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German group is scaling down manufacturing as it struggles with falling demand and shift to electric vehicles

Volkswagen is open to allowing Chinese carmakers to take over its excess production lines in Europe, as it grapples with falling demand and rising competition from the very same companies eyeing its factories.

Executives at Audi and VW’s eponymous flagship brand told the Financial Times that partnering with Chinese makers of EVs, which are looking to expand their footprint in Europe, was one option to address declining sales in the region.

“For sure, that is thinkable,” said Gernot Döllner, chief executive of Audi. Such a move would “lower the entrance barrier of these competitors”, adding: “I believe in free trade.” 

Audi has partnered with MG-maker SAIC to build EVs in China that appeal to local consumers — a type of collaboration that Döllner said Chinese brands might also seek to recreate in Europe.

In a separate interview, David Powels, chief financial officer at the VW brand, would also not rule out the idea of Chinese carmakers taking over idle production lines at the company’s German plants. 

“We’re open for any discussion on any topic with any partner,” he said. “In a dynamic world, you have to keep all options open.”

The comments come as Europe’s legacy carmakers race to shift to EVs, a segment where Chinese brands such as BYD are producing what are considered more technologically advanced vehicles, helped both by subsidies from Beijing and a lower cost base.

For decades, China was VW’s most profitable market but in the past five years, the market share of its flagship brand has nearly halved due to its weak position in the rapidly growing battery-run vehicle market.

Europe’s largest carmaker has also been hit hard by the shrinking automotive market in its home region, where 2mn fewer cars were sold last year compared with five years earlier.

Last month, VW reached an agreement with workers at its flagship brand to scale back production capacity across Germany, avoiding a more drastic plan that would have involved closing at least three plants in the country.

The closure of production lines means that the VW brand — which accounts for roughly half of the group’s sales by volume — was set to reduce its annual capacity by roughly 730,000 cars from about 1.5mn by 2030, the carmaker said.

Excess capacity started to rise during the pandemic when VW began cancelling night shifts due to lower demand, with the brand producing about 900,000 cars in Germany in 2024.

VW’s plants will have to reach new undisclosed productivity targets to fight for remaining capacity, and those unable to meet them will be considered for “alternative use” — which could include being put up for sale.

Some Chinese carmakers see using excess production capacity in Europe as a way to enhance their presence in the bloc.

Stellantis, for example, has taken a 20 per cent stake in Chinese start-up Leapmotor, giving it exclusive rights to build and sell Leapmotor cars outside China through a joint venture. If Leapmotor sales grow in Europe, Stellantis could utilise more spare capacity at its own factories and avoid politically controversial closures.

Döllner said that Audi was also opposed to the EU’s higher tariffs on Chinese-imported EVs, saying the protectionist measures would ultimately hurt its position.

China remains a crucial market for many non-Chinese carmakers, while several companies including Audi, manufacture vehicles in the country and then import them back into Europe.

“Tariffs will only block [competition] for some time and give you a wrong [sense of] security. We have to keep pace,” Döllner added.

The country is focused on exports, but China is slowing imports and U.S. tariff threats are growing. Politicians are offering few alternatives.

INGOLSTADT, Germany—Christian Scharpf, the mayor of this city of 140,000, Germany’s second richest, is looking for ways to save close to €100 million.

Carmaker Audi, headquartered here near the Danube river, used to pump over €100 million a year in municipal tax into Ingolstadt’s coffers through its parent, Volkswagen, but those flows dried up over a year ago. Audi in November reported a 91% decline in operating profit for the three months through September and has been cutting thousands of jobs in Germany.

Audi’s business in China, where Germany’s flagship car industry used to make a big chunk of its sales and an even bigger chunk of profits, shrank by a quarter in the nine months through September from a year earlier. Chinese carmakers, once mocked by Western auto executives as primitive, have turned into formidable rivals, gobbling up market share in and outside China.

Slowing economic growth in China and growing competition from companies there have undercut German industry as a whole. Combined with exploding energy costs and the threat of new trade tariffs, the forecast is grim.

German carmakers and their suppliers have announced tens of thousands of job cuts. Germany’s manufacturing industry, the world’s third largest, has shrunk steadily for seven years. And Germany’s economy as a whole has contracted for the past two years, marking only the second back-to-back annual contraction in records dating back to 1951, according to Germany’s federal statistics agency.

Gross domestic product has roughly flatlined since 2019, before the start of the Covid-19 pandemic—the longest period of stagnation since the end of World War II. Most economists expect it will stagnate again this year.

America, recently a relief valve, likely won’t come to the rescue: President Trump is threatening to disrupt global trade with a slew of tariffs that would raise barriers in the U.S., Germany’s biggest export market.

For Germans, who will elect a new parliament next month, this is a scarier version of the mid-2000s, when the unemployment rate reached 12%, double today’s rate.

At that time Berlin enacted unpopular overhauls of its labor market and welfare system that encouraged more people to find work, while holding down business costs and boosting exporters’ international competitiveness, paving the way for two decades of solid growth.

Economists say the current crisis is worse, because it questions the very foundation of Germany’s export-reliant economic model. In the earlier downturn, China’s economy was growing at around 10% or more a year, absorbing goods and powering global trade and the global economy. Today, China’s economy is growing at half that rate, and global trade volumes have stalled, according to the World Trade Organization.

Without fast-growing export markets, Germany’s model “is dead,” said Jacob Kirkegaard, a Brussels-based senior fellow at the Peterson Institute for International Economics in Washington, D.C.

Yet few politicians are focusing on the major changes economists say are required. Germans “don’t want to look at the problem in the face. They still think it’s a blip, and it can be addressed the way they usually do things,” incrementally, said Ludovic Subran, chief economist at Allianz, the German insurance group. “I don’t think this will suffice.”

The country, with 83 million inhabitants, grew into the world’s third largest economy by making and exporting the engineering products—cars, robots, trains, factory machinery—others wanted to buy. Now, the world is turning its back on made-in-Germany, and Germany has no plan B.

‘Spoiled over many years’

Until recently, the fallout from this slow-motion economic crash has been confined to newspaper editorials and economic data releases, with little tangible impact on voters’ lives.

