impor-

tance of cybersecurity in the

financial system. Supervision

on cybersecurity includes on-

site inspections at banks. “The

ECB takes data security ex-

tremely seriously,” it said on

Thursday.

The central bank said it is

contacting people whose data

may have been affected in the

BIRD hack.

—Patricia Kowsmann