Below is the transcript of a CNBC interview with Jim Hagemann Snabe, Chairman of the Supervisory Board, Siemens. The interview was first broadcast on CNBC's Capital Connection on 14 September 2018.
All references must be sourced to a "CNBC Interview'.
Interviewed by CNBC's Nancy Hungerford
Nancy Hungerford (Nancy): I am live at the Singapore summit today and I am pleased to say that I am now joined by Jim Hagemann Snabe who is currently the Chairman of the Supervisory Board over at Siemens in addition to your many roles, it is an absolute pleasure to speak to you. Thank you for taking the time to speak to us here at the Singapore summit. There is a great discussion going on at the moment about the U.S.-China trade tensions if you will. And you are really seen as a titan of European industry but all of the companies you work with worked with in the past demand a global footprint here. How concerned are you about the tensions at the moment?
Jim Hagemann Snabe (Jim): Well of course it is concerning to see the tensions grow if I might put it like that. I think we shouldn't forget that growth rates generally spoken are quite good. We have a pretty high growth rate on average around the globe. We see Asia growing more than average, even Europe and the US, so the fundamental of business is actually pretty good. And the tensions and trade war are giving concerns right now, they don't have a significant impact, they have been very targeted in certain categories but of course if this continues, it will have in my opinion a negative impact on growth and with that could have ripple effects on the economy in particular in developing countries.
Nancy: Does that mean if the US administration moves forward on the next tranche that they have threatened let's say goods worth 2 hundred billion dollars that might have tariffs slapped on them, would you worry at that point?
Jim: I am not sure it is that step but it is clear and the experience we have seen from the financial crisis ten years ago is that the global economy is very connected. And so we cannot keep this as a bilateral conversation between two countries. It has effects on the entire value chain and with that it will have effects everywhere. So right now, I believe it is a sign wanting to have a level playing field. In all countries, I hope it will stay at a level of warning and not escalate because nobody wins from a global trade war.
Nancy: Does that suggest that you haven't yet seen any real impact in your businesses either at Siemens or at A.P Moller Maersk when it comes to either the shipping demand or even orders I think of new businesses looking to invest when it comes to Siemens business line. Is it fair to say you haven't yet seen an impact?
Jim: Yes that is correct. We have not seen the impact yet. Siemens just delivered another record quarter where orders are growing even more rapidly than in the past and in A.P Moller Maersk, we are transporting global trade and we are seeing good numbers so the impact is not there yet and we are of course looking at this in details but so far without any significant impact.
Nancy: When you talk about the strong growth story you still witness across the region in Asia, I mean many are as you point out looking at the previous financial crisis wondering what risks are out there currently. The guest we had on previously was talking about this issue of leverage perhaps too much indebtedness out there, if you think about the debt China fueled and the growth that fueled really in the region. Is that something that concerns you we could be set up for a slowdown at some stage?
Jim: I don't see the same effect as we had 10 years ago right now. I would say the growth rates we see now are driven by fundamentals in some case you could argue that the financial crisis was by the end of the previous era. Right now, growth is driven by digitization. The fact that value chains can be significantly more efficient, more customers oriented, more rapid in the way it is taking place and through innovation we see the opportunity to grow. So companies that invest in R&D right now. At Siemens, we have increased our R&D spending by 20 percent more than five billion euros a year and that is what is fueling real growth, not a bubble type growth.
Nancy: Digitization is certainly part of your agenda over at Siemens given your expertise from SAP. Many times, when people hear about innovation and digitalization of companies, they worry about what this means for the workforce. I know in Siemens 2020 vision, and the very first line of the plan actually talks about a leaner business. Many people would read between the lines and say does this mean job reduction, does it?
Jim: We have actually very deliberately built a plan which is a growth strategy. With this plan, we are trying to empower you could argue front line people, we are trying to fuel growth through innovation and so it's a growth story. It's actually a company under Joe Kaeser's leadership has done tremendously well since '13 really come back in a strong way, now leading most of the categories we are in. Because we are so strong, we can take the next step towards not a job cutting exercise, it is a growth seeking strategy.
Nancy: Are job cuts inevitable given the fact that we are talking about innovation digitalization and a leaner business?
Jim: It is very clear to me that digitization will have a dramatic impact on jobs, there is no doubt about that and that tendency will accelerate. However, I have been in IT industry for 25 years of my career and I have seen when innovation happens, new job categories appear. Only ten years ago, we would not have some of the social media jobs that we have today. We have a lot of categories around building software into hardware which was not there a few years ago. So I do believe that new jobs will be created. We cannot in my opinion protect the old jobs that are getting automated but we can develop people and that is one of the commitments we have done at Siemens is to develop people with the skills that are relevant for future jobs and through that actually accelerate growth and give people opportunities.
Nancy: Just finally, since you are really based in Europe but as I mentioned you have a global footprint especially as Siemens has a big business in the U.S. We talked about U.S - China trade tensions but also U.S - Europe as well don't always get along when it comes to trade issues. Are you concerned that the benefits that some of these European companies got (including Siemens) in the way of the Trump tax cuts and some of the pro-business reforms in the US, all those benefits could go away if they go ahead with this protectionist agenda.
Jim: Well I am in general against protectionism no doubt I think protectionism basically hides lack of competitiveness and so when you take a level playing field approach, you will foster the most competitive, the most innovative companies which is (I believe) the recipe for success of a country also in the long run. So will we see some hiccups on the way? Yes I believe we will. I have seen businesses become more resilient to any of these changes. Business leaders today look and lead for the longer run and they will be able to manage some of these hiccups that come on the way. I am fundamentally optimistic. I am a concerned optimist because the changes we spend in front of are very significant and got to make sure that people get a chance to get change.
Nancy: Significant enough to put investment decisions on hold today. Is that what you are saying?
Jim: Absolutely not. On the contrary, you see Siemens and A.P Moller Maersk move ahead with an ambitious plan, an optimistic point of view but able to deal with whatever comes up from the political side
Nancy: Thank you for bringing us a douse of optimism. It is good news on a Friday for sure. I know you are busy today wearing many hats so we appreciate your time.
Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, London and New York. The TV channel is available in more than 410 million homes worldwide.
CNBC.com is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.
CNBC is a division of NBCUniversal. For more information, visit www.cnbc.com