This year, the crisis has turned political. Most polls show the economy has upstaged immigration, security and climate change as voters’ top concern. The outgoing government of Chancellor Olaf Scholz is the most unpopular since 1949.

Most politicians are focusing on how to tweak and improve the current export-reliant, manufacturing-heavy economic model. New ideas to encourage investment and consumption, boost trade inside Europe or open up to fast-growing tech or services sectors are virtually absent.

Scholz, whose coalition collapsed in November because of internal tensions over economic policy, has pushed for the European Union to sign new trade deals. The center-right Friedrich Merz, now front-runner to replace Scholz, wants lower taxes and fewer regulations for manufacturers.

“I see no serious initiative to try and develop a new economic model,” said Jens Südekum, an economist and professor at Heinrich-Heine-Universität Düsseldorf. “In the short term, it’s all about how to tactically deal with the situation along the lines of: ‘If Trump imposes tariffs, then we’ll go and manufacture there.’”

Germany’s industrial output has fallen by 15% since 2018, and the total number of people employed in the manufacturing sector is down 3%. Manufacturers in Germany’s metal and electrical industry, weighed down by costs, could lay off as many as 300,000 workers over the next five years, said Stefan Wolf, president of a lobby group for the sector. “Deindustrialization is in full swing,” said Wolf, adding that over €300 billion in investment capital has flowed out of Germany since 2021.

Trade in goods is more critical to Germany’s economy than oil is to Texas or tech to California—an overdependence that is the result of decades of government policy that supported export manufacturing while creating hurdles to investment in new sectors such as IT or in the country’s infrastructure. Exports support roughly one in four German jobs. More than two-thirds of cars produced in Germany are exported. Since the mid-1990s, exports’ share of Germany’s GDP doubled, reaching 43% of GDP, four times the share in the U.S. and twice as high as China.

Now that the heart of the German economy—its sprawling automotive sector—is struggling, the pain is spreading. In Schweinfurt, a former American garrison town north of Ingolstadt, workers at auto supplier Schaeffler went on strike late last year to protest plans to cut up to 700 jobs. ZF Friedrichshafen, another supplier, agreed in November to reduce local employees’ working hours by 7% to save jobs, as it starts to cut 14,000 jobs across the country. The IG Metall trade union has warned of thousands of possible job cuts in the central German industrial region.

To try to cover the shortfall in Ingolstadt, Scharpf, the mayor, has jacked up fees for museums, parking spaces and buses, and ordered that public lawns be mowed less frequently. He is considering raising property taxes and cutting spending further.

“You can’t simply replace a company with 40,000 employees,” Scharpf said.

Audi declined to comment.

The company is everywhere in the city: It sponsors the local ice hockey team, football arena and plenty of cultural events.

At the boutique Block Hotel, a couple of miles from Audi’s headquarters, owner Carolin Block said revenues have declined by about 10% since 2019 as conventions dried up and business guests stayed away. Room rates are down about 15%, and the length of stays has shortened.

“We were spoiled over many years. We didn’t have to do much to attract tourists because business guests had to come to Ingolstadt because of Audi,” said Block.

Jürgen Seissler, a master carpenter with 16 employees, said order books are shrinking and inexperienced carpenters are finding it harder to find work. Many of his clients are engineers at Audi or its suppliers. Businesses are becoming more cautious about hiring new employees and investing, he said. Seissler himself is rethinking plans to renovate his own house.

In the medieval city center, restaurateurs complain of being squeezed after Audi canceled Christmas dinners. Local businesses, including Block, stepped in to finance a free ice rink overlooking the New Castle after Audi pulled out. City authorities are considering whether to cancel next summer’s Bürgerfest, a two-day street festival in the old town with music, food and drink, that costs about €350,000.

Audi boom

No other city in Bavaria grew as quickly as Ingolstadt in past decades, fed by the auto industry. Its population has increased by about 50% since the mid-1980s. It built a regional court, a police headquarters, a conference center and a large university.

Today, nearly half of the jobs in Ingolstadt are in the auto industry. Many of the rest provide services to those auto workers. Fewer than 2% of Ingolstadt’s employees work in IT.

“Ten years ago, it was said that Ingolstadt had to reduce its dependence on Audi,” said Stefan König, a former newspaper editor who is running for mayor in local elections next month. Little has happened since then, König said.

Block’s family fortunes mirrored those of Audi. Her grandparents fled Soviet occupation in the Sudetenland after World War II with few possessions. They settled in Ingolstadt and soon started to cater to local auto workers, who had arrived from Saxony after Soviet authorities expropriated the Auto Union factory there.

In the early 1960s, Block’s grandfather built a hotel 2 miles from the Audi factory, close to the autobahn. The Audi boom took off in earnest in the 1980s with the introduction of the Quattro, a popular sports coupe. The company adopted the slogan Vorsprung durch Technik—Leadership Through Technology.

With Ingolstadt’s fortunes soaring, Block decided eight years ago to build a new hotel, its spiral structure inspired by Manhattan’s Guggenheim museum. She increased the number of rooms from 38 to 50. She now blames city authorities for focusing too much on auto exports at the expense of other business sectors. “There are signs of a Detroit effect. We fixated only on this one area,” she said.

In the early 2000s, amid the economic upheaval after the unification of East and West Germany and the end of the Cold War, politicians revitalized the export model by cutting taxes and loosening wage policies, amid other reforms, which made German companies more competitive on manufacturing costs. The country became the largest exporter of goods in the world from 2003 to 2008, ahead of the U.S. and China.

Since then, successive crises have thrown sand into the gears of Germany’s export machine. A political backlash against globalization brought a protectionist President Trump into power in 2016 for his first term. The pandemic disrupted supply chains. Russia’s war on Ukraine, China’s saber-rattling in the South China Sea and Hamas’s attack on Israel all weighed on international trade.

Inside China, a critical German export market, growth has slowed. And Chinese companies gorged with state subsidies have been producing more than China can absorb, stoking exports that in turn pressure German firms, including carmakers.

