POLITICS. ECONOMY. LAW

The pace of dividend cuts in 2017-Q3 has decelerated from what we were observing a month ago, where suddenly, 2017-Q3 is perhaps shaping up to be the best quarter to date in 2017. The following chart compares where the cumulative number of dividend cu...

Just in case you wrongfully assumed that President Trump and Attorney General Sessions were credible authorities on border security, read this summary of a recent Department of Homeland Security (DHS) report.

Sneaking across the U.S. border from Mexico is tougher than ever before, and U.S. agents are catching or stopping the majority of those who attempt to do so, according to a new report by the Department of Homeland Security.

The report, published last week by the agency’s Office of Immigration Statistics, estimates that 55 to 85 percent of attempted illegal border crossings are unsuccessful, up from 35 to 70 percent a decade ago. In one telling sign of the difficulty, the number of illegal migrants and deportees who make repeated attempts to get in has also fallen dramatically, because so many would-be migrants are giving up.

The report’s findings challenge depictions of the U.S. border as a place where American law enforcement is overwhelmed and ineffective. President Trump has ordered DHS to make preparations for the construction of a wall between the United States and Mexico, and last week he met with Democratic Party leaders to negotiate additional border security improvements.

The new DHS report indicates the agency has already made significant progress in its ability to stop people from sneaking in or consider trying. Arrests along the Mexico border fell to historic lows during the Obama presidency, then dropped further after Trump took office vowing a crackdown.

 Trump’s defective posture on immigration.

We've turned our unis into aimless, money-grubbing exploiters of students (?)

As an economist, Ross Gittins often has substantial things to say.  But as a Leftist he is also a compulsive moaner.  So the points he makes below are cogent but most of them are disputable.

The one area wherein I agree wholeheartedly with him is his condemnation of relaxed assessment standards for overseas fee-paying students.  This practice is, I think, still a minority one but will surely be a big negative eventually when our universities send home to Asia students whose knowledge and skills don't match what is on the pieces of paper we give them.  It devalues our degrees.

Gittins may also have half a point in saying that Lecturers are poorly paid.  In my day we were paid well above average and there does seem to be some slippage from that.  But with salaries closing in on $100,000 pa it's still a long way from  poverty.  Many junior software engineers get about that and they are undoubtedly bright sparks.

And Gittins again has half a point in saying that tenure is now harder to get.  I was appointed with tenure, a rare thing nowadays. But there has to be a balance.  Tenure protects divergent thinking but it also promotes laziness. Once you can't be fired, why work?  I suspect that the delayed granting of tenure that we now see is not a bad balance.  It ensures that for at least a large part of one's academic life we do some work.

But his other points are contentious.  Recorded Lectures are bad?  I would think they are wholly good.  They relieve students of the pressure to take notes, though they can still take notes if they want or need to.  There was only one course I did in my undergraduate days in which I took notes.  Otherwise I concentrated on listening instead. And I am sure I learnt far more that way.  My grades certainly did not suffer from it.

"Overcrowded" lecture halls?  I don't know what he is talking about.  A lecture hall is not a high school classroom.  In my academic career I often fronted up to a lecture in an auditorium with 1,000 or more students in front of me.  And I was able to allow students to interrupt with questions.  So I would think it was a poor lecturer who couldn't handle that.

He says that universities put too much pressure on academics to do research.  I would say that they do too little.  There are now whole tertiary institutions which devalue research.  And many lecturers in all institutions do little of it. But it is only by doing research that you get a real hold on knowledge in your selected field.  You cannot be at the cutting edge without doing your own research.  Otherwise you are just reading the conclusions of others.

But in the end, Gittins's big beef is that the present system of running our universities amounts to a sort of "privatization", which is of course anathema to Leftists.  I think he should throw off those ideological blinkers and look at what is actually happening.  He looks at that so far only "through a glass darkly"


Of the many stuff-ups during the now-finished era of economic reform, one of the worst is the unending backdoor privatisation of Australia's universities, which began under the Hawke-Keating government and continues in the Senate as we speak.

