Wednesday, September 23, 2015
Volkswagen chief quits over emissions scandal; China economy: Shaken but still growing; How discounters are beating supermarkets in Britain
1 Volkswagen chief quits over emissions scandal (Graham Ruddick in The Guardian) The chief executive of Volkswagen has quit the car firm, insisting he was not involved in the emissions tests scandal that has rocked the automotive industry and could lead to one of the biggest ever legal claims. Martin Winterkorn said the German company needed a fresh start but stressed he was “not aware of any wrongdoing on my part” as he stepped down as boss.
The resignation of Winterkorn follows five days of growing pressure on VW after the US Environmental Protection Agency (EPA) accused the carmaker of using a defeat device to cheat emissions tests on diesel cars. The crisis could lead to millions of VW and Audi vehicles being recalled around the world and legal claims from motorists. Leigh Day, a UK law firm, said that if VW also manipulated tests in Europe then UK consumers could claim compensation.
Almost 50 class action lawsuits have already been filed in the US and Canada by law firms. German public prosecutors are also examining a collection of legal claims that have been filed by private individuals. The US Department of Justice and the New York attorney general have launched criminal investigations. VW has enlisted Kirkland & Ellis, the US law firm that defended BP after the Deepwater Horizon oil disaster, to help it deal with the growing pile of investigations and lawsuits.
VW has admitted that 11m cars were fitted with the defeat devices and set aside €6.5bn to pay for the costs of the crisis. However, it also faces the prospect of fines of up to $18bn from US regulators and a prolonged legal battle on multiple fronts. Almost €25bn, or a third, has been wiped off the value of VW this week, although shares in the carmaker rebounded 5% after Winterkorn’s resignation.
VW said in a statement on Wednesday that it has voluntarily reported itself to state prosecutors, paving the way for a criminal investigation. As the carmaker seemed to be clearing the way to pin the scandal on workers below Winterkorn, Simon Walker, the director general of the Institute of Directors, criticised the company’s response. “Fitting 11m cars with a piece of software which artificially reduces vehicle emissions during regulators’ tests is not the work of a few rogue employees. That decision was taken and put into action by people of reasonable seniority”, he wrote.
VW employs more than 600,000 staff and sold than 10m cars last year. It accounts for one in four new car sales in Europe. Prof Karel Williams of the University of Manchester business school said the VW scandal reflected badly on Germany. “Germany has been lecturing the Greeks for years on how they cheated on the budget deficit calculations and now look at this – Germany’s largest company is cheating on emissions,” Williams said.
2 China economy: Shaken but still growing (San Francisco Chronicle) President Xi Jinping is visiting the US as leader of a China whose image of economic success has taken a beating. But even a weaker China still is on track to turn in some of the world's strongest growth this year. And some industries including retailing are expanding at double-digit rates.
"Those touting China's sudden fragility are either exaggerating current problems or have entirely missed the slowdown of the past several years," said China Beige Book, a US research firm, in a report. It said China's image might be "more thoroughly divorced from facts on the ground" than at any time since it began conducting surveys of the country's economy five years ago.
This year, Beijing is expected to report growth of 6.5 percent to 7 percent. That is down from last year's 7.3 percent but more than double the 3.1 percent forecast for the US by the International Monetary Fund. Only India is expected to grow faster at 7.5 percent. Some forecasters suggest Beijing overstates growth and the true rate might be as low as 5 percent. Even at that level, China will add almost one Indonesia to its economy this year.
Faith in China's ability to surge ahead while the rest of the world struggled was shaken by the collapse of a stock price bubble. Yet the economic meltdown many feared never materialized. Only about 7 percent of Chinese households own stocks, which is a fraction of levels in the US, Europe or Japan, so losses had little impact on consumer spending.
Still, China is doing better than South Korea and Taiwan, where exports fell 6.1 percent and 8.8 percent in the same eight-month period, respectively. And exports matter less to China than they did in the '90s, when its domestic market was anemic.
3 How discounters are beating supermarkets in Britain (Peter Shadbbolt on BBC) Where you shop in Britain has always been one of the great social signifiers. According to shopping folklore, for the middle classes it is Marks and Spencer, for the upper-middle class Waitrose, and Morrisons is the redoubt of lower-middle class Britain.
But the big four retailers - Tesco, Asda, Sainsbury's and Morrisons - have been facing a game-changing threat as German competitors Aldi and Lidl cut into their market share with no-frills shopping that is marking a generational shift in retail patterns.
The latest statistics for the 12 weeks to 13 September from Kantar World Panel UK show just how bruising the business landscape has become for the UK's grocery retailers. The big four still occupy the commanding heights in terms of market share in grocery retail: Tesco 28.2%, Asda 16.7%, Sainsbury's 16.2%, Morrisons 10.7%.
By comparison, Aldi still only has 5.6%, and Lidl 4.2%, of the entire UK grocery market. But it is in the growth figures that the pain is visible. Sainsbury's managed a mere 0.9% growth over the same period, Tesco and Morrisons both dropped 1.4%, while Asda fell 2.9% in terms of sales growth. Yet Aldi and Lidl have achieved spectacular growth of 17.3% and 16%, respectively.
What went wrong at Morrisons, in particular, has become a signal lesson in what to avoid in grocery retailing. Analysts say its thrust for online sales, where the slice of the profits pie is smaller, undermined the profitability at its stores.
In the meantime, they say, their German competitors have simply built a better mousetrap. Rather than offering a wide range of choice to trolley-stacking weekly shoppers, the discounting German chains are aimed at the little-but-often shoppers. By ruthlessly culling brands that don't sell, producing copycat versions of high street lines, and even offering expensive fare in the form of lobster tail and Belgian chocolates, they are reaching a wide audience.