Energy costs are another problem. The end of natural gas deliveries from Russia because of the Ukraine war, the shuttering of Germany’s last nuclear plants and a costly transition to renewable energy have made costs in Germany spike to 10 times the costs in Texas, said Peter Huntsman, chairman and CEO of Huntsman Corp., a Texas-based chemicals manufacturer with $6 billion in revenue that supplies auto manufacturers in Germany, including Audi.

In Ingolstadt, energy-hungry manufacturers are suffering badly. MT Technologies, a local auto supplier founded in 1869, filed for insolvency in November.

Franz Schabmüller, CEO of Framos Holding, another auto supplier with around 1,200 employees, said he had become used to annual revenue growth of 10%-15% in the 2010s. Recently, growth has flattened, and it could stall this year as the automakers he supplies, including Audi, Volkswagen and Daimler, sell fewer cars.

The second Trump administration, he said, was adding to uncertainties by threatening German auto manufacturers with tariffs. “The visibility is lower than ever,” Schabmüller said.

Lagging investment

Executives say Germany is missing out on the investments that could lay the foundations for new industries. Over a third of industrial companies in Germany are cutting investments in core processes due to high energy costs, according to Allianz. Two-thirds report that their competitiveness is at risk.

The country lags behind in sectors such as software and AI. Investment in research and development stood at 3.1% of GDP in 2022, compared with 3.6% in the U.S. and 5.2% in South Korea, according to Allianz.

Decades of government underinvestment have left Germany with a depleted transportation infrastructure, including trains that no longer run on time and a military that is a shadow of what it was during the Cold War. In May, the business-affiliated IW economic institute and the trade union-owned IMK think tank estimated Germany would need €600 billion in spending over the next 10 years to offset its investment gap, modernize the country’s education system, fix its transport networks, upgrade its power grid and digitize its public administration.

Germany also needs tens of billions of euros every year just to maintain defense spending at 2% of GDP or more—one of its obligations as a member of NATO. Trump has demanded that the country raise defense spending to 5% of GDP.

German consumers, meanwhile, are among the most highly taxed in the world. Last year, a German employee with no children was paying 47.9% of gross pay in taxes and social security contributions on average. Germans are also saving 20% of their income as of the second quarter of 2024, more than the eurozone average and a near two-percentage-point rise since just before the pandemic.

“This is a problem because every one-point increase in the saving rate takes €25 billion in demand out of the economy,” said Rolf Bürkl, head of consumer climate at the Nuremberg Institute for Market Decisions, which compiles Germany’s main consumer confidence index. A big chunk of these savings is languishing in bank accounts and, given the right incentives, could be tapped to fund productive investments.

Another hurdle, constitutional restrictions on government spending and public debt would have to be overcome in parliament.

The current electoral campaign has mostly ignored these ideas. Unpopular measures, such as welfare-state cuts that might be needed to free up funds needed for urgent investments, also are hardly being discussed.

Instead, most politicians are defending the status quo. “I think the top priority for Germany and for Europe is to try and keep trade channels open as much as possible,” said Yannick Bury, an economist and a lawmaker for Merz’s center-right CDU party. “We will lose market share in China but the market is still growing so I wouldn’t write it off,” he said, adding that strong growth in the U.S. might offset Trump’s tariffs.

Even the upstart antiestablishment parties that have thrived on challenging old consensus positions are sticking to traditional economic policies.

“If you ask about plan B, my opinion is that we should go back to plan A,” said Leif-Erik Holm, a lawmaker and economy expert for the right-wing AfD, which is expected to emerge as the second-biggest party in the next German parliament.

“Our business model worked very well, when we had lower energy costs,” Holm said. The next government should focus on lowering these and cut environmental regulations for business, he said.

In Ingolstadt, Scharpf, the mayor, opened a 150-acre technology park south of town on the site of a former refinery in late 2023, hoping to seed a Bavarian Silicon Valley. The park’s only significant tenants so far: Audi and Cariad, Volkswagen’s struggling software arm.

The city council said in December it would no longer try to promote startups at a business center it owns but instead concentrate on renting out the space. It blamed the city’s strained finances for the decision.

City officials are in talks with a Chinese engineering company to build its German headquarters in Ingolstadt, and are seeking to attract more Chinese businesses, said Scharpf. In Schweinfurt, the city to the north, local officials are working to lure XPeng, a Chinese EV manufacturer, to build a factory on the site of a former U.S. Army barracks.

“I don’t think it’s possible to replace the auto industry…It will remain the biggest economic sector here,” said Christian Lösel, a former Ingolstadt mayor.

QXO expected to take offer directly to shareholders after being rebuffed

Building-products distributor QXO QXO -1.79%decrease; red down pointing triangle is preparing to take its all-cash offer to acquire Beacon Roofing Supply BECN 1.62%increase; green up pointing triangle directly to shareholders after being rebuffed on several occasions, according to people familiar with the matter.

The details

QXO is planning to launch a hostile bid for Beacon as soon as Monday, the people said.

It will offer to buy all shares outstanding of Beacon for $124.25 per share, the same price it previously proposed, the people said. That would value Beacon at $7.7 billion, or roughly $11 billion including debt.

Beacon shares closed Friday at $118.42, giving the business a market value of around $7.3 billion. The shares have run up since mid-November, when The Wall Street Journal reported on the bid QXO had privately made to Beacon.

QXO hopes to clinch a deal quickly after its tender offer expires on Feb. 24, the people added.

The context

Herndon, Va.-based Beacon is the largest publicly traded distributor of roofing materials and complementary building products in the U.S. and Canada.

Earlier this month, QXO published a letter detailing its cash offer, which it said Beacon had refused to engage on. The offer was initially submitted on Nov. 11, it said.

QXO argued that its offer was compelling for shareholders and that it shouldn’t face any significant antitrust or other regulatory issues.

Beacon said in response that QXO’s proposal “significantly undervalues Beacon and fails to reflect the company’s growth strategy and upside potential.” It said it offered QXO the option to sign an NDA to share confidential management projections, but that QXO wasn’t interested.

QXO has said it secured financing for a deal and is prepared to nominate directors to Beacon’s board. The window for shareholder nominations at Beacon ends on Feb. 14, according to the company’s proxy materials.

