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Porsche reckons with history of forgotten Jewish co-founder

Relative driving recognition campaign says legacy of industrialist Holocaust survivors should be revisited

Porsche’s 75th anniversary extravaganza this summer included a frenzy of sports cars whizzing around its Stuttgart headquarters in front of an audience including heirs to co-founders Ferdinand Porsche and Anton Piëch.

But although the marque’s first car was produced in 1948, the company that made it was formed 17 years earlier and had a third co-founder, Adolf Rosenberger, who gave up his role and stake before fleeing Nazi Germany and remains largely absent from the famed brand’s corporate history.

“My family is not unique,” said Rosenberger’s second cousin Sandra Esslinger, explaining that she had been contacted by descendants of other Jewish German industrialists who escaped the Holocaust, many of whom like Rosenberger died unrecognised overseas while their former businesses flourished in postwar Germany.

Esslinger’s goal is to support other Jewish families whose ancestors play small roles if any in the official histories of companies they helped build — but the first step is seeking justice for her own.

Rosenberger, born in 1900 in the south-west German town of Pforzheim, was a racing driver for what is now Mercedes-Benz when he met Ferdinand Porsche. He helped fund Porsche, taking a 10 per cent stake in the company — the same as Piëch, Ferdinand Porsche’s son-in-law — and served as the company’s managing director.

The luxury car brand has recognised Rosenberger as a co-founder of the company along with Porsche and Piëch, whose descendants now control both Porsche and Volkswagen, with a stable of brands from Audi to Lamborghini.

But the exact circumstances under which Rosenberger transferred his shares to Ferdinand Porsche’s son at far below their full value in 1935 — the same year he was sent to a concentration camp because of his relationship with a gentile woman — as well as his postwar correspondence with co-founders Porsche and Piëch and their ancestors, are only now being investigated by the company.

The research project was commissioned jointly last year by Porsche and the Adolf Rosenberger non-profit that Esslinger founded, which had contacted the company outlining “some issues” with the portrayal of Rosenberger in a recent corporate biography.

Porsche said last year that the study, due to be published next year, would “for the first time” take into account documents held by the Rosenberger family.

It will be too late for Rosenberger, who told journalists before he died in 1967 that he had unsuccessfully sought to re-enter the company after the war and that his co-founders used the fact he was a Jew “to get rid of me cheaply”.

The company told the Financial Times that “researching and coming to terms with history” was an ongoing process both for it and parent company Volkswagen, adding that they “fully support research into their past”. The Adolf Rosenberger non-profit declined to comment.

The company said Rosenberger was not “hidden” in Porsche’s corporate history, pointing among other things to a plaque among several “team members” at the company’s official museum in Stuttgart, which named him as a “co-founder, shareholder and financier [and an] essential source of support in the early days”.

The plaque, which was installed two years ago, goes on to say that Rosenberger quit his managerial role at the company in 1933 — the year Adolf Hitler came to power — for “economic reasons” and adds that the Jewish businessman only received the initial capital he had put into Porsche when he “withdrew as a partner” two years later.

While civil society in Germany has been praised for its willingness to acknowledge the horrors committed by the Nazi regime, the wartime behaviour of some of the country’s richest industrial families remains a sensitive topic.

The account of Porsche’s history told at its 75th anniversary began in 1948, when Ferdinand Porsche’s son Ferry — to whom Rosenberger transferred his shares — designed the first Porsche-branded sports car, although Porsche has stated that “the groundwork for the company was laid in the design office of Professor Ferdinand Porsche”.

Porsche said Wolfgang Porsche and Hans-Michel Piëch — descendants of the co-founders who sit on the supervisory boards of Volkswagen and the family’s holding company — had “neither denied nor glossed over the involvement of their ancestors or their companies in National Socialism”.

“Essentially, both gentlemen state that they only became fully aware of the involvement of their family and their companies over the course of their lives [and] even if they bear no personal guilt, they are aware of their special responsibility for the past of their family members and their companies,” the company said.