This is not so much "neoliberalism" as a folly of the smaller-government brigade, since the ultimate goal for the past 30 years has been no more profound than to push university funding off the federal budget.

The first of the budget-relieving measures was the least objectionable: introducing the Higher Education Contribution Scheme, requiring students – who gain significant private benefits from their degrees – to bear just some of the cost of those degrees, under a deferred loan-repayment scheme carefully designed to ensure it did nothing to deter students from poor families.

Likewise, allowing unis to admit suitably qualified overseas students provided they paid full freight was unobjectionable in principle.

The Howard government's scheme allowing less qualified local students to be admitted provided they paid a premium was "problematic", as the academics say, and soon abandoned.

The problem is that continuing cuts in government grants to unis have kept a protracted squeeze on uni finances, prompting vice-chancellors to become obsessed with money-raising.

They pressure teaching staff to go easy on fee-paying overseas students who don't reach accepted standards of learning, form unhealthy relationships with business interests, and accept "soft power" grants from foreign governments and their nationals without asking awkward questions.

They pressure academics not so much to do more research as to win more research funding from the government. Interesting to compare the hours spent preparing grant applications with the hours actually doing research.

To motivate the researchers, those who bring in the big bucks are rewarded by being allowed to pay casuals to do their teaching for them. (This after the vice-chancellors have argued straight-faced what a crime it would be for students to be taught by someone who wasn't at the forefront of their sub-sub research speciality.)

The unis' second greatest crime is the appalling way they treat those of their brightest students foolish enough to aspire to an academic career. Those who aren't part-timers are kept on serial short-term contracts, leaving them open to exploitation by ambitious professors.

However much the unis save by making themselves case studies in precarious employment, it's surely not worth it. If they're not driving away the most able of their future star performers it's a tribute to the "treat 'em mean to keep 'em keen" school of management.

But the greatest crime of our funding-obsessed unis is the way they've descended to short-changing their students, so as to cross-subsidise their research. At first they did this mainly by herding students into overcrowded lecture theatres and tutorials.

An oddball minority of academics takes a pride in lecturing well.

Lately they're exploiting new technology to achieve the introverted academic's greatest dream: minimal "face time" with those annoying pimply students who keep asking questions.

PowerPoint is just about compulsory. Lectures are recorded and put on the website – or, failing that, those barely comprehensible "presentation" slides – together with other material sufficient to discourage many students – most of whom have part-time jobs – from bothering to attend lectures. Good thinking.

To be fair, an oddball minority of academics takes a pride in lecturing well. They get a lot of love back from their students, but little respect or gratitude from their peers. Vice-chancellors make a great show of awarding them tin medals, but it counts zilch towards their next promotion.

The one great exception to the 30-year quest to drive uni funding off the budget was Julia Gillard's ill-considered introduction of "demand-driven" funding of undergraduate places, part of a crazy plan to get almost all school-leavers going on to uni, when many would be better served going to TAFE.

The uni money-grubbers slashed their entrance standards, thinking of every excuse to let older people in, admitting as many students as possible so as to exploit the feds' fiscal loophole.

The result's been a marked lowering of the quality of uni degrees, and unis being quite unconscionable in their willingness to offer occupational degrees to far more people than could conceivably be employed in those occupations.

I suspect those vice-chancellors who've suggested that winding back the demand-determined system would be preferable to the proposed across-the-board cuts (and all those to follow) are right.

The consequent saving should be used to reduce the funding pressure on the unis, but only in return for measures to force them back to doing what the nation's taxpayers rightly believe is their first and immutable responsibility: providing the brighter of the rising generation with a decent education.

SOURCE




Town of the damned: the Australian town with ‘staggering’ child sex abuse rate

Aboriginal men very commonly abuse their women and children but it seems to have got really out of hand in this community.  Only a much increased police presence would seem to offer any hope of control

ONE tiny town is in the grip of a paedophile epidemic which in a population of 1400 has seen 184 sexually abused. Warning: Confronting.