The rationale

QXO, based in Greenwich, Conn., has a market value of around $5.6 billion. It is headed by Brad Jacobs, who has built multibillion-dollar companies in logistics and other sectors through acquisitions.

Jacobs and others agreed in late 2023 to invest roughly $1 billion into a small, publicly traded software company—SilverSun Technologies—and renamed it QXO. The company has yet to strike its first big deal.

Dealmaking in the building-materials space has been heating up. Home Depot last March struck a more than $18 billion deal, including debt, for SRS Distribution, a Beacon competitor.

Shippers Wary of Red Sea Routes Despite Houthi Pledge to End Targeting

World’s top three container operators say they fear instability in Gaza and broader regional tensions mean continued danger

Big shipping companies say they won’t send vessels back to the Red Sea despite a pledge by Iran-backed Houthi militants in Yemen not to attack them as long as a cease-fire in Gaza holds.

The world’s top three container shippers, MSC Mediterranean Shipping, A.P. Moller-Maersk and CMA CGM, in recent days said they would stick with other routes given what they called the unpredictable situation in Gaza and broader tensions in the Middle East.

“You don’t want to send a gas carrier that will go up in flames,” said Nils Haupt, spokesman for Germany’s biggest shipper, Hapag-Lloyd. “We don’t know when we will be returning.”

For more than a year, the Houthis have used missiles and drones to target commercial ships and naval vessels sent to protect them in the Red Sea, once one of the world’s busiest trade routes. Shippers have taken to sending vessels around the Cape of Good Hope at the southern tip of Africa instead.

The Houthis have attacked more than 100 vessels in the Red Sea since Hamas’s Oct. 7 attack on Israel sparked the war in Gaza.

In an email to shippers, the Houthis said they wouldn’t attack U.S. and British vessels while a cease-fire was in effect. The group also this month released 25 crew members of the cargo vessel Galaxy Leader, which they had seized in November 2023.

The rebels, however, said they would still target Israeli vessels. The Houthis in the past have attacked ships that they have claimed to be Israeli but which have had limited or no ties to Israel. Houthi leader Abdul Malik al-Houthi said the group could resume its attacks if the cease-fire agreement fails.

Global shippers’ hesitance reflects the danger posed by the Houthis despite efforts by the U.S., Israel and others to halt the group’s attacks.

The Houthis have indicated they will resume attacks if Israel continues military operations in the West Bank, where it says it is fighting militants. The Trump administration has redesignated the Houthis a terrorist organization.

Before the Hamas-Israel conflict, ships traveling through the Red Sea carried about 40% of the goods traded between Asia and Europe. The ships now diverting around South Africa add as much as two weeks of sailing time and higher freight rates that are passed on to the cargo owners.

There are more than 14 million containers normally moved annually through the route packed with everything from cars and food to home goods and electronics, valued at a total of more than a trillion dollars.

Some shipping experts estimate that rerouting and increased insurance charges could have cost more than $40 billion in the first year of the attacks.

Some operators signaled that they would resume Red Sea crossings once the second phase of the Gaza cease-fire is completed, said a maritime security executive.

That phase—which could still be weeks away—envisions a negotiation about a permanent end to the war and the release of any remaining hostages held by Hamas.

Shipping executives say they are now planning for a gradual return to the area in the second quarter. But they fear the return could end up in a stampede.

Rerouting “is complicated as we will have significant congestion issues at some European ports with ships coming in from both the Suez and from South Africa,” said an executive from a major European carrier.

DP World, an Emirati company that manages terminals in the Red Sea, says some previously diverted trips could resume in two weeks if the cease-fire holds.

That “would mean freight prices crashing down, 20, 25%,” said its deputy chief executive, Yuvraj Narayan. “And if there are no incidents, it is just a matter of time.”

President Trump has said he intends to restore extensive sanctions against Iran, the Houthis’ top sponsor. His decision, during his first presidency, to impose a full oil embargo on Tehran over its nuclear program triggered a string of attacks on oil tankers and facilities in the Persian Gulf region.

On Friday, the U.K. Maritime Trade Operations, a British naval body that liaises with merchant ships in the Middle East, said it had received reports of attempts by Iran’s military to order ships in the Persian Gulf to enter Iranian waters.

There is little sign of crimped demand for equities among individual investors, who remain bullish after two years of blockbuster gains

Stocks haven’t looked this unattractive, by at least one measure, since the aftermath of the dot-com era. Plenty of investors are piling in anyway.

The equity risk premium, often defined as the gap between the S&P 500’s earnings yield and that of 10-year Treasurys, turned negative in late December for the first time since 2002 and sat last week at negative 0.15 percentage point.

The metric is based on a calculation of how much stocks yield, which is derived by dividing the stock market’s expected earnings by its price. The earnings yield is then compared with the yield on government debt.

The difference between stock and bond earnings yields shows how much investors are compensated for the additional risk of owning stocks over relatively risk-free government bonds. Over the long term, stocks need to promise a higher reward than bonds. If not, the safety of Treasurys would outweigh the risks of stocks losing some, if not all, of investors’ money.

In recent weeks, a combination of higher Treasury yields and soaring equity valuations pushed the equity risk premium into the red. That could pose a threat to the recently rekindled stock rally.

In reality, though, there has been little sign of crimped demand for equities among individual investors, who remain bullish after two years of blockbuster gains.

“I think you get what you pay for,” said Mike Ugino, a 73-year-old retired surgeon in Columbia, S.C. High valuations haven’t deterred him from scooping up more shares of Robinhood Markets, Nvidia and Intuitive Surgical in recent weeks.

Despite his age, Ugino keeps more than 80% of his portfolio in equities and said he believes tech stocks including Tesla and Meta Platforms can keep powering double-digit-percentage gains in major stock-market indexes in 2025.

“I don’t think you can sit back and have a 60-40 portfolio. I think that’s the stone age,” he said, referring to the traditional mix of stocks and bonds that was for years considered a safe and steady way to expand one’s nest egg.

“You want to make sure you’re invested with these companies that are proven winners,” he added. “You don’t want to bet against these guys. You don’t want to bet against Elon Musk.”

