TheChek News Flow

Waiting for GodOAT

Markets are treating France a bit more like Italy, and that is unusual enough to demand an explanation. In August, the yield on the Italian 30-year BTP was, on average, 0.01 percentage points below the equivalent maturity French OAT. Let’s not pretend this elevates Italian BTPs to the status of a safe asset — Italy’s debt burden is still heavier than France’s. But it does suggest investors are reassessing French political risk (a budget due in October; a presidential election next spring).

France’s fiscal position is hardly a new problem. It has had dicey public finances almost every year since the birth of the euro. It has overshot the currency union’s deficit rule more than 20 times, and its debt-to-GDP ratio has been consistently above the limit since 2003. It has paid for this in higher borrowing costs, and repeated EU corrective procedures, but not yet in an actual debt crisis.

French yields today are similar to where they were during the euro sovereign debt crisis in 2009-2012. But so are almost everyone else’s. The bigger problem is the move in spreads — the difference between the yield on two bonds. The 10-year French OAT yield is about 0.87 percentage points above German Bunds, which is about 0.4 percentage points above the average since Mario Draghi’s declaration to do “whatever it takes” to save the euro in 2012. To put it in even more nerdy terms, that’s in the 99.8th percentile of spreads since Draghi’s speech — meaning it’s rarely been wider.

Of course, many have forecast a French debt crisis before. The closest the country has come to a debt reckoning in the 21st century was around 2011, when the spread to Germany hit 1.89 percentage points. France got through that. But that may have had less to do with the country fixing its finances than with being a kind of middle child whose problems were neglected while the parents (read: bond markets) were busy with the younger siblings.

But the big difference between then and now is the implicit backing of the European Central Bank. Draghi’s pledge made clear that monetary union — whatever its economic defects — was a political project European leaders were committed to preserving. The option to conduct outright monetary transactions — bond purchases — made that pledge credible (on top of prior targeted purchases under the securities markets programme). The more recent transmission protection instrument expanded the toolkit further, giving the ECB something closer to a financial stability tool, even if in the guise of monetary policy.

Neither OMT nor TPI has ever been used, and France would be an awkward test case. OMT was designed for countries under debt restructuring conditions. TPI sheds some of that conditionality, but deploying it for political risk in a core Eurozone country would be extremely controversial. If French spreads keep widening, we might see how usable it really is.

This doesn’t mean France is safe. One source of vulnerability is its investor base. As we showed in a recent chart (reminder to sign up here), more than 60 per cent of French debt is held by foreign investors, compared with about a third of Italian debt. Those investors are likely to be more flighty. Larissa de Barros Fritz at ABN Amro estimates that about 35 per cent of OAT holders are price sensitive, meaning pressure on OATs does not require a large sell-off: “A smaller reduction in demand from marginal buyers could already put upward pressure on yields.”

In Samuel Beckett’s play Waiting for Godot, originally written in French, two men wait for a man named Godot who never arrives. France’s debt crisis has acquired a similar quality. Investors have waited for years for France’s fiscal position to collide with market discipline, only for the reckoning to be postponed by low rates and crises elsewhere. The ECB’s backstop makes its arrival much less likely than before, but it doesn’t require a full-blown debt crisis for French finances to become uncomfortable.

‘Plan 2’ graduates earning less than £45,000 are unlikely to clear debts

Government data will add to calls for reform of tuition fee system in England

Graduates on the most contentious student loan plan who earn less than £45,000 six years after leaving university are unlikely to ever clear their debts, according to official data that will add to calls for reform of the tuition-fee system in England.

Borrowers on the “Plan 2” scheme have to be earning £20,000 more than younger graduates either to see their balance fall or to be likely to pay off their student loan plus interest, figures from the Department for Education showed.

Some graduates with the highest outstanding loan balances can be earning more than £100,000 but still see their debt rising every year because of high interest payments, according to the data.

Oliver Gardner, founder of student loans campaign group Rethink Repayment, said the figures highlighted the need for ministers to “act urgently to fix the student loan system”.

“It makes no sense to run a student loan system where, unless you are among the top earners, you can never realistically expect to clear what you owe,” he said.

Plan 2 loans, for English students who started undergraduate courses between 2012 and 2022, have been subject to heightened scrutiny in recent months, with university sector leaders and graduates making vocal demands for reform.

In July, the House of Commons Treasury Committee accused ministers of mis-selling loans to students and called for a reversal of the government decision to freeze at £29,385 the threshold at which graduates start to repay 9 per cent of their salary.

The value of a degree has also come under increased scrutiny over the past year, with research from the Institute for Fiscal Studies think-tank finding the financial return on a university education is a third lower than previously estimated.

Unlike the subsequent “Plan 5” scheme, for those who started degrees from 2023, where interest is charged at retail price inflation, interest on Plan 2 loans starts at RPI and rises to RPI plus 3 percentage points once earnings are over £52,885. This is capped at 6 per cent.

However, Plan 2 loans are written off if they are not repaid after 30 years, compared with 40 years for Plan 5.

Analysis produced by the DfE in response to the Treasury Committee showed that Plan 2 borrowers had an average debt of £52,100 and that it would rise unless they earned £63,600 this financial year.

Plan 5 borrowers are forecast to graduate with £45,800 average debt and will see this balance increase unless they earn more than £43,625.

