trump angst From Germany With Love

As the economic policies of the new U.S. president remain unclear, German executives are deeply unsettled. Fearing for their business in the United States, they are doing their utmost not to anger the new man in the White House.
U.S. President-elect Donald Trump touring a factory in Indianapolis.

Donald Trump's presidency is a matter of great concern among German executives, who fear an administration that will make good on the promise of "America first" and either get rid of or weaken trade agreements such as NAFTA and TPP. They are concerned about a president who will impose higher tariffs on imports and punish companies that have moved production abroad.

There's much at stake for the German economy in the U.S. Since 2015, the United States has become Germany’s most important trading partner with a trade volume of $183 billion (€173 billion). And only a few managers are as optimistic as Tom Blades, CEO of German industrial services provider Bilfinger, who says: "For Bilfinger, North America is a market in which we want to grow profitably, irrespective of election results."

But he's alone with this point of view: In a survey by the German-American Chamber of Commerce, 28 percent of 1,900 respondents of German companies in the U.S. said that the change of office in the White House has negative effects on their business. "There are currently too many open questions," the chairman of the Chamber of Commerce in New York, Caroll Neubauer, said.

"Nothing is worse than unpredictability," said a senior Daimler manager. "And Trump is the epitome of unpredictability." In German government circles it is said that the companies' concerns are justified. Mr. Trump's camp is staying tight-lipped. "We're talking to his people, often even. But they don't know much either," one U.S. lobbyist said.

And so in the days running up to the inauguration, something unique is happening. Hardened rivals are becoming allies in the fight for access to Capitol Hill. And it isn't only lobbyists for the car companies - from BMW to Daimler, from GM and Toyota to VW - who are joining forces. Other industries, such as pharmaceutical companies, are also pooling their resources to influence the new president.

Some corporations, such as Ford or Toyota, are already trying to buy Trump's favor with promises of investing billions. The motto seems to be: duck away, lobby and satisfy the President's vanity. For many managers it is now about showing the necessary flexibility with the Trump administration and thus stay in business with the United States.

We shouldn't be giving the impression that we are preparing for a war against Trump. Manager of a DAX-listed company

In the past weeks, political advisors and lobbyists from German car manufacturers have held crisis meetings. "We shouldn't be giving the impression that we are preparing for a war against Trump," said a manager of a DAX-listed company. To publicly contradict or even to criticize Mr. Trump would be the dumbest thing anyone could do right now, is what managers in another German company are saying.

Above all, the future of the European-American free trade agreement TTIP is worrying German executives. "In its current form, it is very difficult," said Oliver Bäte, Allianz Chief Executive Officer in Munich, with view to the agreement. He is betting on Mr. Trump's obsession of being successful. "And because he is relatively opportunistic, I could imagine that the Republicans can implement this energy positively."

Such hopes however are not very close to reality. After his election, Mr. Trump initially attacked domestic car makers GM and Ford, because they were building new factories in Mexico and not in the U.S. Then he took on Toyota. "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax," he tweeted.

The Japanese carmaker soon promised to spend $10 billion in U.S. capital investments over the next five years. Fiat Chrysler also announced plans to invest $1 billion in U.S. factories and create 2,000 new jobs.

But German carmakers have just invested billions and built several new plants in Mexico, mainly to supply the U.S. market. Every seventh car built in Germany is sold to the U.S.

BMW is currently building the first Mexican factory in the company's history. But managers in Munich are also making efforts to appease Trump - at least rhetorically. The factory in Mexico is not only going to be producing for the U.S. market, Ian Robertson, BMW's sales manager, hurriedly underlined during the Detroit Motor Show.

Daimler is also building a plant in Mexico together with Nissan, which is due to open this year. And in 2012, Audi decided against supporting the city of Chattanooga with a production facility, and instead built a factory south-east of Mexico City, which opened last September.