Rosenberger, who in the US changed his name to Alan Robert, died weeks after the birth of Esslinger, who said his story was kept alive by his wife Anne Junckert and the documents held by the family.

While Esslinger said Junckert had at one point served as Ferdinand Porsche’s secretary, the company argued that her exact role was one of the questions under academic review.

The circumstances under which Rosenberger left the company and requests for a review of the matter by the non-profit both hung over the company’s €75bn listing last year.

In its prospectus, Porsche outlined that its brand risked being dented “for historical reasons” stating that “it is possible that the outcome [of the independent review] could reflect negatively on Porsche and its founders, and adversely affect the Porsche brand”.

It also said the company had reached a settlement with Rosenberger in 1950 after he sought compensation “because he was of the opinion that he had to leave Porsche because of his Jewish faith”.

While the descendants of Porsche and Piëch were among the main beneficiaries of Porsche’s initial public offering, Rosenberger’s family have no legal claims to financial compensation after the settlement in 1950, in which Rosenberger was granted 50,000 Deutsche mark, roughly equivalent to €165,000 today, and the choice of a Volkswagen Beetle or a Porsche 356. Rosenberger chose the Beetle.

Rosenberger “was actively being forgotten” during his lifetime, said Esslinger, adding that she was relieved his side of the story was being studied independently. “He lost so much,” Esslinger said, explaining that beyond family, homeland, culture and property, Rosenberger “lost his story”.

Fed rate pivot leaves stocks and bonds with ‘no room for error’

Market rally of the past two months has left markets vulnerable to disappointment, say big-name fund managers

A huge rally driven by the US Federal Reserve’s recent about-face on interest rates has left some big-name fund managers nervous that markets now look highly vulnerable to disappointing economic news.

Stocks and bonds have ripped higher over the past two months, and received a major boost when the Fed dropped its biggest hint yet that it could start unravelling its series of rate rises as soon as next spring. The ascent leaves US equities close to their highest levels on record.

In the short term, that fosters a celebratory mood. But it also means key assets are now priced for perfection — a benign world where central banks chop interest rates back down but without an economic recession forcing their hand. Big investors worry that these assumptions may not match up, and that it would take very little to force a rethink in a year studded with economic, political and geopolitical risks.

“We have an ‘everything rally’ at the year’s end. The magnitude is breathtaking,” said Sonja Laud, chief investment officer at Legal & General Investment Management, the UK’s largest asset manager. “I’m worried about that. There’s no room for error.”

US government bond prices are playing a central role in the late-2023 markets shift. Benchmark 10-year Treasuries have been gaining in price since October, when yields struck 5 per cent — the highest since before the financial crisis. At that point, investors were reflecting the message drummed in by the Fed over the summer that interest rates would stay high for the long haul to drag down persistent inflation.

However, throughout autumn, with inflation falling and signs of cooling in the robust US labour market, the Fed’s message began to shift.

First the central bank suggested that high yields were doing some of its heavy lifting — an acknowledgment that higher borrowing costs were starting to bite. Then officials started to talk about the possibility of cutting rates even with inflation still above target. Yields, which move inversely to prices, sank.

But the breakthrough came at Fed chair Jay Powell’s regular press conference on December 13, when he started to sketch out the potential path towards rate cuts and presented forecasts from other rate-setting officials, pointing to several cuts over the coming year.

Analysts and investors scrambled to catch up, pencilling in rate cuts earlier than they had previously predicted, and in much greater number. Subsequent efforts by Fed officials to cool market exuberance have had little impact.

Swaps markets show some investors are looking for six quarter-point rate cuts next year, against guidance from the Fed for a potential three. Such market measures are not perfect, and could mean that most investors are anticipating two or three cuts but a smattering of hedging for extreme outcomes is bending the median out of line.

Since those pronouncements from the Fed, yields have lurched lower, sinking well under 4 per cent and blasting through many of Wall Street analysts’ forecasts for where they might end 2024. The impact fanned out across other major government bond markets and sent stocks motoring higher.