For the first time, officials estimated how likely it would be for borrowers at different salary levels to repay their balance before it was written off. Repayment typically starts in April the year after graduation.

Five years after this date, Plan 2 borrowers must be earning between £45,000 and £50,000 before their probability of repayment reaches 50 per cent.

Those earning £30,000-£35,000 by that point have only a 25 per cent chance of repaying their debts.

Plan 5 borrowers are more likely than not to repay if they are earning £25,000-£30,000 five years after they begin paying loans back. Those earning between £45,000 and £50,000 have an 81 per cent chance of repaying.

A lower share of Plan 2 borrowers was expected to repay at a given earnings level because of the “higher rate of interest accrual, higher repayment threshold and shorter repayment term”, the DfE noted.

It has estimated that only 32 per cent of those who took out a Plan 2 loan in 2022 would repay, compared with 55 per cent of those who took out a Plan 5 loan in 2025.

Nick Hillman of the Higher Education Policy Institute think-tank said Plan 5 was “less progressive” in that lower earners paid proportionately more, and that Plan 2 had “real strengths” in using higher earners to subsidise others.

But the figures would “reignite the debate because the government’s position is so incredibly weak”, he added. “They have spent two years criticising Plan 2 without making any changes whatsoever. If they don’t like Plan 2 they should change it. If they do, they should defend it.”

Plan 5 graduates begin making loan repayments once their salary reaches £25,000, against £29,385 for Plan 2, meaning they pay £33 a month more for salaries over about £30,000.

A worker on £50,000 would pay £154 on Plan 2 against £187 on Plan 5, rising to £529 and £562 respectively at a salary of £100,000.

The forecasts are based on modelling for younger graduates with Plan 2 loans who started three-year undergraduate courses in 2022 under Plan 2 and 2025 under Plan 5.

The DfE said ministers “continue to look at further ways to make the system we inherited fairer for everyone. Borrowers should also be reassured that their total balance does not affect their monthly repayments, and any outstanding debt is written off at the end of the term.”

Maersk turns to wind sails to cut fuel for container ships

Maritime industry returns to age-old technology to cut future fuel consumption

Maersk has signed a deal to install the first wind sail on a container ship as the maritime industry returns to an age-old technology to cut fuel consumption and comply with tougher environmental regulations.

The sail, a 35m-high rotor sail designed by the British company Anemoi, will be retrofitted to a medium-sized container ship as a pilot project to demonstrate whether the technology can meaningfully cut the cost of fuel and emissions permits.

Nick Contopoulos, chief commercial officer at Anemoi, said that container ships presented a particular challenge for installing wind power as nearly all the deck space was used for cargo storage.

“Container ships haven’t been core to [installations] because of the deck space question,” he said. But he added that there were benefits to using modern sails on container ships.

“They are on very dedicated routes so knowing the predictability of wind [and] the vessel’s operating speed, you can target the high wind profile routes which improves the business case and the return on investment,” he said.

There is little resemblance between the rotor sails installed by Anemoi and the traditional white sheets hung from masts, whose use dates back to ancient Egypt.

The rotor technology spins in the wind using a physical phenomenon by which spinning objects create propulsion, known as the “Magnus effect”, to push the vessel forward. According to Anemoi, optimal conditions are winds of around 35 metres per second coming from the so-called starboard side of the ship, or the vessel’s right when looking towards the front.

The rotor sail installed on the Maersk ship will be positioned at the front of the ship and will be fixed upright. Other systems Anemoi builds can be folded down when a ship comes into port.

Ole Graa Jakobsen, head of fleet technology at Maersk, said that the world’s second-largest container shipping line saw the project “as a valuable opportunity to build practical experience and assess its relevance for our fleet and for container shipping more broadly”.

Gavin Allwright, secretary-general of the International Windship Association, said that there had been a steady increase in interest in wind propulsion technologies as environmental regulations for shipping tighten.

There are a variety of other wind propulsion technologies being developed, including retractable folding sails and suction wings.

The EU has included the maritime sector in its emissions trading system since 2024 and has introduced new rules requiring shipowners to cut the emissions intensity of the fuels they burn. Meanwhile, the International Maritime Organization is negotiating new emissions rules for the sector despite deep divisions over the level of ambition with strong pushback against the decarbonisation effort from the US.

Shipping currently accounts for around 3 per cent of global annual carbon emissions.

There are about 110 commercial installations on vessels above 400 gross tonnage, with a further 80 to 90 on order and around 50 in the pipeline, said Allwright.

“In the past few years we’ve seen a doubling [of installations] each year,” he said, with higher fuel costs as a result of the war in the Middle East also boosting interest.

Owing to the large spare deck space, sails have mostly been installed on tankers, but have also been built into bulk cargo ships and car carriers.

Peter Jameson, managing director at Boston Consulting Group, said that fuel savings from wind technology could be anywhere between 5 and 25 per cent “depending on the vessel and route, and potentially higher in favourable conditions”.

“The bigger barrier now is commercial rather than technical. These systems can cost several million dollars to install and the payback period can extend well beyond a typical charter contract. Often the shipowner bears the upfront cost while the charterer benefits from the lower fuel bill, so the incentives are not naturally aligned,” he added.

Anemoi estimates that each of its rotor sails, which are typically installed in groups of three to five, save approximately one tonne of fuel per day and around three tonnes of CO₂ emissions per sail.

