Siemens and Deutsche Bank CEOs Talk German Investment

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It looks increasingly like there's not going to be a US EU trade deal, and we've got Ollie Crook sitting down with a few CEOs.

He would very much like to see some carve outs.

Absolutely, Germany's been moving in that direction. Germany's be hoping that it's going to get carvats, particularly for the car sex, particularly for the industrial sector. That is looking like it is going to be harder and harder to achieve.

So A, how do you prepare for that?

And B how do you invest in Germany to take advantage of the current government large est that appears to be emanating from Berlin. There's two people that we should be asking, So let's hand things over to Olie Krug.

Yeah, that's right guy. I mean, we know we've been talking about it for years. The German economy has been effectively flatlining for a number of years. With the new Chancellor of Friedrich Meritz, he's made it the central promise to turn that economy around. The first step was by amending the German constitution to change the so called debt break, freeing the government to unleast potentially more than they're a

Well?

Thanks, first of all, thank you for the invitation. Look, I think we always strifle the same gold, which is to finally have gross and competitiveness back in Germany and in Europe. And I do believe, and we do believe if gross is coming back to Germany, it's also good for Europe. And in this regard, gross cannot only be debt financed by the government, it cannot only be stimulated by the government.

Actually we need the economy.

And therefore a small group around Roland and myself and others, within a couple of months after in my view, a solid start of the government actually said.

We also want to step up.

We want to show what potential Germany has, and therefore we founded this initiative. And I think it's quite impressive for what we have collected after a couple of months was over six hundred billion of investments sixty one companies, and to be honest, I think more to come over the next month.

But it shows what the sentiment is and that we have a chance.

And so I'd like to get an idea sort of more concretely, because we get we're sort of in the age of large pledges to government and spending in local economies. So I like to get an idea from Zeemans, for example, how much of that money is coming from Zemans and specifically what are you targeting those investments into.

Well, So, I mean this goes much beyond Semens.

Now, these are more than six hundred, six hundred and thirty one billion euros which we are talking about.

And it's a combination of as.

You said, sixty one companies, its corporations, it's financial institutions, but it's also small and medium sized enterprises and startups.

So it's a combination.

They're all geared for deploying capital into a country where we believe in its innovation strength. We have small and medium sized companies hidden champions. They are unique in their technology and we believe that with the people which we have, we can drive this to the next level. Yet you need a little bit of structural changes in order to really attract the capital that we all know that.

So, and they've identified nine.

Action fields and they are almost completely in sunk what's written in the coalition contract. And then coming to SEMENS, I mean we're investing in manufacturing innovation in along it. For example, want to invest in what we call the industrial meto verse kind of manufacturer driving digitalization to the next level, be about to deploy that capital as we speak. The same is what happens here in Berlin. It's a completely new new precinct in Berlin. We're investing, leveraging also

But we have more than that. We have more than fifty lighthouse projects from.

All the companies where they say these are my ideas, this is what I use the capital.

For, and so's to sort of zoom out and see kind of looking into the future five ten years from now, Christian when we're trying to imagine, if this initiative is successful and the initiative of the government, what the German economy looks like, how different it might be from these sort of traditional ideas that we have about the German economy, which is a lot of smokestacks, a lot of heavy industry, a very energy.

Dependent.

What do we look like in this what does economy look like in five to ten years?

Always hard to exactly zoom out and says what it looks like in five to ten years, but you know, sometimes history tells you what is possible.

If you think about.

How the German economy actually changed over the last.

Thirty or forty years.

When I started in banking in the area in the location where I started, this was an industry or this was a location which was dominated by textile and the printing industry completely changed. And if I think about family owned companies, if I think about semens, if I think about others how they now actually apply artificial intelligence for industrial processes, I think Germany can be and must be

Challenge to export that.

I do believe by the way that Germany will always be an export country. And then with leading technologies we can master that. For that, you need investments. For that, you need to up to date, and therefore it is so important that we actually invest into our capabilities.

Third point could be defense.

I'm actually glad that we are upsizing our defense, not only in order to defend our own continent, but moreover that most of the defense investments will actually doing very well for future technologies, so you can actually initiate a new industry with defense investments. So I think we will

In Roland, you are sort of coming from this company that has this heritage and extreme heavy in the streets. Now transition to do exactly sort of what you're describing there to what So how do you appraise the kind of Germany's structural advantages in order to sort of sort of take advantage of what we're talking about here.