ROEBOURNE, Western Australia, is in the grip of a paedophile epidemic that has seen such a high incidence that child sex abuse is “normal”.

Police have charged 36 men with more than 300 offences against 184 children from Roeburne and surrounding communities.

West Australian Police Commissioner Karl O’Callaghan has described the rate of alleged child sex offending in Roebourne as “staggering” and the problem as “a cancer”.

The former gold rush town, which has a greater population of around 1400, lies in the Pilbara region 1500km north of Perth.  The Pilbara, with vast mining resources and sparsely populated Aboriginal towns, covers 500,000 square kilometres stretching from the Indian Ocean to Central Australia.

Roebourne, where the streets are lined with brick and stone colonial buildings, has dwindled since its 19th century boom as the largest settlement between Darwin and Perth.

It has now been singled out as a festering mess of intergenerational child sexual abuse where kids are more likely to be raped than almost anywhere else on earth.

“It’s a war zone out there and the victims are little kids,” Mr O’Callaghan told the ABC in a recent news report following the multiple arrests of local men under ­Operation Fledermaus.

In a nine-month operation across areas including Roebourne and the neighbouring city of Karratha, police identified almost three times as many suspects as the number arrested.

The scale of the abuse uncovered was the worst WA Police had ever seen and the communities were in an “almost unrecoverable crisis”, Mr O’Callaghan claimed.

Earlier this month, The Australian reported that child sex abuse in Roebourne was so “normal” that even jailing known paedophiles was not enough to end it.

That was the opinion of West Australian Child Protection Minister Simone McGurk who visited Roebourne following the ­Operation Fledermaus arrests. “Yes, you would have to say that, through the sorts of numbers we are starting to see,” she told West Australian Bureau Chief, Paige Taylor. “It’s intergenerational. Many of these perpetrators were victims themselves.”

Alcohol, drugs and violence afflict the Roebourne and surrounding communities whose population is more than half indigenous.

In September last year, police made a public announcement to residents encouraging them to report child abuse.

Several Aboriginal women, young people and children came forward and in the same month, police charged three Roebourne men with child sex offences against girls aged between 13 and 16.

A 45-year-old man was charged with indecent dealing with a child over 13 and under 16 years, offering a prohibited drug and possession of drug paraphernalia.

A 52-year-old man was charged with two counts of sexual penetration of a child over 13 and under 16 years and one count of indecent dealing with a child over 13 and under 16 years.

A 39-year-old man has been charged with indecent dealing with a child over 13 and under 16 years.

Minister McGurk said “child protection workers, specialist police officers and other dedicated resources [were] on the ground giving support to the families and the community”.

“I’d like to acknowledge the strength of the children, the families … who have the courage to come forward,” she said.  “Actually coming forward is a first step in systemic change.”

Commissioner O’Callaghan, however, identified another factor in the community, which is 80 per cent on welfare. In an article he wrote for The West Australian, Mr O’Callaghan said child sex offenders were spending welfare money on drugs and alcohol to lure children.

“A further pattern emerging is that offending activity seems to increase when offenders receive substantial amounts of money and spend it on a combination of alcohol, drugs, gambling and sex.

“Knowing that welfare payments contribute to increases in many types of offending, particularly alcohol and drug-related offending, is hardly rocket science.

“Linking such payments to an increase in sexual abuse of children, however, is a much newer phenomenon.”

Communities in WA and South Australia were trialling a cashless debit card for welfare recipients, which cannot be used for alcohol, gambling or illicit substances.

Seven years ago, a WA government report painted a bleak picture of the life of Aboriginals in Roebourne.

The Roebourne Report said alcohol abuse, child neglect, violence and crime were occurring at an alarming rate.

Annual alcohol consumption in Roebourne Shire was 26.8 litres per person, three times the state average.

Cannabis use was rife among young people.

On fortnightly welfare pay days, gambling soared and children were left to their own devices. Unsupervised children roamed the streets at night and house break-ins were viewed “as the rite-of-passage for many Roebourne youth”.

A high proportion of Roebourne children considered vulnerable in terms of their physical, social and emotional development.