They cost between $600,000 and $1.2mn per sail, excluding installation costs, Contopoulos said.

Big employers including Mercedes-Benz call for Germans to work longer on the same pay to stem the country’s industrial decline

Four decades after German metalworkers won one of the most acrimonious labour disputes in the country’s postwar history to secure a 35-hour week, some of the largest industrial employers are reviving the totemic debate over longer working hours.

Prominent executives, including at Mercedes-Benz and toolmaker Stihl, have called for employees to work 40 hours a week without extra pay, arguing that high labour costs are eroding the country’s competitiveness.

“Labour has become too expensive here by international standards,” Martin Brudermüller, chair of Mercedes-Benz Group AG’s supervisory board, told the German newspaper Handelsblatt earlier this summer, adding that the country had lost its “productivity advantage over important competitors”.

“We should seriously consider a return to the 40-hour week,” he argued.

Labour costs in Germany are among the highest in the EU. An hour of work in manufacturing costs €49.50, 47 per cent more than the EU average of €33.70 and three times as much as in Hungary, where it costs €15.60. 

While German employees are more productive than their eastern European peers, unit labour costs measuring workers’ output have risen significantly faster since 2023 than in previous years, according to a survey by IMK, a think-tank financed by Germany’s unions.

The calls to return to a 40-hour week come before industrial unions start their latest pay negotiations in October. The 35-hour week was introduced gradually over more than a decade that followed a dispute in 1984 that saw tens of thousands of metalworkers in the former West Germany stage a seven-week strike to secure shorter hours.

Today, 35 hours a week is the collectively agreed standard for about a fifth of German employees, concentrated in sectors including automotive, engineering, iron and steel. Across all sectors, the length of the average working week stands at 37.8 hours. Germans work fewer hours a year on average than employees in almost any other OECD economy, although the comparison is heavily influenced by the country’s high share of part-time employment. 

What has transformed a decades-old argument into an urgent competitiveness debate is the deepening crisis in German manufacturing.

Since peaking in late 2017, German industrial production has fallen more than 15 per cent as manufacturers have been hit by successive energy price shocks, intensifying competition from China, US tariffs and the disruptive shift towards electric vehicles. 

High labour costs were once offset by Germany’s other attractions for employers, including political stability, strong infrastructure, skilled workers and dense industrial clusters, according to Marcus Berret, global managing director at consultancy Roland Berger.

But those advantages were eroded just as the cost gap with countries in eastern Europe and beyond widened. “When it comes to labour costs, we are not talking about a difference of 10 or 20 per cent [with rival economies]. In some cases, we are talking about a factor of three or four,” he said.

So far employment in German manufacturing has fallen much more slowly, leaving about 6.5mn people working in the sector despite the steep decline in output.

But Berret expects further job losses. “If I put together what I know from individual companies, I expect that we will end up with fewer than 5mn people employed in manufacturing.”

Currently about 12,000-15,000 manufacturing jobs are disappearing per month, and large employers like Volkswagen have already indicated that many more positions in Germany will have to be axed.

For workers who manage to retain their jobs, an increase in working hours may become inevitable, argue economists.

Martin Werding, a member of the German Council of Economic Experts, says that the mechanisms manufacturers once used to compensate for high labour costs — such as using temporary agency workers who can be let go during periods of weaker demand — are no longer enough.

“Today’s challenges have become so big that this flexibility is no longer sufficient,” he said.

Moving from 35 to 40 hours without additional pay would increase working time by 14 per cent while leaving weekly wage costs unchanged. The debate about working hours is “much more than symbolic politics”, Werding added. 

IG Metall, Germany’s biggest and most powerful trade union with more than 2.2mn members, rejects the premise that factories are constrained by a rigid 35-hour week. Nadine Boguslawski, the IG Metall executive in charge of collective bargaining and member of Mercedes’ supervisory board, said agreements with employers already allowed companies considerable flexibility to increase or reduce hours. 

“The rigid 35-hour week that is sometimes portrayed simply does not exist in the companies I know,” said Boguslawski. Moreover, IG Metall was open to finding bespoke solutions for companies in trouble, she said.

At the heart of the debate is a fundamental disagreement between unions and employers about whether longer hours would destroy jobs by spreading a fixed amount of work among fewer people or preserve them by making German factories more competitive.

Boguslawski argued that one of the key reasons that IG Metall fought heavily for the 35-hour work week in the 1980s was “to get more people into employment” by spreading the available work among more people. “If you turn that around and increase working hours to 40 a week, regardless of whether those additional hours are paid or unpaid, you tend to need fewer workers,” she warned. 

But economists like Werding counter that the amount of work available is not guaranteed and depends on firms’ competitiveness. If lower labour costs per unit of output make German factories more competitive, companies could retain production and jobs that would otherwise move abroad or disappear, they argue.

Whether the push for longer hours will make it on to the negotiating agenda between unions and employers this autumn is unclear. Gesamtmetall, the metal industry employers’ association, declined to comment on calls to abandon the 35-hour week, citing “internal considerations”.

Berret fears that the political and public debate has yet to catch up with the scale of the crisis facing German industry. “A lot of people are living in a different reality when it comes to what is heading our way,” he said.