"New tariffs for exports from Mexico to the U.S. would force us to rebalance our entire global production network," said a Daimler manager, but he cannot say exactly how that might look. BMW is now considering where the BMW 3 Series could be exported to from the new Mexico site if the U.S. were no longer an attractive market. Since Mexico has free-trade agreements with 46 countries and the production costs are at at a similar level to China, exports to many countries, including in Europe, could pay off.

But according to a German industrial lobbyist who has been traveling to Washington for 15 years, there has long been no talk of import tariffs for products coming from Mexico to the U.S. in Trump's camp. "But with the constant change of personnel in Trump's transition team, it is difficult to get reliable statements," the American complained.

In the battle for Capitol Hill and the favor of the new president, top attorneys and their political advisors play a key role so it is important to get along with them. Lawyers are sought after who are not only able to help companies with regulatory or tax issues, but who also have good relations with congressmen and senators. "Because the new administration under Trump is so unpredictable, it's getting harder for companies to find out what policy is actually desired and planned," said Ian Bremmer, director of U.S. think tank Eurasia Group. Those lawyers and advisors who have very good access to Mr. Trump's transition team and to the new administration are particularly in demand.

That German chemicals giant Bayer is using several channels to influence the future president is no surprise given much is at stake for the company. Bayer wants to acquire Monsanto for $66 billion, though is not yet through and in theory, Mr. Trump could intervene in the planned takeover. His views of the deal are not known.

According to research by the Washington Post, Bayer has hired four big-name lobbyists to advocate for the proposed merger. All have one task: to make Mr. Trump understand the deal is in America's interest and to find out where Bayer could meet him halfway.

Other companies prefer a different strategy: Just don't get noticed, avoid provocation. Linde, the German industrial gases giant, for example, is in the middle of a merger with American industrial gas producer Praxair. Behind the scenes, just before Christmas, according to an insider, Praxair would have done anything to prevent public announcements or even a press conference on American soil. "They wanted to keep this under the radar."

Rather than lobbying hard themselves, like Bayer, many companies prefer to latch on to large American lobbying associations together with their competitors to press forward their interests with the new government. Pharmaceutical companies such as Boehringer and Merck pursue this approach. Both are members of one of the most important U.S. lobbying groups for drug producers: Phrma, or the Pharmaceutical Research and Manufacturers of America, situated in a brick building opposite Madame Tussauds and within walking distance of the White House. At the head of the association, top executives such as Joseph Jimenez, head of the Swiss Novartis Group, and Joaquin Duato, Executive Vice President and Worldwide Chairman of the U.S. company Johnson & Johnson, are fighting Mr. Trump's plans to dismantle President Barack Obama’s signature health-care reform.

Scott Whitaker, also a senior health care executive, is a regular in the office tower on 1717 Pennsylvania Avenue in Washington where Mr. Trump's transition team is based. Mr. Whitaker is the CEO of AdvaMed, a group of 350 medical technology companies, including German corporations such as B. Braun Medical, Siemens Healthcare and Berlin Heart, a specialist in artificial hearts. Depending on the importance of the topic, between 8 and 30 people sit at a table for meetings with Trump's team, according to Mr. Whitaker. Talks usually last for an hour, rarely longer than 90 minutes. Mr. Whitaker is optimistic about the dismantling of Obamacare: "We emphasized our role as an employer for nearly 1.5 million Americans, and we have also mentioned that health policy is a sensitive field because it is about people's well-being."

Whether these dramatic words made a difference is not yet clear. During his first press conference last week, Mr. Trump emphasized that he wanted to abolish Obamacare. But Mr. Whitaker is confident. "We were listened to with much interest and saw accommodation in one of our core concerns, namely abolishing a special tax on new products registered in our industry," Mr. Whitaker said. He knows how important it is to score points among Mr. Trump's confidants and said, "Whatever recommendations the transition team makes is mostly followed."

 

This article originally appeared in WirtschaftsWoche, a sister publication of Handelsblatt. To contact the authors: [email protected]