In the coming days, investors are awaiting the Federal Reserve’s next interest-rate decision and a spate of corporate earnings from the likes of Tesla, Microsoft and Starbucks as they weigh whether or not stocks look pricey.

Ugino is far from alone in his optimism. Investors poured $62.5 billion into U.S. equity mutual and exchange-traded funds in December, according to Morningstar Direct data, the highest monthly inflow on record.

The postelection stock rally found its second wind earlier this month after a round of reassuring inflation data brightened investors’ economic outlook. The S&P 500 set its first record of 2025 on Thursday and is up 3.7% this month.

Optimism among investors swelled. The percentage who are bullish and expect stock prices to rise over the next six months jumped to a seven-week high of 43.4% for the period ended Wednesday, up from 25.4% a week before, according to survey data from the American Association of Individual Investors.

Some factors that helped fuel last year’s blockbuster gains—such as the promise of artificial intelligence—are driving confidence.

Despite being a former bond trader, Robin Davis Wilson keeps the entirety of her $1.7 million portfolio in the stock market. Big tech stocks including Apple, Amazon.com, Microsoft and Nvidia comprise about 60% of her investments.

“That’s almost an anomaly, for someone my age to be that aggressive,” the 61-year-old small-business owner said. “I’m a big believer in these big stocks.”

Wilson has firsthand experience with how a bet on big tech can pay off. She purchased $100,000 of Nvidia shares in 2021, before the stock soared. That investment, which she still holds, is now valued at seven times that amount.

She is monitoring potential risks to equity prices, such as the threat of another interest- rate increase or the impact of President Trump’s economic policies. But those headlines are unlikely to shift her strategy.

“There’s going to be some volatility, but it’s not going to change my course of action,” she said.

U.S. investors’ affinity for equities has been shaped by a series of challenging years for the bond market. In 2022, the classic 60-40 strategy fell apart when both stocks and bonds sank in tandem, shrinking many households’ savings. For the first time in decades, fixed income didn’t act as a hedge against a stock-market downturn.

Now, bond investors are worrying that a tough market could get worse if the Trump administration raises the federal deficit or enacts inflationary policies such as tariffs.

“The majority of advisers that we’re working with, they’re buying bonds for protection,” said Tim Urbanowicz, chief investment strategist at Innovator Capital Management. “I think 2022 really woke a lot of people up to the fact that it doesn’t always work that way.”

The yield on 10-year Treasurys peaked above 4.8% two weeks ago and settled Friday at 4.624%.

Persistently high yields could pressure the equity risk premium and threaten stocks’ rise. Market watchers are monitoring those odds. In a recent Bank of America Global Research survey of fund managers, 36% said they see a disorderly rise in bond yields as the most bearish potential development this year. That number ticked higher from December.

The former Gucci president and CEO is said to be busy raising funds to invest in the Milan-based fashion brand.

Some new names have surfaced in the race to buy Versace — including former Gucci chief Marco Bizzarri, who is looking for a major coup in his new career as an investor, according to sources.

But he has plenty of competition in the process, which has Barclays drumming up buyers for both Versace and Jimmy Choo on behalf of Capri Holdings. The auction is said to have started off with about 15 would-be buyers and it’s now down to half of that, with next round bids expected to be finalized in early February.

Prada Group’s interest has been buzzed about for some time, but among the other players are said to be Bahraini firm Investcorp, private equity company Permira and others. Ferrari-owner Exor was also said to have taken a look, but has apparently decided to pass.

As is typical in the secretive world of high-stakes dealmaking, the parties either did not respond to a WWD query on Sunday or declined to comment on the record.

Each investor is coming to the process with their own strategy and not everyone is bidding on all the assets.

But the focus is on Versace, which is still seen as a top-tier brand with tremendous global appeal even though it’s struggled under Capri.

“Versace is the commodity that people see value in,” said one source familiar with the process.

“The pure financial sponsors are looking at [the assets] and saying, ‘OK, there’s opportunity,’ everyone sees the value in the brand, if you can get it at the right price and the right leverage,” the source said.

The fashion-centric players — including Prada and Bizzarri — could have an advantage with well-developed networks to build the brand. Strategic buyers, like Prada, can also afford to pay more by saving money later with back-office consolidations.

Miuccia Prada and her son, Lorenzo Bertelli, are said to be particularly interested in Versace. While Prada’s involvement was initially viewed skeptically or as simply an opportunity to get a peek at a competitor’s books, the company is said to still be in the running.

“I wouldn’t be surprised if Prada ends up taking both [Versace and Jimmy Choo],” said one source. “They have the means. They have to figure out if they’re going to try to compete with Kering or are they going to focus on Prada and Miu Miu.”

However, many people remain skeptical that Prada will ultimately walk away with the brands.

Sources say the contract of Donatella Versace, chief creative officer of the Italian brand, is up in February. The speculation surrounds whether she — or Capri — will renew it.

Bizzarri and Prada’s interest could support speculation that Dario Vitale, former Miu Miu ready-to-wear design director, might succeed Donatella Versace. A source said Vitale is a thoughtful designer that is not prone to rash decisions and would be mindful of getting involved with the brand while the sale process is underway.

Donatella Versace reached a $2.1 billion deal to sell her family’s company to the-then Michael Kors Holdings in 2018, which subsequently changed its name to Capri. The company is widely seen as considering its options for both Versace and Jimmy Choo — and perhaps even for Michael Kors — since Capri’s $8.5 billion buyout by Tapestry Inc. was dropped following an antitrust challenge from the U.S. government.

Versace’s first-half revenues fell 22.1 percent to $420 million, but Capri chairman and chief executive officer John Idol recently said the brand could bounce back by “engaging and energizing both new and loyal consumers, broadening our product offering, improving store productivity and returning our wholesale business to growth.”

For Bizzarri, who is said to be working to secure funds for the deal, buying Versace would cement his second career in dealmaking.

The former Gucci president and CEO told WWD earlier this year that he was “prioritizing investments in creative entrepreneurs, business leaders and great Italian brands.”

Bizzarri has already dipped his toes into the investment fund pool with the acquisition of a 23 percent stake in Elisabetta Franchi, becoming chairman of the Italian fashion company. This deal was done through his personal holding, Nessifashion, last spring.