According to Roebourne local, Violet Sampson alcohol abuse has turned the town’s grandmothers into safe house operators.

Ms Sampson told news.com.au that she began looking after her grandchildren when their parents were out drinking. “I have three kids here,” she said. “When their parents split up and went off drinking, the kids came to me.

“When they need a good sleep, without overcrowding and a feed, I take them. “And they can go to school in the morning.

“It’s what grandmothers do here in Roebourne, Karratha. Aboriginal families we look after the kids.”

SOURCE






'If you don't know, vote no': Gay, conservative professor joins the push to oppose same-sex marriage

Flinty was a good-looking guy in his early years so I always suspected that he had a good time with the ladies. It seems I was wrong

Professor David Flint, who is openly gay but discreet about his personal life, quoted another gay conservative, Sydney broadcaster Alan Jones, to argue why voters should vote 'no' in the federal government's postal vote survey.

'As Alan Jones said in 1999, if you don't know, vote no,' the 79-year-old academic told Sky News Australia.

'We just don't know what's going to happen.'

Jones, a perennial top-rating broadcaster on radio 2GB, is actually in favour of gay marriage but shares former Liberal prime minister John Howard's concerns about religious freedom.

'I'll be voting 'Yes' for same sex marriage. But John Howard is right. We must protect parental & religious freedoms and freedom of speech,' Jones tweeted last week.

The phrase 'if you don't know, vote no' was used by opponents of Australia becoming a republic during the November 1999 referendum on whether to cut ties with the Queen.

That phrase actually belonged to future prime minister and Howard government minister Tony Abbott, who was the leader of the 'No' case 18 years ago as an ardent constitutional monarchist.

Mr Abbott is now a leading 'No' case campaigner, despite having a lesbian sister, Christine Forster, who supports gay marriage.

Professor Flint, who is also a monarchist, has joined gay couple Ben Rogers and Mark Poidevin in publicly speaking out against gay marriage.

The men from Wollongong, south of Sydney, fell in love 15 years but don't want to tie the knot. Mr Poidevin, a practising Catholic, opposes gay marriage on the grounds it could be a slippery slope that leads to polygamy.

'If we make one exception for one community - that being the same-sex couples - where does it stop?,' he told the ABC's 7.30 program earlier this month.

'Do we then see other cultures being allowed to have multiple marriages?  'Do we allow, see the age of consent being lowered for another group of minorities? 'That is my concern of where it would lead.'

Mr Poidevin hasn't always opposed the idea of same-sex marriage, having popped the question to his partner five years ago.

Professor Flint, a former head of the Press Council and the Australian Broadcasting Authority, is a former Labor Party member turned conservative with close ties to John Howard, who is spearheading the 'No' campaign.

Gay former High Court justice Michael Kirby is a monarchist who supports gay marriage and will be voting 'Yes'.

The Coalition for Marriage launched its 'Vote No' campaign at Sydney's Darling Harbour on Saturday night.

Ballots are being sent to Australian households and are due back by November 7.

SOURCE






AGL gets more from Greenie subsidies than it get from burning coal

No wonder it wants to shut down its coal generators -- thus leaving Australia with insufficient base-load power

Australians are on track to pay more than $500 million to AGL to fund its flagship solar generators, as the energy giant prepares to shut down its Liddell coal power station, a move that has prompted warnings of a power shortfall that could lead to blackouts and price hikes.

The company has already ­secured $230m in direct grants and is forecast to gain far more under the renewable energy ­target, deepening the political divide on energy policy as the federal government considers cutting ­future aid to make coal more competitive.

The scale of the subsidy is now a key question in the government’s debate on whether to ­embrace a clean energy target, as opponents of the idea challenge AGL and others to prove that wind and solar schemes can work without taxpayer handouts.

Malcolm Turnbull and his cabinet ministers are yet to decide on whether to adopt a clean ­energy target but are unwilling to continue the heavy subsidy, ­putting a priority on more reliable power supplies, including coal and gas.