“What the Fed delivered in terms of message was not a big shock. The market reaction was more of a shock,” said Vincent Mortier, chief investment officer at Amundi, Europe’s largest asset manager. Like Laud at LGIM, however, Mortier was worried that this left both stocks and bonds looking vulnerable. “For the markets to continue to rise needs an alignment of planets that’s very unlikely,” he said.

Some believe the potentially conflicting signals being sent by markets are no impediment to further gains. Days after Powell’s comments Goldman Sachs, which had already set a target of 4,700 for the S&P 500 for the end of 2024, raised that forecast to 5,100, seven per cent above prevailing levels.

“A lower cost of capital should allow stocks with weak balance sheets to ‘catch up’ to the few stocks that have led the market in 2023,” the bank said.

Some fund managers are reluctant to embrace that view, however, in part because of how frustrating trying to make forecasts this year has proved. Numerous times investors unsuccessfully tried to spot a switch in stance on interest rates from central banks still fixated on high inflation. Those efforts “seem a bit ‘old regime’,” said Alex Brazier, deputy head of the BlackRock Investment Institute. “Like we’re going back to how we used to be.”

Investors have also been puzzled by the failure of a widely-anticipated recession, and an associated slide in stocks, to materialise. The accelerating revolution in the use of artificial intelligence pumped up some of the biggest stocks on the planet by market capitalisation, pulling up otherwise lacklustre equity indices.

It took months of persuasion for investors to get the message from monetary policymakers that rates would stay high, particularly after a clutch of US regional bank failures, only for market rates to collapse shortly after the message from central banks had been absorbed.

“The past two years have been a humbling experience for strategists and investors,” said Kevin Gordon, a senior investment strategist at Charles Schwab in New York. “Nobody had a good idea what was going to happen. We’ve had this monster mash-up of prior crises merged into one short period — pandemic, supply chain, inflation, multiple bear markets in multiple sectors. It’s a lot to digest.”

The thorny issue now for investors is the US economy. Equities are anticipating a healthy earnings environment for corporate America while bonds are pointing to a recession. Fund managers have been left nervously watching individual data points, particularly around inflation, that threaten to spark outsized market reactions.

If the Fed cuts rates early, “they will be making a big mistake”, said Mortier at Amundi. “To assume inflation is no longer an issue . . . you can have a remake of mistakes in the past.” The bracingly upbeat reset in markets of late, particularly the drop in bond yields, could even precipitate a resurgence in inflation by stoking cheaper lending, investors warn.

On the flip side, a deep economic downturn could still materialise. “There’s a chance that central banks have pulled this one off, and they have been able to engineer a soft landing, but it’s premature to declare victory,” said Daniel Ivascyn, chief investment officer at Pimco.

“You have to keep two conflicting things in your head at the same time,” said Peter Fitzgerald, chief investment officer for multi-asset and macro at Aviva Investors. He said the Fed could cut rates early in the year but later feel the need to raise them again. “Markets can’t price that,” he said.

The other major source of potential volatility is politics. About 40 per cent of the world’s population will be subject to elections in 2024. The year will start with elections in Taiwan in January — a potentially delicate moment for China’s global relationships. The UK is likely to go to the polls at some point in the year. But many traders see presidential elections in the US in November as the obvious potential flashpoint, especially if Donald Trump prevails in his efforts to secure the Republican nomination.

“If Trump comes in, we don’t know his agenda yet,” said Andrew Pease, global head of investment strategy at Russell Investments. “If he does want to go for growth, he may well be great for equities,” he said.

However, fund managers are wary that elections — particularly in the US and the UK — could prise open cracks in government bond markets.

On several occasions in 2023, investors have proven themselves to be unusually highly attuned to fiscal policy, demanding higher yields even from the US government to compensate for significantly higher borrowing targets. One extreme but unlikely potential outcome for the Treasury market is a sell-off similar to the cratering of the UK gilt market under the brief prime ministerial stint of Liz Truss in 2022.