And in 2021, he took a stake and became a partner in Orienta Capital Partners, which specializes in investments in small- and medium-sized companies with strong growth potential.

Orienta Capital Partners was cofounded by Mario Gardini in 2011 and he and Bizzarri go way back as they are both from the Emilia Romagna region — as is Franchi — and worked together early in their careers in Bologna at both Arthur Andersen and Mandarina Duck in the 1990s.

His first investment, leading FOREL with Gardini as an advisory company to FARO Alternative Investments, was in design, leading the acquisition of Visionnaire last April.

FOREL entered into an agreement on behalf of the FARO fund to acquire a majority stake in the Italian luxury interior design brand with the goal to accelerate its international expansion.

As reported, FOREL is supporting a sub-fund of the newly launched FARO Alternative Investments. As per its mission statement, the FARO Fashion, Luxury and Design sub-fund targets “global companies with strong brand recognition and high business potential.” FARO Alternative Investments SCSp SICAV-RAIF is a Luxembourg-based umbrella fund managed by Crestbridge Management Company SARL with FARO Value SpA S.B. operating as lead adviser. Its aim is to fundraise 1 billion euros.

Twenty years ago, the hotel magnate stepped down from Starwood, which later sold to Marriott for $13 billion. Now, he wants to give it another go.

Barry Sternlicht made a fortune building Starwood Hotels and Resorts, which birthed successful brands like W Hotels, into a giant of the travel industry.

Now he wants to do it all again — under the Starwood name.

Mr. Sternlicht is resurrecting the Starwood Hotels brand starting in February, nine years after the previous company was sold to Marriott in a $13 billion deal that created the biggest hotel chain in the world. His current hotel company, SH Hotels & Resorts, will take on the Starwood name.

The move is a sign that Mr. Sternlicht, 64, wants to reassert himself as a force in hospitality 20 years after stepping down from Starwood. Since then, he has focused largely on Starwood Capital, the $115 billion private equity firm where he created Starwood Hotels.

Hotels have remained part of part of Starwood Capital’s business, with Mr. Sternlicht buying and selling them just as he has apartment buildings and other properties. But since 2015, he said, he has wanted to have another crack at making a mark on the hotel-management industry under the Starwood name.

“I’m kind of like a singer having one song,” he said in an interview. “I want to have two songs.”

Reviving the Starwood name may seem like a small change in the grand scheme of things; indeed, Marriott had retired it years ago. But beyond his attachment to the name, Mr. Sternlicht believed getting it back would raise the company’s profile and help with recruiting. He took back the brand last year.

It’s the latest step in Mr. Sternlicht’s campaign to build a new hotel empire. By the time Marriott acquired the Starwood of old, that company oversaw more than 1,300 properties in 100 countries, with brands including Westin, W, Sheraton and St. Regis. The newly reborn Starwood has three brands so far, with 14 hotels in five countries.

It will likely be benchmarked against what Mr. Sternlicht achieved the first time around.

A real estate investor by background, Mr. Sternlicht hadn’t worked in the hotel business specifically before 1994, when his Starwood Capital bought Westin from a Japanese corporation, and then began adding other chains. In 1998, Mr. Sternlicht created the W chain, whose glamorous lobbies and bars made it synonymous with sleek chic.

He pored over even tiny details — the number of pillows, how porters handled guest luggage — at existing chains like Westin and Sheraton. “I’m like the style police, so people don’t drift off,” he said.

Company is exploring strategic options and may concentrate on its travel business

Retailer WHSmith is in talks to sell its UK high street shops more than two centuries after it opened its first store in London.

The FTSE 250 company, which has been focusing on its outlets in airports, train stations and hospitals in recent years, confirmed on Saturday that it was “exploring potential strategic options”, including an outright sale of about 500 UK shops, which have around 5,000 staff.

The high street stalwart that is known for its stationery and books is in talks with several potential buyers and a deal could be agreed in the coming months, according to a person familiar with the process.

However, WHSmith cautioned on Saturday “there can be no certainty that any agreement will be reached”.

Interested parties in the company’s high street shops include Alteri, a private equity investor which focuses on retail, and Hilco, a turnaround specialist, according to two people familiar with the process.

Jonathan Pritchard, an analyst at Peel Hunt, said it was a more likely that a private equity firm would be better placed to extract value from WHSmith’s shops, and they were unlikely to be bought by a competitor.

“There will always be mechanisms that private equity funds have that can perhaps squeeze a bit more juice out of the orange,” he added. “If they can get it on a low enough multiple and identify more cost savings, they could probably get their money back quite quickly.”

WHSmith recorded a 7 per cent increase in group revenue to £1.9bn in the year ending August 31, while profit before tax fell to £106mn, from £110mn in the previous 12 months.

Kate Calvert, an analyst at Investec, said WHSmith’s decision to explore a sale of its high street stores was “just another step” in the company’s evolution.

WHSmith’s travel business and the high street arm “have always been kept quite separate from an infrastructure perspective. It [the high street arm] still generates good cash, and that cash has been useful in terms of growing the travel business internationally”, she added.

Over the past decade WHSmith has become an international travel retailer through acquisitions such as a $400mn deal to buy Marshall Retail Group in the US in 2019.

The strategic review, which was first reported by Sky News, marks a watershed moment in the history of the UK high street, which has been struggling with a shift to online shopping and higher costs.

Some established chains such as Debenhams and Topshop have disappeared from the high street.

WHSmith was established in 1792 as a family-run newsagent, and opened its first travel retail store in London’s Euston station in 1848.

WHSmith’s travel business now has more than 1,200 stores across 32 countries, and it accounts for three-quarters of the group’s revenue and 85 per cent of its trading profit. 

Calvert added: “The business is big enough elsewhere to take on the growth, and do you really need the cash flow [from the high street arm]? I think that’s the decision.”

Tony Shiret, an independent analyst, said current WHSmith management could buy out the high street arm and run it as a private company, but a person close to the company said such a move was not on the cards.

Hilco declined to comment. Alteri did not immediately respond to a request for comment.

