The Economist February 20th 2021 Business 55Glencore
Pit stop
M
ining bosses often leave under a
cloud, ousted after a profit slump, a
public-relations disaster or pit-hole ca-
lamity. Not so Ivan Glasenberg. For his last
set of results on February 16th the boss of
Glencore offered shareholders—including
himself—a reinstated dividend and an up-
beat outlook. Leaving on a high after 19
years in the top job will not make life easier
for his anointed successor, Gary Nagle.
All miners have had a bull run of late as
commodity prices have surged. China’s ap-
petite for natural resources is unabated.
America and Europe are planning infra-
structure pushes that will juice demand.
The green tinge of such stimulus spending
is especially good news for Glencore, a big
producer of the cobalt, copper and nickel
needed for electric cars and the like.
Investors on the earnings call were as
focused on life after Mr Glasenberg. It may
not be so different. Those used to seeing
the Swiss firm run by a fast-talking South
African accountant who has spent much of
his career on the coal side of the business
might not notice the handover, due to hap-
pen in the next few months. Like his prede-
cessor, Mr Nagle is all those things. He will
become only the fourth boss to lead the
company since its founding in 1974.
Investors expect continuity in the busi-
ness. Mr Glasenberg has re-engineered a
pure commodities trader into a firm that
also digs the stuff up. The model has not
delivered stellar returns, at least since the
firm went public in 2011 (see chart). But
trading profits last year were fat and Mr Na-
gle says the set-up is fit for purpose.
Three thorny dossiers will keep him bu-
sy. The first is coal, of which Glencore is the
biggest shipper. The banks that fund its
trading arm are under pressure to cut ties
to polluters. Glencore has some green cre-
dentials and says it is running down coal
assets gradually. But a more radical move,
like a spin-off, may be needed.
Then there is the Democratic Republic
of Congo. A big source of copper and cobalt
profits, it is also in the sights of America’s
Department of Justice. Glencore denies any
wrongdoing. After the Congolese elected a
new president in 2018 some faces that
helped Glencore thrive are being replaced.
Dan Gertler, who teamed up with Glencore
to develop assets in the drc, recently
earned a partial reprieve from American
sanctions (he also denies wrongdoing).
The copper belt is rife with rumours that
Mr Gertler may be looking to cash out.
Perhaps the trickiest dossier is Mr Gla-
senberg. He will not upgrade himself to
chairman, as some ceos are wont to do. But
he intends to keep his 9% stake, making
him the second-biggest shareholder. And,
potentially, its biggest back-seat driver.KOLWEZI AND PARIS
A new boss takes the reins at a good
time for commodities
Mining the depths
Total returns, May 18th 2011*- Feb 15th 2021
Average annual %, $ termsSource: Refinitiv Datastream *Glencore IPOGlencoreValeAnglo AmericanBHPRio Tinto9630-3-6CarmakingICEy conditions
ahead
T
he scrambleto electrify motoring re-
sembles a car race. Tesla and like-mind-
ed startups, unencumbered by the legacy
of the internal combustion engine (ice),
are surging up the straight. Behind them,
jostling for position at the first corner, are
the established carmakers, urged on by
ever-tightening government deadlines for
clean power to supersede fossil fuels.
Many are calling time on the ice. On Febru-
ary 17th Ford’s European division said that
it would go all-electric by 2030. Days earli-
er Jaguar Land Rover (jlr), an Indian-own-
ed firm based in Britain, announced that
the posh Jaguar brand would become fully
electric by 2025. In January General Motors
(gm) promised it would make only zero-
emissions cars after 2035.
No one is dedicating more resources to
electrification than Volkswagen Group,
says Herbert Diess, the German giant’s
boss. The company plans to spend around
€73bn ($88bn) over the next five years on
battery power and digitisation, he says.
“The competition is now taking the same
decisions,” Mr Diess notes, alluding to rival
firms’ pledges.
Among the old guard, vw is indeed
firmly in the driving seat. A fifth of the mil-
lions of cars it sells will be electric by 2025.
Some analysts think that by then vwwillchurn out more electric cars than Tesla, to-
day’s market leader. Mr Diess is more cir-
cumspect. A year ago he was confident his
firm would lead the world in electric vehi-
cles in ten years’ time. Now he is less sure,
admitting that Tesla’s surging shares give it
the resources to grow fast. Although Ap-
ple’s talks with carmakers such as Hyundai
and Nissan did not go anywhere, the tech
giant’s evident interest in an iCar could yet
make it a force to be reckoned with, Mr
Diess admits. But he still thinks that the
electric race is Volkswagen’s to lose, not
least because the cashflow from its tradi-
tional business gives him the money to in-
vest in the future.
Indeed, despite all the noise about elec-
trification the old icetechnology has plen-
ty of mileage left in it. Unlike his counter-
parts at Ford Europe, jlror gm, Mr Diess is
unwilling to set a date for the demise of the
fossil-fuel engine. His electric plans for
2025 still leave four-fifths of his firm’s cars
powered by petrol or diesel. Volkswagen is
a global company and, he says, many mar-
kets will not be ready for electric cars by- Coal-fired power stations will still
provide part of the electricity that might
charge batteries, making electric cars a
moot proposition. In places such as Latin
America ice-friendly biofuels will be the
prevailing green alternative to petrol.
Scratch the surface and the iceseems to
be lurking even at firms which claim to be
forsaking it. gmsays its target is an aspira-
tion. Citigroup, a bank, notes that the ma-
jority of investment by established car-
makers is still directed towards conven-
tional power trains. Bloombergnef, an
energy-analysis firm, reckons that more
than one in three cars sold in 2040 will be
powered by petrol and diesel. Some will
sport the Volkswagen logo.
Volkswagen’s boss wants more electric
cars—but won’t kill the petrol engineElectrification is a heavy lift................................................................
For the full interview with Herbert Diess go to
economist.com/VWpod