The two AGL solar farms in western NSW generate a combined 359,000 megawatt hours of electricity, just 4 per cent of the ­capacity of Liddell, but have ­secured more long-term investment than the coal power station under laws that continue the ­renewable subsidy until 2030.

Investors are warning the ­government against a halt to the taxpayer assistance for renewables, arguing this would lead to an investment freeze that would ­intensify the energy shortages in the decade ahead.

Former resources minister Matt Canavan said the subsidy going to AGL from taxpayers and electricity consumers contrasted with claims that renewables would be more efficient than coal regardless of government assistance.

“AGL keeps telling everybody that renewables no longer need a subsidy — well, if that’s the case, why do we need a clean energy target?” Senator Canavan said.

The Australian understands the government is aiming to encourage more investment in reliable power with a “capacity pricing” structure that could favour coal and gas and meet Mr Turnbull’s stated aim of improving the ability to “dispatch” power at short ­notice.

Even so, AGL is seeking to shut Liddell in 2022, rejecting a ­government push to keep it open a further five years, and is planning to replace it with renewable power and “peaking” gas that can fire up when electricity supply is low.

AGL chief financial officer Brett Redman told The Australian the subsidies for the solar farms would shrink in the decade ahead as the value of renewable energy certificates declined.

Mr Redman also sent a clear warning that the government’s looming decision on a clean ­energy target would not change the company’s assessment that a new coal-fired power station was not viable.

“The economics are now somewhat overwhelming — the world of electricity generation is heading down the renewables path,” Mr Redman said.

“Even without the impact of carbon-emissions policies, we would absolutely be heading down the path of building more renewables. Coal-fired power will not be built in that world.”

The AGL solar projects at ­Nyngan and Broken Hill received $166.7m in direct grants from the Australian Renewable Energy Agency and another $64.9m from the NSW government, as well as qualifying for credits under the renewable energy target.

The Australian estimates the Nyngan project receives more than $18m a year for its 233,000 megawatt hours given an $80 price for renewable energy ­certificates, while the Broken Hill project receives about $10m a year for its 126,000 megawatt hours.

While taxpayers funded the initial grants, households pay for the renewable certificates because the cost is passed on to them in their electricity bills.

TFS Green analyst Marco Stella wrote in RenewEconomy on September 4 that the spot price for these certificates rose above $85 in late August.

AGL stands to receive $589m from the original grants and consumer subsidies for the two solar projects over the period to 2030 if the price holds at $80 until 2020 and then falls to $60 for the ­subsequent decade, an outlook described as conservative by two sources familiar with the market. This falls to about $480m if the renewable certificates fall to $30 in the next decade. It drops to $375m in the unlikely event the certificates fall to zero from 2021.

AGL sold the two projects to its Powering Australian Renewables Fund last November, making no cash profit in the sale. It owns 20 per cent of the fund while 80 per cent is held by Queensland Investment Corporation for clients including the Future Fund.

Mr Redman said the two projects were built in response to government calls for early investors to demonstrate large-scale solar and when the cost of the technology was much higher than it is today.

He said “we’d build a wind farm in every backyard” if the spot price of certificates stayed at today’s levels, but added this was unrealistic and the values were likely to fall in the early 2020s as they had in the past.

The government is weighing up whether to embrace a “reliability energy target” or a “strategic reserve” to offer financial rewards to AGL and others to build gas power, given the industry belief that major new coal power stations will not be viable.

This will get a higher priority than new schemes to subsidise renewables.

However, the rewards to AGL and others for their existing solar or wind projects cannot be altered because the Senate is highly unlikely to allow a change to the renewable energy target rules that apply until 2020 and continue payments until 2030.

The government has decided it has nothing to gain from ­starting a fight over the RET that it cannot win, leading it to keep the rules as they were agreed by Tony Abbott as prime minister in 2015.

SOURCE

Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

A few weeks back, a friend of mine bought himself a used Nissan Leaf. Even though it is fully electric, this car is a long way from being a Tesla—its range is less the 100 miles and quite honestly, it is kind of ugly. Even so, I am pretty sure that no purchase in his life has made him happier. It actually makes him giggle.