In Reid Hoffman’s new book Superagency: What Could Possibly Go Right With Our AI Future, the LinkedIn co-founder makes the case that AI can extend human agency — giving us more knowledge, better jobs, and improved lives — rather than reducing it.

That doesn’t mean he’s ignoring the technology’s potential downsides. In fact, Hoffman (who wrote the book with Greg Beato) describes his outlook on AI, and on technology more generally, as one focused on “smart risk taking” rather than blind optimism.

“Everyone, generally speaking, focuses way too much on what could go wrong, and insufficiently on what could go right,” Hoffman told me.

And while he said he supports “intelligent regulation,” he argued that an “iterative deployment” process that gets AI tools into everyone’s hands and then responds to their feedback is even more important for ensuring positive outcomes.

“Part of the reason why cars can go faster today than when they were first made, is because … we figured out a bunch of different innovations around brakes and airbags and bumpers and seat belts,” Hoffman said. “Innovation isn’t just unsafe, it actually leads to safety.”

In our conversation about his book, we also discussed the benefits Hoffman (who’s also a former OpenAI board member, current Microsoft board member, and partner at Greylock) is already seeing from AI, the technology’s potential climate impact, and the difference between an AI doomer and an AI gloomer.

This interview has been edited for length and clarity.

You’d already written another book about AI, Impromptu. With Superagency, what did you want to say that you hadn’t already?

So Impromptu was mostly trying to show that AI could [provide] relatively easy amplification [of] intelligence, and was showing it as well as telling it across a set of vectors. Superagency is much more about the question around how, actually, our human agency gets greatly improved, not just by superpowers, which is obviously part of it, but by the transformation of our industries, our societies, as multiple of us all get these superpowers from these new technologies.

The general discourse around these things always starts with a heavy pessimism and then transforms into — call it a new elevated state of humanity and society. AI is just the latest disruptive technology in this. Impromptu didn’t really address the concerns as much … of getting to this more human future.

You open by dividing the different outlooks on AI into these categories — gloomers, doomers, zoomers, bloomers. We can dig into each of them, but we’ll start with a bloomer since that’s the one you classify yourself as. What is a bloomer, and why do you consider yourself one?

I think a bloomer is inherently technology optimistic and [believes] that building technologies can be very, very good for us as individuals, as groups, as societies, as humanity, but that [doesn’t mean] anything you can build is great.

So you should navigate with risk taking, but smart risk taking versus blind risk taking, and that you engage in dialogue and interaction to steer. It’s part of the reason why we talk about iterative deployment a lot in the book, because the idea is, part of how you engage in that conversation with many human beings is through iterative deployment. You’re engaging with that in order to steer it to say, “Oh, if it has this shape, it’s much, much better for everybody. And it makes these bad cases more limited, both in how prevalent they are, but also how much impact they can have.”

And when you talk about steering, there’s regulation, which we’ll get to, but you seem to think the most promise lies in this sort of iterative deployment, particularly at scale. Do you think the benefits are just built in — as in, if we put AI into the hands of the most people, it’s inherently small-d democratic? Or do you think the products need to be designed in a way where people can have input?

Well, I think it could depend on the different products. But one of the things [we’re] trying to illustrate in the book is to say that just being able to engage and to speak about the product — including use, don’t use, use in certain ways — that is actually, in fact, interacting and helping shape [it], right? Because the people building them are looking at that feedback. They’re looking at: Did you engage? Did you not engage? They’re listening to people online and the press and everything else, saying, “Hey, this is great.” Or, “Hey, this really sucks.” That is a huge amount of steering and feedback from a lot of people, separate from what you get from my data that might be included in iteration, or that I might be able to vote or somehow express direct, directional feedback.

I guess I’m trying to dig into how these mechanisms work because, as you note in the book, particularly with ChatGPT, it’s become so incredibly popular. So if I say, “Hey, I don’t like this thing about ChatGPT” or “I have this objection to it and I’m not going to use it,” that’s just going to be drowned out by so many people using it.

Part of it is, having hundreds of millions of people participate doesn’t mean that you’re going to answer every single person’s objections. Some people might say, “No car should go faster than 20 miles an hour.” Well, it’s nice that you think that.

It’s that aggregate of [the feedback]. And in the aggregate if, for example, you’re expressing something that’s a challenge or hesitancy or a shift, but then other people start expressing that, too, then it is more likely that it’ll be heard and changed.

And part of it is, OpenAI competes with Anthropic and vice versa. They’re listening pretty carefully to not only what are they hearing now, but … steering towards valuable things that people want and also steering away from challenging things that people don’t want.

We may want to take advantage of these tools as consumers, but they may be potentially harmful in ways that are not necessarily visible to me as a consumer. Is that iterative deployment process something that is going to address other concerns, maybe societal concerns, that aren’t showing up for individual consumers?

Well, part of the reason I wrote a book on Superagency is so people actually [have] the dialogue on societal concerns, too. For example, people say, “Well, I think AI is going to cause people to give up their agency and [give up] making decisions about their lives.” And then people go and play with ChatGPT and say, “Well, I don’t have that experience.” And if very few of us are actually experiencing [that loss of agency], then that’s the quasi-argument against it, right?

You also talk about regulation. It sounds like you’re open to regulation in some contexts, but you’re worried about regulation potentially stifling innovation. Can you say more about what you think beneficial AI regulation might look like?

So, there’s a couple areas, because I actually am positive on intelligent regulation. One area is when you have really specific, very important things that you’re trying to prevent — terrorism, cybercrime, other kinds of things. You’re trying to, essentially, prevent this really bad thing, but allow a wide range of other things, so you can discuss: What are the things that are sufficiently narrowly targeted at those specific outcomes?

Beyond that, there’s a chapter on [how] innovation is safety, too, because as you innovate, you create new safety and alignment features. And it’s important to get there as well, because part of the reason why cars can go faster today than when they were first made, is because we go, “Oh, we figured out a bunch of different innovations around brakes and airbags and bumpers and seat belts.” Innovation isn’t just unsafe, it actually leads to safety.