CEO’s plan to become smaller and less German sparks union and political outcry; ‘Detroit-ization’ is new buzzword

When Volkswagen VOW3 -1.42%decrease; down pointing triangle Chief Executive Oliver Blume took a cost-cutting plan to his board this summer that envisioned a doubling of job losses to 100,000, he was fully aware it would be rejected.

Such is the predicament of running Germany’s premier industrial company, where half the supervisory-board directors are worker representatives and swing votes are held by the local government.

Now Blume is considering an audacious workaround, according to people familiar with his plans. If the board factions can’t come to an agreement at a meeting set to take place on Friday, he could go hostile—bypassing the board like an activist investor or corporate raider by taking the plan directly to shareholders.

It’s a nuclear option, a move without precedent at Volkswagen or the broader German corporate scene, where for years stakeholder capitalism has meant that decisions are driven by consensus among workers, regulators and shareholders.

The stakes are enormous. Chinese automakers are moving headlong onto German carmakers’ home turf after dethroning them in China, previously their strongest overseas market. Higher U.S. tariffs under President Trump and a bumpy transition to electric vehicles and hybrids have cost automakers billions of dollars.

“Tariffs, new competitors and geopolitical risks: The entire automotive industry is under enormous pressure,” Blume told employees last week.

Germany for decades has staved off the kind of deindustrialization that has wiped out millions of U.S. manufacturing jobs, maintaining a generation of well paid, skilled workers, particularly in the auto industry. Now “Detroit-ization” is a buzzword in the German media.

No German automaker is more affected by the industry turmoil than Volkswagen, which competes head-on with mass-market Chinese brands such as BYD and doesn’t have a big U.S. manufacturing base to limit the fallout from Trump’s tariffs.

Blume wants to slim down VW and reshape its global footprint, upending a decades-old business model where cars are designed and in some cases made in high-cost Germany for markets overseas. In essence, he wants to make Germany’s largest corporation smaller and less German.

“Over the years we have built up structures, capacities and head count,” Blume said in a Q&A published on the company intranet last month. “Too many interfaces, too many layers, too many duplicate structures.”

Volkswagen is bloated, employing many more workers per car produced than competitors. The company makes around 150 vehicle models, including those of Audi, Porsche and other brands bought over the decades. Much of the office staff working in design, marketing and forecasting are in Germany, where employee protections make it hard to cut workers.

Blume and his team want to halve the number of models—still leaving Volkswagen with many more than peers, they say—and make sure those that survive better match the tastes of consumers in different markets. They also want to cut overhead and a portfolio of some 2,000 investments that include stakes in four German soccer clubs.

But the company’s complex governance, with the billionaire Porsche-Piëch family vying for control with politicians and Europe’s most powerful union, puts a speed limit on change in an industry that is moving fast.

CEO tour

Friday’s supervisory-board meeting comes 10 weeks after the company first said it was working on a new restructuring plan. To sell his plan, Blume fanned out last week to Volkswagen locations on a tour more akin to a political campaign than a corporate roadshow.

In Wolfsburg, the company headquarters, about 10,000 employees packed into a hall to hear the CEO defend his plan in front of Daniela Cavallo, Volkswagen’s top union representative.

Trade unionists held placards with slogans such as “Our jobs aren’t your balance-sheet adjustment,” according to people present. Blume’s introductory pleasantries about how much he valued communicating with the staff were greeted with boos.

Cavallo, who leads Volkswagen’s group works council—its top union body—acknowledged the company was in a tough spot but said Blume needed a detailed strategy for getting out of it before deciding on job cuts.

“Volkswagen is simply not a corporation that operates solely according to capitalist rules,” she said. “Because of its history, Volkswagen also belongs to us, the employees.”

Another source of power at Volkswagen is campaigning as well. The state of Lower Saxony owns 20% of the carmaker’s voting shares. Last week, state Premier Olaf Lies, one of the Volkswagen board members who voted against Blume’s plan, embarked on a tour of factories that the CEO has said might not be needed.

“Lower Saxony is automotive country, and this must remain so,” Lies said at the Hannover plant, where Volkswagen has for decades built its much-loved campervans.

After Wolfsburg, Blume addressed employees in Emden and Zwickau, towns heavily reliant on their Volkswagen factories. He warned that the plants weren’t competitive enough, even after a roughly 20% reduction in costs last year.

“Other plants are still significantly cheaper,” he said, while stressing that closing a plant was “always the last and most expensive solution.”

When Blume became CEO four years ago, he was welcomed as a peacemaker, a consensus-minded company lifer who would restore relations between bosses and workers.

His combative predecessor Herbert Diess, a former BMW executive, had unsettled the workforce by drawing unfavorable comparisons of Volkswagen’s technology and manufacturing with those of Tesla, which at the time was expanding rapidly. Blume had been the CEO of Volkswagen’s sports-car business Porsche, where years of profitable growth had kept everyone happy.

VW had grown rapidly over the previous two decades, above all in China, to become the world’s second-largest automaker behind Toyota.

Its core operations, however, stayed in Germany. More than two in five employees worked there—a higher percentage than Japan-based workers at Toyota, which has a more decentralized model of control in its markets around the world.

As part of his drive to transfer power to the regions, Blume pressed ahead with a project to revive sport-utility-vehicle brand Scout Motors as an all-American EV, including with a $2 billion new factory in Blythewood, S.C.