So let's take the AI technology as one of those fundamental technologies which are fundamentally changing actually everything we talk about industrial AI. So what you do need is data. I mean better data beat better algorithms. So we're sitting on a massive amount of data. This is one of the most industrialized economies in the world, and against more than medium sized enterprises, large ones. They're creating data from

The data village of available that can help us a bit.

The only point here is we need less regulation to release the power and the speed with which this technology can really hit the market. So there are a couple of things which we have to change. I'm constantly saying that, but the potential is there.

Well, while we're on the subject, I'll stay with you because this is my next question. Is the roadmap to getting there? Right, we've slaid out the ambition, Now the roadmap to getting there specifically, what have you been encouraged by what you've heard from this government and what you know sort of what reforms concrearly would you like to see in the next six months.

So we have nine action fields and again they are in sunc with what the government is planning to do any and just to spell out some Number one is coming back to innovations, the way how we are supporting innovation, university schools, education system.

The other one is the labor market.

We need the best talents in the market and we need to deploy the working forces which we have.

You have to bring people who are coming to us into work.

Another one is the investment climate that you have incentives for investing and deploying money and vc some first actions already taken by the government. We talk about less regulations, faster decision processes. It doesn't help I A if it takes five years to get an approval for our plan, then you want to deploy capital in the.

Next three years. And the other one is digitalization.

We have to digitalize the companies but also government processes because you can be much much faster and much more productive.

I'm doing so just to.

Line out some of those areas.

It's not you know what to do, it's about doing do it.

So Christian, we've heard about cutting red tape in Germany for how many decades now, right, this is something that we keep hearing about from the government. What do you think again, like concretely where would you like to see from this government. You speak to every basically business within Germany. What are the sort of three things that you know you could really concretely put into place in the next six months which would encourage these companies and give them the confidence to invest well.

The three main complaints of the people and in particular family owned companies but also larger companies clearly a regulation and bureaucracy and their speed. And this is an issue where it's not only Germany. We also have to have a far bigger influence of what is happening in Europe. And therefore I also think more leadership, a stronger government in Germany will also help to do structural changes in Europe which we need. Number Two energy prices. It's still

I think there is a.

Force one now, as I said, the government had a good start. We need to focus on our pension plans because I do believe it's not only important that we have a secured system for our people, for the retirement people also in ten fifteen years time. I think it's actually the key to success for investments. If we have a capital based pension plan that also means that more investments will go into our economy. It's nothing else than the real start of a domestic capital market.

That's what we need.

If we can focus on that, I think even more foreign investments will run into Germany.

So you've touched a number of points. I want to pick up on a couple of them. But a little bit earlier, you said you think that Germany will remain an export economy at a time when we're seeing that sort of concept really being challenged at the global.

Scale by the United States.

I'd like to get an idea from you personally, but also the clients you speak to. How are they weighing the optimism that comes with what we're heard from the German government with the risks that we're hearing from.

The United States.

And you know what is winning in terms of making decisions.

For businesses, Well, I think it's all about diversification. I think we learned through COVID already the first steps of what it means to be diversified, not only to diversify your production and supply chains, but also you sort of say sales market. So I think a lot of companies are actually looking into diversification, more agreements, more bilateral relationships.

But I hear nobody.

Actually talk about let's only focus on the German market, because we know that's too small. Second point is actually that we all need to focus more on Europe.

We need a stronger European home market.

The stronger this market is was four hundred and fifty million consumers, the better it is also for our negotiations versus the US, versus other countries. And therefore, I do believe the stronger you make yourself, and again this initiative is prone to that, the better your starting position is. I do believe that most of the companies are not

And roland, you know, I mean, the worst of the world may not be, but the United States certainly is. We're going to get teriffs from at least ten to thirty percent in the next two weeks. How are you sort of appraising that risk and how it could sort of affect the plans here within Germany.

So what is the eventual outcome. Let's put it that way. We will end up in higher tariffs. These are the United States is what we don't really want. Actually, we wanted to have lower ones because we believe in free trade. This stimulates economies and growth, so that would drive inflation to some point. However, there's one point which is super

And secondly, is it's super important.