What I encourage people, especially in a fast moving and iterative regulatory environment, is to articulate what your specific concern is as something you can measure, and start measuring it. Because then, if you start seeing that measurement grow in a strong way or an alarming way, you could say, ”Okay, let’s, let’s explore that and see if there’s things we can do.”

There’s another distinction you make, between the gloomers and the doomers — the doomers being people who are more concerned about the existential risk of super intelligence, gloomers being more concerned about the short-term risks around jobs, copyright, any number of things. The parts of the book that I’ve read seem to be more focused on addressing the criticisms of the gloomers.

I’d say I’m trying to address the book to two groups. One group is anyone who’s between AI skeptical — which includes gloomers — to AI curious.

And then the other group is technologists and innovators saying, “Look, part of what really matters to people is human agency. So, let’s take that as a design lens in terms of what we’re building for the future. And by taking that as a design lens, we can also help build even better agency-enhancing technology.”

What are some current or future examples of how AI could extend human agency as opposed to reducing it?

Part of what the book was trying to do, part of Superagency, is that people tend to reduce this to, “What superpowers do I get?” But they don’t realize that superagency is when a lot of people get super powers, I also benefit from it.

A canonical example is cars. Oh, I can go other places, but, by the way, when other people go other places, a doctor can come to your house when you can’t leave, and do a house call. So you’re getting superagency, collectively, and that’s part of what’s valuable now today.

I think we already have, with today’s AI tools, a bunch of superpowers, which can include abilities to learn. I don’t know if you’ve done this, but I went and said, “Explain quantum mechanics to a five-year-old, to a 12-year-old, to an 18-year-old.” It can be useful at — you point the camera at something and say, “What is that?” Like, identifying a mushroom or identifying a tree.

But then, obviously there’s a whole set of different language tasks. When I’m writing Superagency, I’m not a historian of technology, I’m a technologist and an inventor. But as I research and write these things, I then say, “Okay, what would a historian of technology say about what I’ve written here?”

When you talk about some of these examples in the book, you also say that when we get new technology, sometimes old skills fall away because we don’t need them anymore, and we develop new ones.

And in education, maybe it makes this information accessible to people who might otherwise never get it. On the other hand, you do hear these examples of people who have been trained and acclimated by ChatGPT to just accept an answer from a chatbot, as opposed to digging deeper into different sources or even realizing that ChatGPT could be wrong.

It is definitely one of the fears. And by the way, there were similar fears with Google and search and Wikipedia, it’s not a new dialogue. And just like any of those, the issue is, you have to learn where you can rely upon it, where you should cross check it, what the level of importance cross checking is, and all of those are good skills to pick up. We know where people have just quoted Wikipedia, or have quoted other things they found on the internet, right? And those are inaccurate, and it’s good to learn that.

Now, by the way, as we train these agents to be more and more useful, and have a higher degree of accuracy, you could have an agent who is cross checking and says, “Hey, there’s a bunch of sources that challenge this content. Are you curious about it?” That kind of presentation of information enhances your agency, because it’s giving you a set of information to decide how deep you go into it, how much you research, what level of certainty you [have.] Those are all part of what we get when we do iterative deployment.

In the book, you talk about how people often ask, “What could go wrong?” And you say, “Well, what could go right? This is the question we need to be asking more often.” And it seems to me that both of those are valuable questions. You don’t want to preclude the good outcomes, but you want to guard against the bad outcomes.

Yeah, that’s part of what a bloomer is. You’re very bullish on what could go right, but it’s not that you’re not in dialogue with what could go wrong. The problem is, everyone, generally speaking, focuses way too much on what could go wrong, and insufficiently on what could go right.

Another issue that you’ve talked about in other interviews is climate, and I think you’ve said the climate impacts of AI are misunderstood or overstated. But do you think that widespread adoption of AI poses a risk to the climate?

Well, fundamentally, no, or de minimis, for a couple reasons. First, you know, the AI data centers that are being built are all intensely on green energy, and one of the positive knock-on effects is … that folks like Microsoft and Google and Amazon are investing massively in the green energy sector in order to do that.

Then there’s the question of when AI is applied to these problems. For example, DeepMind found that they could save, I think it was a minimum of 15 percent of electricity in Google data centers, which the engineers didn’t think was possible.

And then the last thing is, people tend to over-describe it, because it’s the current sexy thing. But if you look at our energy usage and growth over the last few years, just a very small percentage is the data centers, and a smaller percentage of that is the AI.

But the concern is partly that the growth on the data center side and the AI side could be pretty significant in the next few years.

It could grow to be significant. But that’s part of the reason I started with the green energy point.

One of the most persuasive cases for the gloomer mindset, and one that you quote in the book, is an essay by Ted Chiang looking at how a lot of companies, when they talk about deploying AI, it seems to be this McKinsey mindset that’s not about unlocking new potential, it’s about how do we cut costs and eliminate jobs. Is that something you’re worried about?

Well, I am — more in transition than an end state. I do think, as I describe in the book, that historically, we’ve navigated these transitions with a lot of pain and difficulty, and I suspect this one will also be with pain and difficulty. Part of the reason why I’m writing Superagency is to try to learn from both the lessons of the past and the tools we have to try to navigate the transition better, but it’s always challenging.

I do think we’ll have real difficulties with a bunch of different job transitions. You know, probably the starting one is customer service jobs. Businesses tend to — part of what makes them very good capital allocators is they tend to go, “How do we drive costs down in a variety of frames?”

But on the other hand, when you think about it, you say, “Well, these AI technologies are making people five times more effective, making the sales people five times more effective. Am I gonna go into hire less sales people? No, I’ll probably hire more.” And if you go to the marketing people, marketing is competitive with other companies, and so forth. What about business operations or legal or finance? Well, all of those things tend to be [where] we pay for as much risk mitigation and management as possible.

Now, I do think things like customer service will go down on head count, but that’s the reason why I think it’s job transformation. One [piece of] good news about AI is it can help you learn the new skills, it can help you do the new skills, can help you find work that your skill set may more naturally fit with. Part of that human agency is making sure we’re building those tools in the transition as well.

And that’s not to say that it won’t be painful and difficult. It’s just to say, “Can we do it with more grace?”