Based on this small sample size, I am quite willing to announce the day of the electric vehicle (EV) has arrived. Yes they are still quite expensive although his used 2015 with less than 20k miles on the odometer cost about $11,000. Yes their low range and high recharging times make them still something of a hardship to own. But the upside is a luxuriously quiet ride combined with hiccup-quick acceleration and premium handling due to a very low center of gravity. This is in addition to a seriously reduced need for routine maintenance, lower costs for fuel, and the satisfaction of knowing your vehicle is arguably the cleanest set of wheels around. But just to make sure my friend has plenty to giggle about, Nissan has built in an incredible electronic feature set. His favorite seems to be the announcement of available chargers whenever his range drops below 20% complete with directions for finding them.

But even if EVs are the future, the current reality is that they still constitute less than 1% of cars on the road. And nobody is making money selling them. This leaves the auto giants with a monumental problem. If they spend the big money developing EVs, they will be manufacturing a money-loser that will take sales away from the highly profitable vehicles they already sell—a least for the foreseeable future. And so the temptation to not change anything is very high. This problem is especially acute in Germany where the automakers sincerely believe that they already make the best cars on the road.

The Arrival of Tesla—German Auto Giants Face an Existential Challenge

BMW, Daimler and Volkswagen have been struggling to adapt to the advent of the electric car, held back by conservatism and internal challenges. Now, Tesla is making inroads in Germany -- and the country's automakers face an uncertain future.

Simon Hage, September 15, 2017

At the start of this year, Karl-Thomas Neumann was planning a minor revolution. His plan was to transform German carmaker Opel, known for basic models like the Astra and the Corsa, into a purely electric brand. Electric cars were to be designed at Opel's R&D center in Rüsselsheim, near Frankfurt, destined for the world market.

As the head of Opel at the time, Neuman was convinced that the end of the internal combustion engine was closer than many believed. He now hoped he could bring the necessary technology to Germany.

His idea was also born out of necessity. As a small manufacturer, it is especially challenging for Opel to adjust its internal combustion-powered cars to increasingly stringent emissions standards. Opel vehicles had attracted unwanted attention because of their excessive emissions and Neumann was at least trying to treat the diesel crisis as a chance to start over.

His ambitious electric plan for Opel failed, however, when the company's U.S. owner, General Motors, suddenly lost interest in the European market and sold Opel to French rival PSA in the summer.

Neumann no longer works for Opel, but he still believes his ideas are the right ones. The former CEO fears that the auto industry - especially BMW, Daimler and Volkswagen - has underestimated the momentum of the transformation, and that it is resting on its laurels instead of developing new concepts.

The German auto industry needs "a clean break," says Neumann. It has to "accept that diesel is gradually going extinct." Of course, he adds, the auto industry can still make money with internal combustion engines for a number of years. "But it's time to reduce complexity, that is, develop a much smaller number of different engines," says Neumann. He recommends car companies use the money they save to invest heavily in electromobility.

He has a warning for the entire sector: Unless the auto industry consistently reforms itself, it "runs the risk of being outpaced by new competitors from China and the United States."

Customers and, in some cases, companies, are still skeptical. The arguments against electric cars cited by critics include their lack of significant range, high costs and questionable carbon footprint.

But does that mean that automobile manufacturers should simply continue pursuing the status quo?

Unprecedented Pressure for Carmakers

For decades, the auto industry kept building bigger, faster and more powerful vehicles outfitted with gasoline and diesel engines. And business has been good. In 2016, BMW, Daimler and Volkswagen reported €465 billion ($552 billion) in sales and close to €30 billion in profits. But their growth came at a high price.

The systematic deception got started in the companies' development departments about 10 years ago. Unable to satisfy increasingly stringent emissions requirements, the engineers resorted to software that was designed to cheat the system. It guaranteed good emissions results in vehicle testing stations, but allowed the supposedly clean vehicles to emit harmful nitric oxides on the road. In the United States, Volkswagen has already admitted to committing emissions test fraud and obstructing justice. VW and Daimler are currently under investigation in Germany. Only BMW has been spared the judicial scrutiny.

