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Good morning. David Meyer here in Berlin, filling in for Alan.
The push for green coronavirus stimulus measures looks like it’s getting somewhere. Following furious wrangling within Germany’s coalition government, Chancellor Angela Merkel’s administration has announced a €130 billion ($146 billion) stimulus package—that’s nearly 4% of GDP—that should aid the energy transition as well as pulling Germany out of its pandemic slump.
A key element is the increase of government subsidies for people buying electric vehicles—up from €3,000 to €6,000 per vehicle. Along with cash for hydrogen energy, this forms part of a €50 billion tranche of the overall package, which is set aside for addressing climate change and researching A.I. and quantum computing. (Other notable measures include a temporary lowering of the sales tax rate, and a one-off allowance of €300 per child.)
“It is an ambitious program,” said Merkel, while her finance minister—Olaf Scholz, from the center-left SPD party—talked about emerging from the crisis with “oomph” (my translation).
In a note today, BoA’s analysts said the EV subsidies were “too high” and would not have a great effect on car demand in Germany. It should also be noted that the full subsidy is only for cars costing under €40,000, which leaves out electric vehicles from the likes of BMW, Mercedes, Audi and Tesla.
Volkswagen should benefit somewhat—its ID.3 EV is coming out this summer at a price of just under €30,000. The car giant had previously called for stimulus measures to also support combustion-engine cars, but no dice as it turns out.
Germany’s move comes after neighboring France also increased incentives for the purchase of electric vehicles, in order to keep its auto industry afloat. As French Finance Minister Bruno Le Maire said last month: “We are ready to support the demand for vehicles but it will be support for clean vehicles that emit less CO2, especially electric vehicles.”
However, France also took a step beyond where Berlin is prepared to go: its bailout for Air France came with “ecological commitments” such as a halving of carbon emissions on domestic flights within the next five years.
Germany’s Lufthansa bailout, agreed in the last few days, comes with no green strings attached.
More news below.
China will allow foreign airlines to step up flights to and from the country as of next week. The move follows a threat by the Trump administration to block Chinese carriers from the U.S., if China does not allow in the likes of United and Delta. Foreign carriers will now be able to fly one service into China per week, or two if they have already been maintaining a China route (which the U.S. airlines were not). Fortune
Former Defense Secretary James Mattis has released an extraordinary statement backing protestors in the U.S. and accusing President Trump of trying to divide the American people. "We must reject and hold accountable those in office who would make a mockery of our Constitution," he said, breaking more than a year's silence about Trump's performance as president. Meanwhile, current Defense Secretary Mark Esper has broken with Trump on the issue of deploying the military to quell protests, and Joint Chiefs of Staff head Mark Milley has written to military commanders to remind them that the Constitution "gives Americans the right to freedom of speech and peaceful assembly." Atlantic
HSBC and China
HSBC's Asia-Pacific CEO Peter Wong, signed a petition in favor of the new national security law that China is set to impose on Hong Kong. The bank also issued a statement supporting the law, which critics say undermines Hong Kong's "one country, two systems" status. HSBC is a British bank but one with deep roots in Hong Kong, and it is increasingly reliant on the region. Fortune
SoftBank's image as an investor has been dented recently, to say the least, by bad bets such as WeWork. But now the Japanese conglomerate has announced a $100 million "opportunity growth fund" to invest solely in companies founded by people of color. SoftBank won't include a management fee or a carry, and a portion of the gains will go to organizations "focusing on creating opportunities for people of color." Fortune
AROUND THE WATER COOLER
Hedge funds see another stock-market slump coming this year, the Financial Times reports, with some managers becoming concerned about surging prices ignoring the reality of slow economic recoveries and overestimating the impact of stimulus packages. Dymon Asia Capital's Danny Yong: "The stability in equity markets does not reflect the job losses and the insolvencies ahead of us globally…prices cannot diverge from fundamentals for too long." Financial Times
Tesla in Germany
Tesla is to revise its plans for its new factory outside Berlin, in order to soothe some of the environmental concerns that locals have raised, particularly regarding water. The new plans will reportedly reduce the amount of fresh water the plant requires, and the amount of waste water that it generates. Bloomberg
The banking advisory firm Evercore is to pay incoming junior bankers up to $25,000 not to start work just yet—that's $15,000 to hang on until January, and $25,000 to wait until next summer, when everyone hopes the coronavirus pandemic will be under control. This sort of move hasn't been seen since the last financial crisis. Wall Street Journal
How can companies thrive in the current economy? According to the Tembo Group's Jen Butte-Dahl and Denielle Sachs, the answer lies in embracing the idea of corporate citizenship. They write for Fortune: "The companies that succeed will be those that balance the need to look both inward and toward the horizon, and act with the empathy, courage, and vision this moment demands." Fortune
This edition of CEO Daily was edited by David Meyer.