Also: Tesla demand, Toyota CEO, and Adani allegations.
Good morning, Peter Vanham here in Geneva, filling in for Alan.
It’s hard not to start this newsletter with the news of Germany approving the delivery of Leopard 2 tanks to Ukraine. Much has already been said about the symbolism and battleground implications of this decision, and CEO Daily won’t be adding to that discussion.
But from an economic perspective, it is hard to understate Germany’s tank decision, either. The approval to send Leopards puts a final dagger in the heart of Germany’s decades-old policy of avoiding war in Europe through trade and cooperation, and is perhaps the surest sign yet that there is no (quick) turning back to a truly integrated European economy—at least not one that includes Russia.
It can be easily overlooked, but Germany’s obsession with trade to maintain peace was one of the crucial building blocks of Western European integration and prosperity after the Second World War. In Eastern Europe, too, Germany bet on the same playbook after the fall of the Iron Curtain. It was a centerpiece of German reunion, and allowed the rapid rise of living standards in many former Soviet states.
So it should be no surprise that many in Germany believed the same doctrine would work in Russia—and, for a long time, it did. Post 1991, German-Russian trade rose rapidly, and so did foreign direct investment. German companies started doing more business in Russia than those of any other EU country. Even a year ago you would have been hard-pressed to find any German business leader or politician disavowing the entanglement.
But then the awakening followed, and it was rude. After the Russian invasion of Ukraine, German companies from Adidas to Zeppelin Foundation rushed to get out of Russia, or at least froze their operations. The German-Russian Chamber of Commerce turned its site into a sanctions info board. And Germany’s political leadership realized their strategy had failed.
Suddenly, previous German chancellors, from the conservative Angela Merkel to the social-democratic Gerhard Schroeder, looked respectively ill-advised and crooked. Merkel defended German dependency on Russian oil and gas throughout her tenure. Schroeder went even further, becoming chairman of the Russian-led Nord Stream gas consortium and the Russian energy giant Rosneft.
German Chancellor Olaf Scholz must have had all this—and more—on his mind as he made the decision to send the Leopard tanks. Beyond the risk of military escalation, the decision means the admission of the political and economic bankruptcy of the ‘peace through trade’ doctrine his predecessors pursued to keep the peace with Russia and allow Germany and all of Europe to prosper.
When the dust settles, Scholz will need to come up with a new doctrine to pursue these goals. As Europe’s largest economy, Germany has a special responsibility, in this regard. So do German companies. They will need to figure out if and how they’ll ever return to Russia, if indeed they ever left.
More news below.
Peter Vanham
@petervanham
Peter.vanham@fortune.com
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Tesla demand
Elon Musk put his Tesla hat back on at an earnings call yesterday, in which he tried to calm investors following a big price (and margin) cut. The poly-CEO insisted demand was strong, with Tesla currently “seeing orders at almost twice the rate of production.” The company could sell up to two million cars this year, Musk said. Tesla stock is currently up more than 8%. (Bonus read: Musk says he can’t fix Twitter overnight.) Financial Times
Toyota CEO
Akio Toyoda, the grandson of Toyota’s founder, will in April step down as CEO and become chairman. The Japanese auto giant’s new president and CEO will be current chief branding officer and Lexus division boss Koji Sato. Toyoda: “To advance change at Toyota, I have reached the decision that it is best for me to support a new president while I become chairman.” Wall Street Journal
Adani allegations
Short-seller Hindenburg Research has set its sights on the empire of Asia’s richest person, Gautam Adani. It yesterday claimed Adani Group has engaged in “a brazen stock manipulation and accounting fraud scheme over the course of decades.” The conglomerate said today that it is now considering legal action against Hindenburg in the U.S. and India. The report’s release knocked more than $10 billion off the market caps of group companies. Fortune
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Sustainability Disclosure and Preparedness As ESG considerations continue to transform today’s financial landscape, companies are moving from commitment to action, according to Deloitte’s 2022 Sustainability Action Report. How are executives making proactive strides to hold themselves accountable among evolving expectations? Explore the findings here.
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Forget Big Tech—Emerging market stocks will be the leaders of the next decade as India takes China’s thunder, Morgan Stanley IM says, by Will Daniel
IBM lays off 3,900, joining an already long list of tech companies slashing jobs as the economy cools, by Bloomberg
America’s biggest banks are teaming up to take on Apple Pay and PayPal with a new digital wallet. Analysts think it could flop, by Ben Weiss
COVID, inflation, war in Ukraine and the climate crisis are all conspiring to put a dent in global economic growth this year, by Associated Press
Donald Trump’s Facebook and Instagram ban for inciting the Jan. 6 riot is lifted: ‘We don’t want to get in the way of open debate on our platforms’, by Bloomberg
This edition of CEO Daily was edited by David Meyer.
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