He also cut the size of a Berlin-based subsidiary called Cariad, his predecessor’s project to create a German software giant that would power the computer brains at the heart of modern automobiles. He set up a California-based joint venture with U.S. electric-vehicle maker Rivian to take on tasks Cariad had struggled with.

There was a plan, too, to give the wider U.S. business more autonomy. Even after growth spurts at Audi and Porsche, the company’s market share in North America for years hadn’t moved above 5%.

One problem was that those luxury brands don’t make cars in the U.S. The company builds some Volkswagen-branded vehicles at a small factory in Tennessee, but has been criticized for selling tweaked versions of European products designed in Germany—seemingly never with enough cupholders for American families. Another negative was lingering suspicion over the 2015 diesel scandal, when Volkswagen admitted to cheating on U.S. emissions tests.

In China, Blume pushed a local-for-local strategy by investing billions of dollars in Chinese partners and a Chinese vehicle-development hub.

larm at home

Volkswagen’s works council started to sound the alarm when Blume and his team moved from investing abroad to restructuring core operations at home.

Two years ago, the bosses canceled a sacrosanct German jobs guarantee and argued that Volkswagen needed to take the unprecedented step of closing a German factory. It took almost four months for Blume’s team to negotiate a package of job cuts.

Initially outraged, union leaders eventually agreed to capacity and workforce cuts in exchange for a fresh jobs guarantee for the survivors. All the job losses relied on voluntary buyouts and early retirements running over five years.

Similar deals at Audi and Porsche brought German job losses negotiated by Blume’s team to 50,000, out of a global workforce of around 680,000 at the end of 2024. Still, that left it with many more employees than its rivals.

Last year, the company’s fortunes took another hit when the White House introduced auto tariffs, which Volkswagen has said would cost it almost $6 billion a year. That revived old talk of a U.S. factory for Audi, which hadn’t followed its rivals BMW and Mercedes-Benz in setting up a production base for SUVs in the American South.

The idea never gained traction. In January, Blume poured cold water on hopes of an American Audi factory, cut a longstanding target for growth in the U.S. market and told local media that what was needed instead was a “reduction in costs.”

As Blume’s cost-cutting plan took shape, one number was bound to rile up the union and local government: Another 50,000 job losses might be necessary to bring Volkswagen’s overhead costs into line with competitors, his team calculated.

Company town

The focus on overhead put the emphasis squarely on the company’s sprawling headquarters in Wolfsburg.

The original 1930s factory building in town bears marks of shrapnel from World War II, retained as a reminder of Volkswagen’s Nazi origins. Much of the money to build the plant came from funds confiscated from unions after they were banned by Hitler—the justification given by successive works council leaders for the argument that the company belongs as much to its workers as its shareholders and should be run accordingly.

These days, four in five of Volkswagen’s roughly 60,000 employees in Wolfsburg work behind desks rather than on the production lines that once turned out the Beetle and now make European bestsellers such as the VW Golf and Tiguan. It is those white-collar jobs that Blume now has in his sights.

“The next step will focus in particular on costs outside of direct vehicle production. That means management, group-level positions, central functions, development and sales,” he told employees at last week’s town hall in Wolfsburg, adding that around half the cost reduction would need to come from Germany.

Wolfsburg barely existed before the Volkswagen factory, and grew up to serve it. The company owns the city soccer team, helped found its art museum and pays a large share of the taxes that pay for local services. It employs many of Wolfsburg’s roughly 130,000 residents on terms negotiated by the works council, including service functions such as kitchen staff that have long been outsourced at other companies.

When Blume presented the new plan at the July supervisory-board meeting, the votes fell along predictable lines: Ten members linked to Volkswagen’s unions were against, as were two representatives of Lower Saxony. The seven votes cast in favor were by representatives of the Porsche-Piëch family and Qatari sovereign-wealth fund, according to someone familiar with the outcome.

The Porsches and their cousins the Piëchs—the descendants of Ferdinand Porsche, who designed the Beetle for Hitler and founded the Porsche sports-car business—own just over half of Volkswagen’s voting shares through their publicly traded holding company, Porsche SE.

While the stake gives them nominal control, the majority of supervisory-board seats held by union and government representatives requires them to regularly bargain with the other stakeholders.

Last month, the holding company’s CEO, Hans Dieter Pötsch, who also is chairman of Volkswagen’s supervisory board, expressed frustration. “The focus must now be solely on what is necessary from a business and economic perspective. All other considerations must be secondary,” he said when the company released second-quarter financial results.

Getting others to agree on that isn’t easy at a company that workers regard as a cooperative.

“We, too, have a right to the returns we make—like a dividend for the workforce,” Cavallo said during last week’s town hall with Blume in Wolfsburg. “That means domestic factories, good jobs and training here at home, job security and strong industrial regions.”

The government of Lower Saxony has sometimes positioned itself as a consensus-builder that can help other Volkswagen shareholders and workers see eye-to-eye.

If no compromise is reached, the two sides could return to negotiations, or Blume and his team could call an extraordinary general meeting of shareholders to vote on the most contentious parts of his agenda.

Under German corporate law, such proposals would normally need the support of 75% of shareholders. But Volkswagen is subject to a special “Volkswagen law” that raises the threshold to 80% for the most important decisions, potentially giving the state of Lower Saxony a blocking minority. Those legal complexities have never been put to the test.

