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ECONOMY

Daimler denies interest in Volvo

According to the latest edition of the weekly Der Spiegel, German car giant Daimler recently decided not to buy Swedish-based Volvo Cars from ailing US manufacturers Ford, but Daimler has now denied it was ever interested.

Daimler denies interest in Volvo
Photo: DPA

The report says that Daimler boss Dieter Spiegel spent the last few weeks examining the possibility of a purchase and concluded that there were too many potential drawbacks. But in a statement made on Sunday afternoon in Stuttgart, a Daimler spokesman refuted the report, claiming that it had never had any interest in buying the struggling Swedish company.

The report claimed that Daimler predicted problems with harmonising Volvo parts and practices with its own prestige Mercedes cars, an operation requiring substantial investment and little return. Ford bought Volvo Cars in 1999 from the Volvo group for a hefty $6.45 billion.

According to Der Spiegel, Daimler rival BMW also turned down the chance to take over Volvo, leaving Ford with little hope of finding a buyer, though China’s Changan has now been mentioned as a possibility.

In a statement made at the beginning of December, Ford Motor Company said that it was reviewing strategic options for Volvo Car Corporation “in response to the significant decline in the global auto industry, particularly in the past three months, and the severe economic instability worldwide.”

Ford said the review would probably take several months to complete, adding that it would continue to work closely with Volvo Cars, which is restructuring “to operate on a more stand-alone basis” under chief executive Stephen Odell.

Volvo Cars sales peaked in 2000 at 422,100 units, and Odell claimed last month, “We have a strong brand presence in Europe, North America and the Asia Pacific region, and are growing in key markets such as China and Russia, where we are the leading premium brand.”

But car sales have slumped in the United States and Europe amid the global financial crisis that erupted in August 2007, and Volvo Cars has announced thousands of job cuts worldwide since June, most of them in Sweden.

Volvo Group chairman Finn Johnsson recently told Swedish financial daily Dagens Industri that his company was not interested in buying back Volvo Cars, and the Swedish state has also ruled out acquiring it.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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