Siemens AG unveiled a €1 billion ($1.1 billion) investment in Germany, with Chancellor Olaf Scholz heralding the plan as his coalition works to reverse an exodus of capital from Europe’s biggest economy.
(Bloomberg) — Siemens AG unveiled a €1 billion ($1.1 billion) investment in Germany, with Chancellor Olaf Scholz heralding the plan as his coalition works to reverse an exodus of capital from Europe’s biggest economy.
Scholz is sharing the stage on Thursday with Chief Executive Officer Roland Busch at Siemens’ vast facility in Erlangen, Bavaria, where the company will build a new 200,000 square meter technology campus and expand production capacity.
The plan — part of the company’s previously announced €2 billion global investment program — marks a victory for the Social Democrat leader and his ruling coalition in Berlin as they try to respond threats to the longer-term outlook for manufacturing. Steep energy prices, a crippling shortage of skilled workers and subsidies in the US and Asia risk have fueled dire warnings from lobby groups that a creeping de-industrialization could take hold.
Some data support the warnings. More than €135 billion of direct investment flowed out of Germany last year, while only €10.5 billion came in — deepening an “alarming” trend, the German Economic Institute warned in a recent report.
The pain is being felt across German manufacturing. Chemical behemoth BASF AG has closed a number of energy-intensive factories at its main Ludwigshafen site. At the same time, cheaper energy and lucrative green-tech subsidies in the US have put Europe on the defensive to protect investments from carmakers and battery producers like Stellantis NV and Northvolt AB.
Scholz said in a statement that Siemens’ investment sent “a strong signal for Germany as a location for innovation and production.”
Once focused on heavy-duty equipment, Siemens has revamped its business to center on higher-margin, software-driven products, such as factory automation devices and smart infrastructure to help industrial customers reduce their carbon footprint. The shift has driven profits in recent years.
Erlangen is Siemens’ largest location globally. In addition to hosting research and development, it’s the administrative home for large parts of its train-making, mobility solutions and smart infrastructure units. The spun-off health-care division Siemens Healthineers is also headquartered there, where it manufactures medical-imaging devices. Siemens has already announced that will convert former research facilities in the Bavarian town into a 540,000 square meter campus for more than 20,000 employees until the mid-2030s.
Siemens is also expanding in other regions, having already earmarked €340 million for factories in Singapore and China, and roughly €200 million to expand rail manufacturing in the US. Siemens isn’t receiving subsidies for the German investment, Busch told reporters on Thursday.
The chancellor attended the signing ceremony in June for a deal with Intel Corp to build a €30 billion semiconductor plant in Magdeburg — a project that included about €10 billion in German subsidies. In May, Infineon Technologies AG hosted Scholz to break ground on a €5 billion chip plant in Dresden. And in February, Scholz met with business and political leaders in Saarland to celebrate a $3 billion deal between auto supplier ZF Friedrichshafen and US semiconductor maker Wolfspeed Inc. to make chips for EVs.
Meanwhile, German Finance Minister Christian Lindner, who heads the business-friendly Free Democrats, is planning a raft of measures designed to boost climate-friendly investments by small and medium-sized enterprises, according to a government paper distributed Wednesday.
The plan, which the government estimates would ease the tax burden on companies and households by about €6 billion a year, includes subsidies that are part of the ruling coalition’s blueprint to help companies speed the process of cutting emissions.
At the same time, Lindner is pushing to consolidate the federal government’s finances after it borrowed record amounts to fund spending to offset the impact of the Covid-19 pandemic and energy crisis.
Yet, there are few broader indications that the string of deals has been enough to swing the momentum to Germany’s favor. Industrial production has continued to fall this year, and with it investor confidence. Concerns among political leaders and executives are growing that the economy is taking longer than they expected to rebound from its winter recession.
(Updates with investment amount in first paragraph and Scholz comment in sixth.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.