CNBC Interview with Siemens CEO, Joe Kaeser, from the World Economic Forum 2019

Following are excerpts from a CNBC interview with Siemens CEO, Joe Kaeser, and CNBC'sKaren Tso.

KT: And we have another heavyweight with us this afternoon, Joe Kaeser's joined us, CEO of Siemens, nice to see you here on the mountain.

JK: Hi Karen, how are you?

KT: Well, thank you.

JK: Good.

KT: A lot to talk to you about. We've heard enormous concerns about growth, some of it triggered by trade, and the macroeconomic environment, Germany, we know, has seen somewhat of a slowdown, and the DAX has been impacted, as well, what conditions are you seeing on the ground, as we go in to 2019?

JK: By the way, first of all, it's interesting, because last year, when we were here, same-, same topic, the sky was the limit-,

KT: Right.

JK: Everybody was enthusiastic, and Europe was growing, everybody was growing, and people wondered, well, this is now the breakthrough to unlimited growth. Now, back-, back, uh, in one year, and everybody now believes, uh, the world comes to an end. I think we just need to look at what are the factual evidences, what do we see. I think the companies are still competitive, they are innovative. We truly have been impacted by geopolitics, because geopolitics drives sentiment, sentiment drives investment decisions, and, obviously, the lack thereof, there's going to be a slowdown. So, I really do hope that the leaders come together and find a meaningful way on how to straighten out trade issues, and not confuse them between unfair trade, and lack of competitiveness-,

KT: Right.

JK: Which is sometimes a lot.

KT: One of the concerns I have is that, again, we have, sort of, grand optimism around a US trade deal, if it gets done, then suddenly investors are saying, 'Well, we've cleared all the clear and present danger signals,' but what we've got in the backdrop, if we look at some of the news flow, German industry is now fighting for Brussels to tackle some of the same issues that the US has taken on with China. Do you think we're just going to be seeing 2019 unfold, where fresh trade issues then crop up, whether it's the US or Europe taking the charge?

JK: Well, I believe we have a responsibility, as company leaders, to help the governments of the whole world understand, if we want to move in to the Internet of Things, if we want to move in to free flow of data, this is an extraterritorial industry, so the industrial-, the next industrial revolution, which is, you know, we are basically in the middle of, this is about, you know, free trade, by definition. So, when the-, when the whole world moves to Industry 4.0, we cannot move in to global governance 0.4. It doesn't work.

KT: German-, German industry has certainly been one of the leaders worldwide, when you talk about technology, efficiency, and even profits. The future could look very different, if China gets there first on 5G, and automated factories produce goods at a much cheaper rate, and highly technological goods, as well, in the mix. Doesn't that leave German industry on the back foot? Are you concerned about what that means for you?

JK: I mean, first of all, most German companies are global companies. I mean, we, in Siemens, do business in 203 countries in the world, uh, less than 10% of our revenues is in Germany. So, you can truly see, I mean, we are home in Germany, but, at the end of the day, we are active in the whole world, so I am not really worried about-, about that, you know, China will conquer us, or something like that. We just need to be smart. We need to be innovative, come up with new ideas, think about, and I'm sure you're going to ask me the next question about, think about what we are trying to do with Siemens also on mobility.

KT: I was about to say, shall we tackle some of that.

JK: See, the whole-, the whole world now thinks about, what tariffs can we impose? How can we make, you know, the companies a miserable life, who have been, you know, in a very excellent way, been optimising the value chain, back and forth, you know, global value chain-,

KT: Mm.

JK: You know, for the greater good of the customers, because the products are cheaper, and-, and more innovative. Now we come up, Siemens and Alstom comes up, and says, 'We are going to form a-, a global champion, we are going to help our customers to get the best and the greatest, and give them options to market leading industries,' and they are saying, 'Oh well, we don't know, we need to go see-, China is not here yet,' and we drag it.

KT: But they are here, aren't they? Raking back over what the figures would mean, if you team up on this rail business, with Alstom, 15.3 billion euros in turnover is what your company, combined company, would have, 9% of the market, versus China, 30 billion dollars in revenue, 12% of the market. You need scale to compete, don't you?

