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Thursday, May 19, 2022

“Without gasoline, there will be massive job losses”

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Mr. Kirchhoff, does the tipping point mean the end of globalization?

I hope not. A lot is changing, we’ve been watching it for a long time, and some things have stagnated. She had to do with Trump, with Chinese trade policy and with the growing tensions in different regions. With the outbreak of war, the question now more than ever is how the Western world should react to authoritarian and aggressive regimes.

Politicians opted for sanctions and rearmament.
Ten years ago we thought that we would prevail everywhere with our values: democracy, social market economy, freedom for the people, it couldn’t be better. But some take different paths, and our moral strength alone is obviously not enough. We have to be economically stronger than authoritarian states so that people realize which system is better for them. I am convinced that our model is more attractive to people because it allows for social standards, diverse education and participation, and a good life.

The German economy is based on exports and free trade, and this is increasingly reaching its limits.
We are certainly an exporting nation, but we have also become more international in other ways. In recent years, we have established more and more productions in the respective countries or regions. We manufacture the goods where there is a demand for them. This is best seen in China, where we have helped lift 700 to 800 million people out of poverty over the last 30 years. We went to China, transferred technology and put people to work. That is also part of the German model.

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German companies have invested considerably more in China than in Russia. What happens if the conflict between China and the United States escalates?
Here, too, we have to show moral and economic strength. Since the World Trade Organization WTO is currently not working properly, we need new trade agreements to define common rules, for example in the Indo-Pacific region. This is also how we show the Chinese that we are strong.

What if Xi Jinping attacks Taiwan?
The Chinese have not fought any wars in the last few centuries. They use their economic strength strategically, for example with the New Silk Road or infrastructure projects in Africa. By the way, they are filling the gaps left by the West. The same applies here: if we conclude agreements with African states, then we can possibly assert our ideas of democracy and human rights there as well.

That didn’t work in Russia. German companies have invested almost 25,000 million euros there; at least part of it will probably have to be cancelled.
That’s possible. The fact is, right now, the world needs to come together and support sanctions. This is happening right now and of course it is supported by the German economy.

The Russian market is dead for Western companies. What’s next for your on-site works?
We build garbage trucks in Moscow and St. Petersburg. Nothing happens at the moment, our accounts are frozen. We don’t know if we will all be dispossessed or if we can finally move on. The important thing is that the bloodshed stops. Then at some point we can get back to taking care of our business and people. Russia is more than Putin.

Entrepreneur Arndt Kirchhoff is Honorary President of Entrepreneurs in North Rhine-Westphalia and Vice President of the Association of…Photo: FUNKE Photo Services

How affected is Kirchhoff in general?
We have 50 production sites in 20 countries on five continents. Production currently takes place at one of our plants in Poland near Poznań because our customer Volkswagen no longer produces locally. Pieces missing, also from Ukraine. Our other Polish plants continue to operate because they supply different car manufacturers.

No restrictions?
Normal work is done from Monday to Thursday, Friday is part-time work. This also applies to our locations in Hungary and Romania, because currently all car manufacturers produce on a limited basis due to problems with pre-products.

First Corona, then war: Can the globalized economy continue to live with these unstable supply chains?
We have realized how vulnerable the chains are and we are readjusting, for example by increasing the number of suppliers. Basically, supply chains need to become more robust. Furthermore, we should at least produce certain goods in Europe. This includes key technologies and medicines, as well as simple products that are important to our supply, such as protective masks.

That does not free us from our dependence on raw materials.
Now the big question is where in the world can we get the most important fabrics? And how fast we get them. There are several working groups in the industry dealing with this.

Can this be done without Russia?
Hard. We not only import oil, gas and coal from Russia and Ukraine, but also titanium and nickel, aluminum and technical gases. Possible alternatives include raw materials from Europe, which we are often not allowed to get from the ground. Even with gravel and sand there are ecological reserves. However, we cannot afford to forbid ourselves from thinking if we want to be more self-sufficient.

Is fracking gas from Lower Saxony conceivable?
That should at least be discussed. Perhaps that makes more ecological sense than shipping fracking gas from Australia and the US to Europe in LNG tankers.

An enormous amount of electricity or hydrogen is needed to convert industry to climate neutrality. How can this work when energy prices are through the roof?
As bad as it sounds, the war brutally reveals the need: to accelerate the expansion of renewable energy, also through much faster approval times. In the short term, we need security of supply and, at the same time, we must rapidly achieve greater independence from energy providers in the medium term.

This will take many years.
We have to be faster. For example in infrastructure. Smart grids allow energy savings. Much can be saved if we manage the flow of electricity with the help of smart grids. We can no longer afford endless planning and approval times. Tesla in Brandenburg is a good example of speed. By the way, this is how many family businesses work: we start when there are preliminary permits, otherwise we lose too much time.

Do you have the impression that traffic light control will bring more speed?
By the end of the year, Robert Habeck wants to have changed the laws so that we can accelerate at all administrative levels. Yes, in general I have a good impression of the semaphore’s work so far.

Do you share Habeck’s assessment that we cannot do business without Russian gas?
In the short term, we can’t get by without gas. The damage we would do to ourselves could be greater than the damage we do to Putin. We do not necessarily need Russian gas for heating, if necessary we can get it from other sources. However, we still urgently need quantities of Russian gas as process gas in many areas of our industry, because there are not enough alternatives. If we cut Russian deliveries here, then we are talking about massive losses of prosperity and jobs across the country.

In view of the economy, can it still be salvaged this year?
It had started well, incoming orders in January were higher than they had been for a long time, the books are full. But we couldn’t process much because the delivery times are getting longer. The war really didn’t make it any better. If consumers now consume less due to high energy prices, at least we will get something.

And the companies?
Of course, they think about what investments will be made now and which ones will be postponed. For many energy-intensive companies, profits are melting like butter in the sun, or already falling deep into the red. Liquidity can be secured in the short term with the help of KfW and state guarantees, as in North Rhine-Westphalia, but this does not solve the structural problems.

Where is the “Alliance for Transformation” that wants to forge the traffic light as an alliance of modernization with companies and unions?
The war relegated that to the background, which everyone understands. With the alliance, we want to be faster and allow the use of hydrogen, for example. You have to coordinate that to get expedited input on transformation problems. The Alliance must be controlled by the Chancery, we are ready.

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