If we finally manage to make free trade agreements in a couple of years, in not decades.

That's super element because what would you do if.

You have two large, large, large economies viure depending on diversifying other ones. Azion is a super important region, growing region, Middle East. We have South America, so there's so many regions where we can create other markets on top. And I'm not saying that the United States is not a relevant market for US, and there's still the most relevant market, but still there are opportunities, and then we're ending up in a much much more resilient and better So.

Yeah, and so talking about some of the investments that you Roland have made in the United States over the last year or two, basically fifteen billion dollars worth of deals in kind of AI based and digital services within the United States, I'd like to get an idea. Did you not see those kinds of opportunities within Europe? Is that something that you could see happening in Europe or the companies just not there.

The investment you're talking about two investments, A ten billion investment in altear simulation software five billion also in software for similating molecules.

It's about the pharmaceutical and biochemical market.

And I have to say that if you look for software assets, indeed you will end up in the United States mainly. There are alternatives. You're also invested in European companies smaller though, but you're not hessitating to invest capital R and D, but also M and A in Europe. We're looking into companies there as well, hardware companies which BRIS do may know.

How hardware which creates data.

So but in that case, if you really look for software, and Simon's invested really quite a bit twenty five billion over the last thouty and fifteen years in software. Most of that comes from.

The United States.

And we've been talking Christian a lot about European champions and changing the way that we think about preserving companies at the national level versus the European level. And I want to understand sort of you when you look at Deutsche Bank, which is now at the end of what was a very long turnaround process but now it's feeling like it's in a strong and confident position.

Is the same moment for Deutsche.

Bank to get into a much more sort of aggressive mode in terms of expansion mode potentially looking at M.

And A across borders.

What do you want Deutsche Bank's world to be in the kind of world of European Champions.

Well, I do think what we see in this world is was all the geopolitical uncertainties with all the also economic uncertainties, there is one trend which is the same across the world that our clients want to have a

That's the role we can play now.

This role we not only want to play because we feel ourselves at lobal bank, but it's obviously much easier to do that if you are coming from a country which is economically increasing, which is economically on the right pass and which is.

Also pulling now Europe.

And therefore I think we have a unique chance, not only as Germany and Europe, but also as Deutsche Bank to actually be the one who is facilitating and who is contributing to our clients growth around the world. The diversification also in banking, not only to rely on one bank, but on many banks, and that from a regional perspective has never been bigger than around.

And you touch about diversifying, and just another question to you, is this by europe trend? Is this a lasting thing? Is this something that you're seeing from investors that you talk to that they're wanting to make a meaningful commitment to Europe, and what does that actually look like in terms of numbers from where you're setting.

Well, for the first time, we see obviously since the last three or four months, a quite significant reallocation from funds in particular into Europe.

The interest is huge.

Whenever we talk with investors, they really want to understand what's going on in Germany, what's going on in Europe. By the way, already in doubles this year, six months ago, most of the investors said micro Germany is really good, and with that they mean the German corporates, the German companies, Macro. You need to do in improvements and that's exactly what we want to try now. Of course, the government stepped up with the fiscal program, but also with the reforms.

A huge chance.

And then I do believe with further reforms to come, and that is necessary. I do believe that this trend of reallocating funds to Europe will not stop if we are not doing further reforms and just rely on fiscal debt.

That doesn't help We need the fiscal.

Reforms and Roland a sort of final question to you to sort of close things up. You know, Europe does not want to become the United States in a lot of different ways, but we do want here sort of capital markets like the United States. We do want the

And that's a very good point. We have to hold in our values. They brought us where we are and they are good, and be keep to these values. We really have to make structural reforms in Germany but.

Also on European level.

That requires courage, It requires solution orientation, but also really bold moves. You cannot just take one of the problems which we have in these acts. You cannot take an act which is substantially misconstructed and find you in a little bit. So we have to go back and really think about what is it. How can we accelerate the development, economic development, but also innovation development, And again it's making bold decisions and make them fast.

Well, gentlemen, thank you so much for your time today. Christian Zaving Roland Bush. And this commitment that we've got for made in Germany, more than six hundred billion euros being pledged from a dozen of different companies across Germany. And we'll be having a meeting there with these gentlemen and the German Chancellor a little later this afternoon.

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