“I can’t quite see a Liz Truss moment in the US, but I can see the markets getting nervous about a tax-cutting, not-prepared-to-cut-spending Republican populist getting elected,” said Pease.

“The next 12 months would be an area where we would be cautious,” he said. “You don’t make big bets about direction”.

European plans for battery supply chain face delays as US lures components producers

Materials manufacturer Novonix issues warning as region struggles to compete with US subsidies

European plans of creating a battery supply chain for electric cars independent of China face big delays as companies focus on the US market because of clean energy subsidies, a top manufacturer has warned.

Chris Burns, a former Tesla engineer who heads Canadian battery materials producer Novonix, told the Financial Times that the US Inflation Reduction Act was drawing producers away from Europe.

Novonix, which manufactures the battery component graphite that is vital for the electric car transition, plans to focus on the US market because of incentives in the $369bn act, which the EU and UK have failed to match.

“We’ve always looked at expansion into Europe but financing becomes the biggest challenge,” said Burns.

“Our focus is on delivering the Riverside site [in Tennessee where it intends to produce graphite] and starting the next site in North America. It will keep us more than busy to the end of this decade.”

Burns’s comments highlight the challenge Europe faces in building a supply chain independent of China, the world’s leading supplier of graphite and other raw materials needed for batteries, without an injection of subsidies.

The challenge is particularly daunting for the anode component of the battery, which is made out of graphite, as China controls 75 per cent of this part of the supply chain, according to Benchmark Mineral Intelligence.

China’s manufacturers are increasingly targeting Europe and nearby regions for expansion after Washington moved to curb their presence in the US with tougher regulations.

Beijing also increased export controls on graphite in October.

Shanghai Putailai, a manufacturer of battery materials, announced in May plans to invest $1.3bn in building a plant in Sweden, while Chinese rival Ningbo Shanshan is weighing a similar investment in Finland.

In addition, Canadian battery materials group SRG Mining, which has partnered with Chinese technology group C-One, said it plans to build a $300mn-$500mn facility in Morocco to serve the US and European markets.

Novonix is aiming to produce 20,000 tonnes of graphite a year at Riverside in Tennessee before expanding further in North America to 150,000 tonnes annually.

Investors in Novonix include Korean battery maker LG Energy Solutions and Phillips 66, the US oil refining group that provides a critical source of non-Chinese coke needed to make graphite from the UK’s Humber refinery.

“We’ve looked at Europe and the UK on the idea of sourcing from Humber,” Burns said. “But those plans will be in the future.”

Burns said Novonix could start drawing up plans for a European plant later this decade but that would depend on commitments from carmakers and cell manufactures to buy its future supply.

A collapse in risk appetite may require a really dramatic geopolitical event or mistake by central banks

In most Hollywood horror movies, the monster is incredibly hard to kill. Not until the final moments of the film will it be dispatched and, even then, enough doubt will be created to leave room for a sequel.

So it has been with the great speculative era on the financial markets. A pandemic, a Russo-Ukraine war and even substantially higher interest rates have not finished off the risk-taking bonanza.

Take the technology sector as a starter. Much of its value lies in the future profits companies are expected to earn because of their superior growth potential. When bond yields rise as they have this year, investors should in theory use a higher rate to discount those future profits taking into account the time stocks have to be held to receive them. That means valuations should fall, not rise.

But the price/earnings ratio of the US technology sector is well above its three-year average and the sector’s shares have jumped more than 50 per cent so far this year.

Second, take the overall market valuation, as measured by the cyclically adjusted price/earnings ratio, or Cape. This averages profits over 10 years to allow for the economic cycle. In March 2022, as the US Federal Reserve started to push up interest rates, the Cape was 34; on the latest figures, the ratio has dropped only to 31, still well above the historical average. And markets have continued to rally in December.

