WEBVTT - Stefan Hartung Talks Tech, Chinese EV Production

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's go to Berlin right now, Bloomberg's Oliver Crooks semi

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<v Speaker 2>blind with an interview with a key player from the

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<v Speaker 2>under pressure auto industry.

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<v Speaker 1>Only that's right, Tom, and listen, it's not just the

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<v Speaker 1>auto industry, because this is the sort of story that

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<v Speaker 1>sits at the very center of the biggest sort of

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<v Speaker 1>stories we've been talking about for the last few months,

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<v Speaker 1>whether it's AI semiconductors, the auto industry, terrorists, and of

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<v Speaker 1>course the German economy. So I'm very pleased to be

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<v Speaker 1>to speak to somebody who really sits at the heart

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<v Speaker 1>of all of all of these stories brought together. It

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<v Speaker 1>is the CEO and chairman of BOSH. Because Bosh, we

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<v Speaker 1>should just say, in addition to being one of the

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<v Speaker 1>biggest companies and employers in Germany, it's technology that it's

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<v Speaker 1>in half of all the smartphones, it's almost in everybody's home,

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<v Speaker 1>and it's in literally almost every single car on the planet. So,

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<v Speaker 1>chefon Hatoon, thank you so much for your time. Today.

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<v Speaker 1>We should start in the auto industry because we have

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<v Speaker 1>more difficult news out of Volkswagen today and probably your

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<v Speaker 1>order book is one of the clearest indications of what

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<v Speaker 1>is to come in terms of demand for the auto sector.

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<v Speaker 1>What are you seeing there.

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<v Speaker 2>We are still growing in the older industry also this year,

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<v Speaker 2>but let's be very honest, the OLO industry didn't grow

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<v Speaker 2>as much as we anticipated. So the overall production of

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<v Speaker 2>vehicles will be pretty much flat.

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<v Speaker 3>It will be a very small growth.

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<v Speaker 2>Just few pockets are left of growth, like India for example,

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<v Speaker 2>or the Chinese export. There's still some growth in the

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<v Speaker 2>better electric vehicles, but we see a big shift actually,

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<v Speaker 2>not only that there is no volume growth, but the

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<v Speaker 2>shift is away actually from the big growth numbers of

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<v Speaker 2>bettery electric cars to plug in hybrids. So that is

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<v Speaker 2>challenging in this industry because if you change production programs

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<v Speaker 2>in this industry, that's a big thing.

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<v Speaker 1>It takes a very long time. So do you see

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<v Speaker 1>any reason to be sort of more optimistic about things

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<v Speaker 1>turning around or do you think we're in this for

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<v Speaker 1>at least another two years or so.

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<v Speaker 2>Well, long term, we know things will change towards a

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<v Speaker 2>better electric vehicles and that's a good thing, but definitely

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<v Speaker 2>the ice technology, so the engines will be needed longer.

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<v Speaker 3>That's what we always thought. So there is a.

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<v Speaker 2>Technology open approach now coming by the consumer, because the

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<v Speaker 2>consumer freely decides what he wants to buy. Our first,

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<v Speaker 2>you see with a flat production line that the consumer

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<v Speaker 2>decides less, so it just waits and takes the car

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<v Speaker 2>a bit longer, which is bad for the industry. On

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<v Speaker 2>the other end, the consumer is deciding to buy more

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<v Speaker 2>pluck in hybrids, which is more to see neutral. But

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<v Speaker 2>in the long run, I'm still optimistic full electricfication will happen.

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<v Speaker 1>And I'd like to also get your broader picture in

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<v Speaker 1>terms of global demand. Because you're in obviously homes, you're

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<v Speaker 1>in consumer goods, you're in obviously cars, you're in smartphones.

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<v Speaker 1>What is the sort of picture of global demand across

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<v Speaker 1>all of your different businesses.

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<v Speaker 2>Well, if you look at consumers, which drive most of it, right,

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<v Speaker 2>which is our home kitchen appliance business, but also a

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<v Speaker 2>power towards consumers are hesitant on spending. You see that

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<v Speaker 2>in China and Europe. You see it less in the US.

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<v Speaker 2>By the way, the US consumers always much more resilient

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<v Speaker 2>in this terms, right, But you see in these two

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<v Speaker 2>sectors are quite strong resilience, so people wait a moment

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<v Speaker 2>to buy.

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<v Speaker 3>Also for cars, so on all the doorables.

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<v Speaker 2>You see that hesitation which comes from unclear regulation or

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<v Speaker 2>unclear view. If this is good, if it's a good

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<v Speaker 2>case for the consumer, they calculate, right, they don't just

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<v Speaker 2>do it.

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<v Speaker 1>More things And one of the things that are obviously

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<v Speaker 1>going to be paying attention to as well as the

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<v Speaker 1>election in the United States, how prepared are you for

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<v Speaker 1>potentially ten twenty percent terrorsts in the event of a

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<v Speaker 1>Trump administration. Does that make you look at your manufacturing

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<v Speaker 1>and production footprint?

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<v Speaker 3>Well, definitely.

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<v Speaker 2>I'm not a big fan of terrorsts, right, that's clear

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<v Speaker 2>because terrors kind of hinder the global collaboration and that's

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<v Speaker 2>important for technology. But you know, the election brings also

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<v Speaker 2>certain clarity. So over the next month some clarity will

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<v Speaker 2>come what the direction is, and then industry will adjust.

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<v Speaker 3>Everybody will be able to adjust. Allo, that's a good thing.