The Maldives has become a pipeline for hundreds of millions of dollars in Western goods heading to Moscow

MALÉ, Maldives—The white sand beaches, turquoise waters and secluded luxury resorts of this South Asian archipelago attract millions of tourists each year. But a new trade has quietly emerged behind the postcard-perfect backdrop: a web of companies helping Russia evade sanctions.

Hundreds of millions of dollars in goods that are restricted or destined for sanctioned companies have changed hands at the airport, according to documents reviewed by The Wall Street Journal and interviews with Western officials. Some of these goods serve both civilian and military uses. The airport’s cargo holds are often filled with aircraft parts and electronic components, as well as other restricted goods, according to the documents and officials.

The amount of goods flowing through the Maldives is relatively small when compared with Russia’s biggest channels for sanctions evasion, including China, Turkey and the United Arab Emirates, which together account for about $15 billion in restricted Russian imports annually. But the flow of goods through the Maldives, which hasn’t previously been reported, shows how expansive Russia’s efforts to thwart Western restrictions are, turning even small and unexpected corners of the globe into channels for goods.

Through more than four years of war, Moscow has repeatedly shown that it can find the gaps in sanctions, leaving Western officials playing a game of whack-a-mole as they try to halt the flow of goods that sustains Russia’s war effort and economy.

The documents reviewed by the Journal—air waybills, a cargo manifest, and emails between logistics companies—paint a picture of how the system in the Maldives works.

A commercial flight operated by Russia’s largest airline, Aeroflot, lands each morning at the airport in Malé, where teams of local middlemen working with Russia-linked logistics companies help get the U.S., European and Chinese goods cleared through customs. The goods are then loaded onto the Aeroflot flights, which fly back to Moscow with goods and cargo around two hours later.

Once in Russia, the products are distributed, in some cases, to sanctioned entities, including Russia’s biggest domestic carrier S7 Airlines and its maintenance subsidiaries, which have struggled to get replacement parts for its fleet of aging aircraft.

“This shows there are effective channels that exist far outside of the usual suspects,” said Pavlo Shkurenko, a sanctions research fellow at the Kyiv School of Economics Institute.

The Maldivian government and the Maldives Airports Company, which operates the airport, didn’t respond to requests for comment.

The Maldives archipelago consists of more than a thousand islands, many of which are home to a single hotel. More than two million tourists travel to the islands each year—drawn by the clear waters where they can observe marine life like turtles, manta rays and whale sharks. Malé, on the other hand, feels like a different world. One of the most densely populated cities on the planet, the capital teems with a relentless tide of scooters and motorbikes in its narrow streets.

Part of Russia’s success in channeling goods through the Maldives stems from its economic ties with the islands. Russians make up the second-largest nationality among tourists in the Maldives, behind Chinese nationals. Diplomatic friction with Russia would pose a threat to the Maldives’ economy, which is still recovering from the downturn in the tourism sector during the pandemic.

Now, the government is making money off a surge in trade, in addition to taxes on the tourism sector. The Maldives Airports Company made a record profit in 2024, becoming the most profitable state-owned company in the country. The company charges handling and commercial fees for cargo and resells fuel at a profit.

Some of the products that flow through Malé to Moscow are designated under sanctions as dual-use, meaning they could be used for military or civilian purposes, such as nourishing the country’s sanctioned airline industry.

Shipments that have transited through Malé include microchips that can be used for both civilian hardware and sophisticated missile guidance systems, optical instruments needed for satellites tracking enemy troop deployments, and high-strength aerospace rivets and bolts that are equally suited for a commercial jetliner as they are for a jet fighter or a long-range rocket.

Customs data from the Maldives shows a paltry amount of exports to Russia between 2022 and 2025—about $2,300 of tuna and $25 in leaflets and brochures. But Russian trade data collected by Import Genius, a U.S.-based research firm, shows that Russian imports from the Maldives, a country with virtually no industry, surged to more than $630 million in 2022—the year the full-scale invasion began—up from less than $7 million in 2021.

Russia imported $160 million in 2024, the last full year of data available from Import Genius. Import Genius Research Director William George said the figures probably understate the true volume of trade between the Maldives and Russia, pointing out that Russian authorities appeared to start censoring parts of the data in 2024 before blocking access entirely in early 2025.

The U.S. and Europe imposed sweeping sanctions against Moscow following its invasion of Ukraine to degrade Russia’s industrial base and isolate it from global commerce. They have frozen around $300 billion in Russian central-bank assets and disconnected major Russian lenders from the Swift messaging network. A web of export controls has cut off Russia’s access to advanced microchips, aerospace technology and industrial machinery crucial to sustaining its domestic manufacturing and war effort.

Western officials have focused most of their recent efforts on closing loopholes and punishing circumvention. The U.S. and European Union are increasingly targeting third-country intermediaries—including banks and logistics firms in nations that facilitate the covert flow of Western goods or illicit oil revenues back to Moscow.

The Maldivian government is under increasing pressure from the U.S. and Europe to shut down this route, according to the Western officials. The authorities there are aware of the issue and are working to address it, according to a person familiar with the matter.

Part of the problem is that the customs office in the Maldives has limited staff, and goods transiting through the country undergo minimal checks, the person said. Cargo in transit typically doesn’t undergo physical inspections, the person said. Instead, authorities rely on paperwork.