Then there is bitcoin. The late, lamented Charlie Munger, the long-term colleague of Warren Buffett, said that investing in cryptocurrencies was “absolutely crazy, stupid gambling”. As if to prove his point, the past 18 months have seen the collapse of the crypto exchange FTX, and Binance — one of its biggest competitors — suffering a $4.3bn fine for money laundering and the forced departure of its founder. There could not be more alarm bells sounding if the entire New York City fire department was racing, with sirens blazing, past investors’ doors. But the bitcoin price has more than doubled this year.

One explanation for the continuation of investors’ risk appetite is that, while nominal interest rates have risen over the past couple of years, they have been outpaced by inflation; the real returns on cash and bonds have not been attractive. That has maintained the allure of risky assets.

Now inflation has fallen, real interest rates are mildly positive in the US, making cash and bonds theoretically more appealing. But investors do not expect this to last. The stock market rally in November was driven by the widespread expectation that the Federal Reserve would be able to start cutting rates in 2024.

But there is more to the frenzy than the prospect of a change in monetary policy. Surveys show that American voters are not happy with their economy, even though it has actually been doing remarkably well. In the third quarter, gross domestic product grew at an annualised rate of 5.2 per cent.

The economy has been supported by fiscal policy, with the budget deficit running at about 5.7 per cent of GDP in the current year. In other words, American pocketbooks are sufficiently flush that they can afford a little gamble.

So what could finally bring the speculative era to an end? In any individual asset class, a collapse usually arrives when investors lose confidence in the fundamentals that have been driving prices higher.

For tech stocks, this could occur if regulation (or geopolitical tensions) severely damage their profits outlook, For cryptocurrencies, regulation is also a risk, as is the collapse of an exchange that results in big losses for institutional investors. 

However, it does not seem as if the boom in tech stocks and crypto is being driven by the use of large amounts of leverage. Historically, the trigger for a more general collapse in risk appetites has been a tightening in credit conditions.

That was the reason for the plunge in mortgage-backed securities in 2007 and 2008, which then filtered through to concern about the health of the banking system. So it might be that a sharp fall in tech stocks or cryptocurrencies would simply cause speculators to switch to another asset class. 

A more general collapse in risk appetite may require a really dramatic geopolitical event, such as war between the US and China over Taiwan, or a central bank miscalculation in monetary policy, either by failing to contain inflation or being too tight for too long and causing a deep recession. These may seem like extreme outcomes but it usually takes an explosion to kill a movie monster.

- According to industry analysts, the vast majority of components for folding iPhones, including processors, lenses, PCBs, etc., would be almost the same as for existing iPhones.

Three-step plan would likely face resistance from both sides

Israel’s war cabinet met on Monday night to discuss a three-step plan put forward by Egypt for ending the war in Gaza, Israeli officials said.

The Egyptian proposal, a copy of which was reviewed by The Wall Street Journal, is the most comprehensive peace plan to be proposed to the two parties in the 11-week-old Gaza war.

Some terms of the plan are expected to be strenuously resisted by both sides.

The deal calls for an initial pause in fighting to allow for the release of Israeli hostages including children, women and elderly in need of urgent medical attention, in exchange for the release of around 140 Palestinian prisoners. It would be followed by the formation of a transitional government for the Gaza Strip and the West Bank made up of various Palestinian factions, including Hamas.

Israel’s war cabinet is meeting as pressure mounts to bring home the remaining 129 hostages, including 22 dead bodies, held by Hamas. It also comes as the death toll among Israeli soldiers rises.

Israeli minister Benny Gantz, a member of the three-member war cabinet, told a group of hostage families on Sunday night that there are several proposals in the works to release those held but signaled it wasn’t clear they were all being seriously considered, according to one of the attendees at the meeting.

“I can’t say there is progress yet,” Gantz said, according to the person at the meeting. “There are Egyptian proposals and there are other proposals flying around from all kinds of directions. I don’t even know which of them are even relevant.”

The White House National Security Council declined to comment on the Egyptian proposal.