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<v Speaker 2>By nation of the election, how the policy actually will

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<v Speaker 2>work we have to see. But in general, the US

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<v Speaker 2>is still the strongest figures, i would say, globally, so

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<v Speaker 2>probably the recovery is coming there fastest, The gross is

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<v Speaker 2>coming the most eminent, so you have to be there.

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<v Speaker 2>And that's why we shift and bought big time towards

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<v Speaker 2>US investments. We did the investment for the semiconductor in California.

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<v Speaker 2>We bought JCI and Titachi for the condition business, and

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<v Speaker 2>that's the strategy to go.

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<v Speaker 1>And the other question is, of course the Chinese economy,

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<v Speaker 1>where we've seen a lot of distinct weakness. But I

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<v Speaker 1>have a theory I'd like to test on you, which

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<v Speaker 1>is that when demand comes back within the Chinese economy,

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<v Speaker 1>is it really for the same items that we've been

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<v Speaker 1>talking about historically because it's been demand's been out for

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<v Speaker 1>about four years. Is it for German ices? And is

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<v Speaker 1>it for really the same components because China has really

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<v Speaker 1>been trying to make its own component industry as well.

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<v Speaker 2>Now China is changing from a pure production manufacturing based

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<v Speaker 2>system and a market for importers right towards the technology

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<v Speaker 2>based system, which is driving its own innovation and bringing

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<v Speaker 2>great product in China for.

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<v Speaker 3>The Chinese people.

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<v Speaker 2>The consumer is extremely demanding, very high tech driven, loves

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<v Speaker 2>high tech functions. So you see way more level two

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<v Speaker 2>plus driving, which is full automated driving, but you are

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<v Speaker 2>still responsible. So it's a thing which is much cheaper

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<v Speaker 2>but still very comfortable. And you see these things in China,

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<v Speaker 2>So the most advanced functions are now asked by Chinese

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<v Speaker 2>consumers and customers, and that's actually a change. So we'll

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<v Speaker 2>China be the same when demand comes back.

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<v Speaker 3>Definitely not.

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<v Speaker 1>And then the other question I also for you is

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<v Speaker 1>that you said that this is going to be a

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<v Speaker 1>very challenging year for you the road ahead, and that

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<v Speaker 1>obviously where demand is absent than cost cuts need to happen.

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<v Speaker 1>Are there going to be more cost cuts at BOSH?

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<v Speaker 1>Where are looking to cut costs? Our jobs on the table,

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<v Speaker 1>You're going to have to cut some jobs now.

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<v Speaker 2>Most important for us are not the cost management questions

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<v Speaker 2>of our plan. The real core thing of the plan,

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<v Speaker 2>which includes cost management right is the innovation plans. Because

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<v Speaker 2>we go for new innovation to face with better value

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<v Speaker 2>to the consumer in different areas. So we've forced to

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<v Speaker 2>go more to the US. We forced to go more

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<v Speaker 2>into new product, new innovation and be on the forefront

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<v Speaker 2>on these new trends, also in China, also in Europe,

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<v Speaker 2>but also in the US.

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<v Speaker 1>So let's not be totally pessimistic in terms of those

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<v Speaker 1>new trends. Where is BOSH right now spending the most

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<v Speaker 1>in R and D? Where are you seeing that sort

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<v Speaker 1>of promise.

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<v Speaker 2>Well, still a lot of money is spent for semiconductors

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<v Speaker 2>because that's an investment based approach. Right, you need to

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<v Speaker 2>build these factory first, right, there is one in the

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<v Speaker 2>US and there are some in Germany.

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<v Speaker 3>We still build. And then there.

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<v Speaker 2>Is obviously the electrification story because long term better electric

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<v Speaker 2>this wild be the way to go. And automation of vehicles,

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<v Speaker 2>including full automation, but majorly the trend is now not

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<v Speaker 2>going for full automation, which some players show, but the

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<v Speaker 2>semi automation, so we.

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<v Speaker 3>Are still responsible. The card does most of the work.

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<v Speaker 3>That seems to be the way where the next wave

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<v Speaker 3>is really coming.

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<v Speaker 1>We had a category where you think you could see

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<v Speaker 1>an acquisition, for example in bat because you said sort

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<v Speaker 1>of a number of times that you need to be

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<v Speaker 1>prepared for inorganic growth. Where are you sort of looking

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<v Speaker 1>at inorganic growth?

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<v Speaker 2>Well, I think on the inorganic side we are not

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<v Speaker 2>so much looking at the automotive because the automotive we

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<v Speaker 2>can do from our own We invest heavily on our

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<v Speaker 2>own capacities.

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<v Speaker 3>Right, But inorganic growth.

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<v Speaker 2>We did this now with the air condition because of

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<v Speaker 2>the heat pump business, which is also transforming the industry

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<v Speaker 2>and there in this non automotive side always we are

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<v Speaker 2>quite active. You saw that also with the building integration

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<v Speaker 2>where we acted in Canada and the northern US with Paladine.

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<v Speaker 2>And that's the right way to do it, because this

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<v Speaker 2>is the moves we need to do to shift more

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<v Speaker 2>to North America, to shift more to this non automotive businesses.

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<v Speaker 2>The automotive we are strong enough to shape this ourselves.

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<v Speaker 1>All right, Well, listen to seven Hart and thank you

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<v Speaker 1>so much for your time today. I really appreciate really

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<v Speaker 1>going around the world and around the different industries that

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<v Speaker 1>BASH is involved in, which is again in half of

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<v Speaker 1>the world's smartphones and in literally every single car, so

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<v Speaker 1>a really a very sort of thorough appraisal of sort

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<v Speaker 1>of demand in the global stage.