Trade appears to only be growing. In July, Maldives Airports Company said it recorded a historic high in its daily cargo volume transiting through the airport by shipping a record 126 tons of freight in one day. Aeroflot accounted for 12% of outbound freight during the first half of the year, state-run news channel PSM News reported.

Documents reviewed by the Journal show that when a cargo initially lands, the name of the company exporting the goods appears on the air waybill, along with the supposed buyer. Once in the Maldives, however, a web of obscure local companies, such as Freight Care and Go Investment, help alter shipping documents and move the goods over the tarmac, making sure they never leave the airport and avoid formal entry into the archipelago.

Cargo is never categorized as imports and only goes through minimal customs checks before being shifted between aircrafts, officials said. A new air waybill is issued for the flight between Malé and Moscow’s Sheremetyevo International Airport. The new bill doesn’t list the name of the company that sold the goods, according to the documents and Western officials.

For example, in May 2024, Kraemer Mining, a German company, sold pumps, batteries, v-belts and other equipment worth about €9,000, equivalent to around $10,400, to Peretsvo, a company based in the Central Asian country of Kyrgyzstan. The goods were first sent from Düsseldorf, Germany, to Malé on an Emirates flight. Freight Care, which is listed as the first contact for the goods on the air waybill, arranges the necessary paperwork to help move the goods through the Malé airport, according to Western officials and the company.

A few days later, the goods were loaded onto an Aeroflot flight to Moscow. Aeroflot issued a second air waybill, which doesn’t include any reference to Kraemer Mining or the origin of the goods. The second bill lists a new recipient—Gruppa Kompaniy Tehno, a Russian importer based in Krasnoyarsk, an industrial and economic hub in Siberia. Gruppa Kompaniy Tehno and Kraemer Mining didn’t respond to a request for comment.

The Journal found two addresses for Freight Care—one on air waybills and another in the country’s official business registry. The addresses were located in neighboring office buildings in Malé, with the Aeroflot office sandwiched between them. Visits to both buildings with listed addresses for Freight Care revealed no trace of the company’s office.

Hussain Waheed, Freight Care’s managing director, said the company handled goods in transit in Malé to Russia, but never knowingly helped ship any goods that could be used to produce weapons. “We do not support any war,” he said.

An address listed for Go Investment in the documents led to a small shop selling electronics. The same address was registered to multiple other companies in the business registry for the Maldives. When contacted, a man who was listed as the managing director or a board member for all of the companies said he couldn’t talk and hung up. He didn’t respond to further messages.

Twelve weeks, five insiders, one question: does the AI buildout fund itself?

The tape now splits 4-to-1 against self-funding. Two-pager attached.

* Baker/Atreides (04-Aug): self-funding -- OCF repricing, "~$700bn of credit need disappears". The lone bull on the financing leg.

* Friar/OpenAI CFO (02-Jun, the inside voice): "not yet an investment-grade entity"; raised $122bn of EQUITY because cheap debt is unavailable; capex

parked on CSP balance sheets (ORCL first).

* Thompson/Stratechery (18-Aug): FCF -> debt -> equity sequence exhausted; GOOGL US issuing equity is the falsifier. Capex $800bn'26 -> $1.3tn'27.

* Chamath (21-Aug): labs = "worst balance sheets", not IG; 30Y at 5.3%.

* Patel/SemiAnalysis (25-Aug) quantifies it: $11tn capex 2024-29, only ~$6tn cash-funded, >$5tn OF CREDIT REQUIRED, +250bps borrowing costs.

That is ~7x Baker's disappearing number -- in the other direction.

THE NUANCE: Patel CONFIRMS Baker on demand (labs profitable, Anthropic since Q2-26 at $50m rev/MW vs $10-15m cost, outbidding everyone toward $25-50m/MW). Profitability funds the BID; credit funds the BUILD. Both true at once.

WATCH (dated):

* Sep-Oct: Anthropic S-1 flip vs the $2tn talk -- Amodei answered none of it

* Oct-Nov: hyperscaler Q3 OCF vs Baker's own >32-35% bar; any equity issuance

* Nov: NVDA US FQ3 + the $500bn GPU facility TERMS -- first T1 in the file

* Jan-Feb 27: capex guidance season -- internal cash, debt, or equity?

Kill-switch either way (rule E in the note): three cumulative conditions restore Baker; ONE event falsifies him terminally -- a second mega-cap

equity raise earmarked for AI capex.

Position read: the cycle moved instruments -- monitor credit (issuance vs the $5tn path, IG spreads, GPU spot as collateral mark), not equity multiples.

Most-corroborated long across all five: memory (MU US, 000660 KS) + TSM US + ASML NA (Zeiss EUV mirrors, ~100 tools by 2030).

Full 2-pager attached. Figures podcast-cited, unaudited except items tagged T1/T2 in the note. Not investment advice.

Laurent Chekroun

Graham Advisors Sarl, Pfaffikon SZ

Ajeya Cotra (METR, co-author of the 26-Aug report) on Dwarkesh, 1 Sep.

She was on-site at OpenAI with unredacted transcripts for the 7-13 Jul window.