On a visit to troops in north Gaza on Monday, Israeli Prime Minister Benjamin Netanyahu gave no signal that the war could end soon. “We’re not stopping, the war continues until the end,” he said.

Egypt shared the multiphased proposal late last week with Israel, Hamas, Qatar and the U.S. and has discussed parts of it with the Palestinian Authority, the semiautonomous body that controls parts of the West Bank. Those discussions, according to Egyptian officials, included the creation of a transitional, technocratic government after a cease-fire deal is reached between Israel and Hamas.

The proposal by Egypt, which has emerged as a key negotiator between Israel and Hamas, will face significant hurdles on both sides.

Including Hamas in any transitional government would run up against Israel’s overarching war aim of eradicating Hamas, while the release of senior Palestinian prisoners would meet resistance from Israel’s right-wing government.

“This deal is really a victory for Hamas and it’s really difficult for me to see the Israelis agreeing to that,” said Gershon Baskin, who previously negotiated a hostage-release deal on Israel’s behalf.

Hamas’s leader in Gaza, Yahya Sinwar, is unlikely to accept a deal that would see him relinquish power in Gaza and release Israeli hostages.

The war is also taking a heavy toll on Hamas and on the civilian population in Gaza, which is facing a monumental humanitarian crisis. More than 20,000 Palestinians, mostly women and children, have been killed, according to the Palestinian health officials. The figures don’t distinguish between combatants and civilians.

On Monday, the Israeli military said fighting continued in the Hamas stronghold of Khan Younis, where it is in the process of establishing operational control over the city’s main routes. Israeli airstrikes overnight killed dozens of Palestinians in central Gaza, health authorities in Gaza said.

The strikes caused damage to roads, hampering rescue efforts, and bodies still lay buried beneath the rubble, according to Palestinian health authorities and the Palestine Red Crescent Society, the main provider of emergency services.

Late Monday, the military said that soldiers found a Toyota Corolla vehicle with an Israeli license plate that belonged to the family of the late Israeli hostage Samer Talalka. Remnants of a rocket-propelled grenade as well as bloodstains, which were identified as belonging to another hostage, were found in the vehicle, the military said. Talalka and two other Israeli hostages were mistakenly shot by Israeli soldiers earlier this month after they emerged from a building in northern Gaza. Their deaths intensified pressure on Netanyahu’s government to take new steps to free the remaining hostages.

Late Sunday, the Israeli military said it had dismantled a large, underground tunnel complex that served as Hamas’s northern command center. It said the complex had sheltered commanders directing the Oct. 7 attack on southern Israel, in which Israel says around 1,200 Israelis, mostly civilians, were killed. The military said the tunnel network was also used to hold Israeli hostages. The bodies of five hostages were recovered from a tunnel tied to the northern command center, the military said. Analysts say that this is an indicator that the tunnels were very important to Hamas.

The Egyptian proposal’s first phase calls for Israel and Hamas to agree to a roughly 10-day pause in fighting, during which all civilian hostages being held in Gaza would be released in exchange for Israel releasing around 140 Palestinian prisoners.

That phase also calls on Israel to withdraw its forces from residential communities in Gaza and allow the free movement of Palestinians across the strip. Israel would also pause drone surveillance and allow a significant increase in aid going into Gaza, especially to the northern part of the enclave, access to which has been restricted.

In the second and third phases, Israel and Hamas would negotiate the release of female Israeli soldiers, followed by male Israeli soldiers, in return for large numbers of Palestinian prisoners.

Those hostage-prisoner exchanges, along with the formation of the transitional, technocratic government, pose a thicket of negotiating challenges for both sides.

The transitional government plans would require rivals Hamas and Fatah to reconcile and work together. Once the transitional government took over, elections would be held in which Palestinian Authority President Mahmoud Abbas, who is 88, would be succeeded by a younger leader accepted by a majority of Palestinians.

While U.S. officials have previously urged a role for the Palestinian Authority, Netanyahu has balked at the group’s involvement in postwar Gaza.