JK: Well, first of all, you need competitiveness and innovation. It's not the biggest who are going to win, it's the smartest who are going to out-, outpace the-, the others. So, we provide industrial solutions, we provide long-term solutions, which are based on competitiveness, and not on regulations, and I think it's important that-, that the European Union understands which way it wants to go-,

KT: Is this discussion-,

JK: Just leave it-, just leave-, yeah, it is. It is. The Siemens-Alstom matter will be a historical proof point-,

KT: Mm.

JK: Whether or not the European Union has understood on how to look in to, let's say, global socioeconomic factors, and not on a rule-based system-,

KT: Mm.

JK: Which goes in to 28 countries, and look at 28 single markets. And so we'll see how it goes, I'm very curious on how it turns out, and still, sort of, optimistic, because we have smart people, the Commissioner is very well aware that this is important-,

KT: That's right. But what about the messages? Because what you've got is a message from Angela Merkel, and a message from Emmanuel Macron, about trying to get this deal done, to create a rail champion, yet the regulator, Vestager does not seem to be listening, is concerned about other issues. So do you think that pressure from the top, well and truly above the pay grade that we're talking about at your company, could get this deal done?

JK: Well, we-, look, I mean, we-, I mean, the Commissioner is right, when she says we must not confuse industrial policies with anti-trust policies, so it's got to be for the greater good of the customers. Customers need to continue to have options. However, in trying to assess what's good for the customer, in the long-term, it takes a long-term view, and it's got to have a global view, and not look backwards, and say, you know, 'Ten years-, ten years back, we had-, you know, everybody had a national champion.' Those days are over. And if you want to embrace Industry 4.0, then-, the Fourth Industrial Revolution, you need to look forward, we need to create the world, and not basically hold it back from developing.

KT: We were talking, off-camera, I'll share with the audience, about some of the big meetings everyone's having this week, and you have a big meeting with the Brazilian President. We just heard from Jair Bolsonaro about his vision or his country, how he intends to fight corruption, money laundering, making it a good country for business to operate in. What did you make of some of his messages, and do you think one man, if he's the right man for the job, can turn the country around?

JK: Well, it is about leadership, and he is an elected President, from his people, so, you know, one leader and a good team can make a huge difference. But one leader and a good team. One leader, alone, sometimes goes to the wrong direction, especially if they don't listen. But I'm-, I'm-, honestly, I'm optimistic. If he really is up to, you know, developing his country, in terms of infrastructure, reliable, affordable, sustainable energy, transporting people and goods in a-, in a-, in an effective way, people will come and invest. I mean, there's 240, or 230 million people there, the middle class has been growing, now it's decelerating again, so I think there is a lot of opportunities, so if he is a strong leader, with a very clear view on what is good for his country and his people, and provides a level playing field, for international companies to help him get this done, and create jobs in the region, in the country, I think that could actually be the revival of the-, of let's say the BRC.

KT: Before I let you go, let's just tackle the perception that you have around Brazil. Have you been – I know you've been operating in the country – but have you been a slightly more reluctant investor, given what's played out on the corruption side, change of government, protest on the ground, deep recession. Has that held you back, on some of the Brazilian investments, which could set you up for a-,

JK: No, we've been-,

KT: A better investment moment?

JK: We've been-, Siemens has been in Brazil for 130 years, so-,

KT: Just a while.

JK: Just-, just quite some time. And then you look-, I mean, the commitment you make is not a commitment to a

single person-,

KT: Mm.

JK: Or a single regime, it's a commitment to people. And that's why we stayed, in the good times, and in the-, and in the not so good times-times-,

KT: Right.

JK: And the last few years have been not so good-,

KT: Right.

JK: Because there was lack of leadership, giving direction, infrastructure, and if you don't have that, you can't invest.

KT: I think we've got a problem with your microphone, so we might leave it there, but thank you so much for joining us-,

JK: Thank you.

KT: Joe Kaeser, CEO of Siemens, joining us for our programme here in Davos.