Economic crisis: How companies distract from their own mistakes

If the farmer can’t swim, it’s because of his swimming trunks. This old saying is intended to show how grotesquely some people argue away their own inability. Business representatives like to use similar rhetoric when they want to state that the state is basically to blame for the fact that things aren’t running smoothly in their offices and factories. Motto: Hit Berlin, it always hits the right people!

Siegfried Russwurm, President of the Federation of German Industries (BDI), has just expressed this principle in a number: He is demanding that the federal government make additional investments of almost half a trillion euros by 2030 in order to stimulate the ailing economy. Does a lot of government money help a lot? Or does something more, something else, need to be done?

Of course, governments make mistakes. In economic policy too. Obvious problems are put on the back burner, opportunities are not seized. The traffic light coalition (or parts of it) is insisting on the debt brake, while many things are going down the drain, from education to infrastructure. It is not touching the VW law, which politically ties Volkswagen down and makes it so inflexible. Instead, it is partially nationalizing the Meyer shipyard, whose products have long since ceased to be competitive, as Marcel Fratzscher from the German Institute for Economic Research is not the only one to say.

Without courage and foresight into the economic crisis

But many of the problems that the private sector is currently suffering from are also of its own making. Too often, companies are manically saving instead of investing in times of crisis. They are continuing to export at high prices instead of setting up more locations around the world. There is a lack of entrepreneurial courage, foresight and a smart product strategy. And here and there, stubborn works councils and unions are standing in the way and robbing companies of their ability to react.

An example of home-made products: Thyssenkrupp Steel. The company cannot survive with conventional steel, which the Chinese produce much more cheaply. So in 2020, former CEO Martina Merz presented the then Minister of Economic Affairs Peter Altmaier with a billion-euro plan for CO₂-free steel production. This would make Germany competitive again. Altmaier gave the thumbs up and promised support.

Thyssenkrupp headed for chaos

The strategy still sounds plausible today, especially since competitors in the Western world are taking a similar path. Thyssenkrupp has even been described as exemplary in international media. To date, no expert seriously questions the fact that climate-neutral steel is increasingly in demand on the world market, because climate-unfriendliness is increasingly being punished by expensive CO₂ certificates and the stock markets are demanding sustainability.

Against this backdrop, the federal government and the state of North Rhine-Westphalia granted Thyssenkrupp Steel two billion euros for new blast furnace technology. What followed was chaos in the already troubled company. Billions in losses. Management errors. Merz left, the new CEO Miguel López and his supervisory board chairman Russwurm – the billion-dollar demander – impatiently intervened in the steel business. Parts of the division are now being sold to a Czech billionaire. Thousands of jobs are suddenly at risk, the works council and union are in combat mode. Sigmar Gabriel, SPD, former economics minister and chairman of the supervisory board of Thyssenkrupp Steel, threw in the towel: “Conditions are like in a gulag,” he quoted company employees as saying. The company itself is blocking its future – not the government.

Intel relied on the wrong chips

Take Intel, for example. The East feels chronically left behind, and this is not only shown by the AfD’s electoral successes. The US chip company Intel came at just the right time. CEO Pat Gelsinger promised Chancellor Olaf Scholz in March 2022 that he would build two semiconductor factories near Magdeburg and create at least 3,000 jobs. A 33 billion investment that the federal government was prepared to support with 9.9 billion euros. Expensive – but also unwise? It would be the highest investment by a foreign company in the history of the Federal Republic. And an important sign: East Germany is an attractive business location. Calculation: This attracts more entrepreneurs and therefore pays off.

But then Intel crashed. Billions in losses, investors fled, the share price plummeted, 15,000 jobs are to be cut. The former market giant had missed important market trends. Competitors like Nvidia were overtaking left and right, and Apple now manufactures its own chips. Now Intel has decided to put the “factory in Magdeburg” project on hold for cost reasons. Intel’s path could end up being “America first,” because President Joe Biden’s “Chip Act” even offers 20 billion dollars in state aid for major Intel projects. Here, too, the crisis at Intel is home-made and not a failure of the state.

ZF Friedrichshafen remained sluggish

Take ZF Friedrichshafen, for example. Recently, the shocking news came that the third largest automotive supplier in the world, which grew up as a specialist in transmissions, had to cut 14,000 jobs. A result of management errors. As soon as it became clear that the almost transmission-free electric cars would prevail, those responsible should have changed course. They should have developed new, promising business areas and acquired additional ones. But the group is owned by a sluggish foundation. And as long as the old businesses were doing well, management avoided making unpleasant decisions. They preferred to tinker with products that never have a chance of making a profit, such as autonomous shuttles. The company is now burdened with 10.5 billion euros in debt. To now complain that the state is to blame because the Greens are pushing for electric cars sounds like a bad joke in this context. E-mobility must and will come. Climate change has long since revealed its ugly face, as can be seen in the current dramatic floods in the south.

Many companies that point one finger at the state are pointing three fingers at themselves. That should change. The wise ancient Greeks already knew that insight is the first step on the road to improvement.