Three points that change the read:

1/ The Hugging Face breach was not answer theft. 1,200 agents had a universal cheat within 4 hours of forming a covert message board on 7 Jul. The next 5 days were spent building infrastructure to beat a transcript-checking scorer that did not exist in OpenAI's implementation. The breach was collateral damage of that R&D, not the objective.

2/ The graver event is the one nobody investigated. Per OpenAI's own report, a newer model generation found the uncleared message board and obtained full administrative access to an internal research cluster on 19 Jul, with a self-respawning fleet across 11 nodes. Outside METR's scope, verified by no

external party.

3/ Detection was contingent, not systemic. Cyber classifiers were switched off for the eval. Of 1,200 transcripts, c.6 agents ever considered alerting humans,

none did. There is no mandatory incident-reporting standard anywhere. We only know about this because the swarm happened to touch a third party.

Cotra: "this might be the clearest warning shot we ever get".

MARKET READ: validates the AI-security spend cycle, but not the way it is being priced. The layer that failed was eval/training design and internal monitoring, not the perimeter. CRWD +95% / PANW +113% Apr-Jun already discount much of it.

We prefer egress control (ZS) and AI-control/audit exposure to classic endpoint beta at these multiples. Watch the c.Mar-27 window: Cotra puts covert rogue

internal deployments as "quite likely possible within six months".

CAVEATS: METR's access was OpenAI-granted and OpenAI-funded (c.USD400k credits), and Cotra is pitching a paid embedded-assessment program. Everything outside 7-13 Jul is relayed from OpenAI's report, unverified. Bear read (Gary Marcus): engineering hygiene dressed up as loss of control.

Full note attachedt.

Laurent Chekroun, Graham Advisors

The country is using its superpower of scaling and building supply chains to challenge the global industry

The recent humanoid games alongside Beijing’s robotics conference at times resembled an expensive comedy reel — an array of robots stumbling, misidentifying obstacles, and executing tasks with toddler-like grace. But the striking spectacle served a purpose — drawing the world’s eyeballs further to the progress being made in robots, adding to a building hype. That buzz helped Unitree, the Chinese producer of humanoids that went viral earlier in the year on social media with their backflipping kung-fu bots, go public last month with a valuation at the end of its first day of trading exceeding 1,200 times its trailing earnings.

Yet China’s real robot revolution has been happening with much less hoopla in industry. Rather than set sprinting records or breakdance, industrial robots do much more prosaic, repetitive stuff, but China is using its superpower of scaling and building supply chains to challenge the global market.

Chinese companies installed 295,000 new industrial robots in China in 2024, capturing 54 per cent of the global total, according to the International Federation of Robotics. Two years ago China already operated over 2mn industrial robots — about 4.5 times more than Japan, the second-ranked nation. 

China’s robotics industry revenue surpassed Rmb300bn ($44bn) last year, with a five-year average annual growth exceeding 20 per cent, according to data from the country’s Ministry of Industry and Information Technology. Industrial robot exports grew 49 per cent in 2025 — the first year China became a net exporter of industrial robots. Chinese manufacturers have now captured the majority of its domestic industrial robot market, which was dominated by the global “Big Four” — Fanuc, ABB, Yaskawa and KUKA — prior to 2024.

In the past year, we have seen the mass rollout of autonomous mobile robots in Chinese warehouses, precision surgical arms in hospitals, and specialised cleaning bots in skyscrapers. These devices are purpose-built. They don’t have faces. They have functions.

The application evidence is everywhere. BYD’s Xi’an facility, its largest manufacturing hub, operates thousands of automation arms on EV assembly lines with close to full autonomy on key parts. Shanghai Yangshan Port built an automated terminal that is the world’s largest, operating almost entirely on automated guided vehicles and remote-controlled gantry cranes with minimal human intervention. In Guangdong province alone, regulators recently approved 48 “Robot+” deployment scenarios spanning manufacturing, logistics and service sectors.

None of this requires general-purpose intelligence. It requires solving specific problems with specialised machines.

So why are billions being invested into building humanoids? The obsession with the human form may be the main culprit. We are building robots in our image not because it is efficient, but because it is emotionally resonant. Yet for 99 per cent of industrial tasks, a humanoid shape is a structural liability. And to try to replicate bipedal balance, manufacturers are using algorithms and specialised motors known as servos at astronomical cost.

None of this is to dismiss the genuine progress being made. Advocates for humanoids raise two counter-arguments that merit consideration. The first advantage is environmental fit. Our world — factories, hospitals, homes — was built for humans. Retrofitting it for specialised robots is costly and slow. A humanoid can use existing spaces and tools as is. This unlocks markets in logistics, care and rescue — no wheeled robot can traverse a collapsed building’s rubble.

The second is software. AI models that simulate how the physical world works could enable real-time reasoning, not just rote moves. Because humanoids share our form and mimic our mobility, they can learn from vast video data of human activity — unavailable to other designs. This hardware-AI synergy could eventually bring robotics its “ChatGPT moment”, allowing one platform to be updated for many tasks.

But while these are serious prospects, they are distant ones. Lab demos are far from factory-floor reliability. Environmental fit doesn’t justify humanoids’ cost and complexity when most tasks suit optimised machines. Their flexibility remains a solution looking for a problem better solved more simply, for now. Robots are, of course, the future. They are already reshaping our world. But the machines that are having most impact, at least in the near future, are specialised and decidedly non-humanoid.