After DER SPIEGEL in July exposed decades of collusion between the three companies on technology, suppliers and exhaust-gas-cleaning systems, the three major German automakers could face further legal troubles. They are making intensive preparations for possible investigations or searches. At BMW, which denies any wrongdoing, 18 lawyers are now analyzing data and documents spanning almost three decades.

The suspicions of collusion are also complicating the plans of BMW, Daimler and VW to cooperate more closely on topics like mobility services and autonomous driving. "From now on, there will always be a lawyer present at any meeting with a competitor, no matter how harmless," an auto company representative explains. Instead of a collective spirit of optimism, a feeling of mutual mistrust reigns.

The German auto industry has never faced this much pressure. Auto executives describe it as a "perfect storm." The old business model is increasingly coming under pressure, both legally and economically.

More and more countries are planning to phase out combustion engine technology. Great Britain and France want to ban cars with gasoline and diesel engines by 2040, while Norway plans to take the same step by 2025. China is expected to impose a minimum sales quota for electric cars starting next year. Surveys show that 60 percent of Chinese car buyers could imagine buying an electric vehicle as their next car.

To be able to sell its products in the future, the auto industry needs alternative, low-emission engines. It also needs to offer mobility concepts like car sharing and ride services. Otherwise the business will no longer be run by BMW, Daimler and Volkswagen in the future, but by foreign competitors.

Tesla Arrives in Germany

The biggest cause for concern in the German auto industry is an American rival, Tesla. Founded in 2003, it has achieved what the German manufacturers failed to do for years: build an electric car that many customers want.

More than 450,000 consumers have already pre-ordered Tesla's new Model 3, and the company says that it is receiving another 1,800 orders a day. "Tesla now has a cult status that other brands can only dream of," says Neumann.

The German carmakers' identity crisis comes at a convenient time for Tesla. While the U.S. company has been restrained in its public statements, Tesla Managers speak off the record about "illegal manipulations in the context of the diesel scandal."

The U.S. company smells an opportunity to finally gain a foothold in Germany, a country that has had relatively little affinity for Tesla in the past and is the home market of Daimler, BMW and VW. The company has more than doubled its German sales in the first half of 2017, for a total of 2,000 vehicles. This is an impressive number for Germany, which lags behind other developed nations when it comes to electric cars.

Management at BMW, Daimler and VW are working on counter-offensives.

The office of Klaus Fröhlich, BMW's head of development, is dominated by model cars on the window sill, relics from the old auto world. The collection ranges from long-extinct brands like the NSU Ro 80, car of the year in 1968, to the Porsche Carrera and the Land Rover Defender, a muscular SUV.

Fröhlich actually wants to talk about BMW and his planned electric strategy, not about the competition. But he keeps coming back to the company's California rival. The BMW executive mentions the word "Tesla" 16 times within 60 minutes.

He sees BMW as being "neck and neck" with Tesla, but plans to have trumped his US rival in no more than three years. Like Tesla, BMW will place a stronger emphasis on "emotionalizing" its electric cars in the future, with wider tires and more dynamic designs.

Fröhlich draws three curves on a piece of graph paper. They illustrate the likely increase in electric car sales in the coming years. The first curve represents sales in China. Starting in 2020, it points almost vertically upward.

BMW plans to produce cars more efficiently to satisfy exploding demand. Plants and vehicle designs are being upgraded so that every car can be flexibly outfitted either with an internal combustion engine, a plug-in hybrid or a pure electric powertrain. As demand increases, the company expects to be able to start producing hundreds of thousands of electric cars by essentially flipping a switch. As such, says Fröhlich, BMW will be ready if consumers in China decide to buy only electric cars.

Fröhlich's second curve represents the east and west coasts of the United States. According to his calculations, the electric car boom will begin there in about 2025. Germans will follow suit about five years later. Fröhlich describes Germany as a country "where they like to talk about e-mobility" but where "relatively little is being done." He blames policymakers, pointing out that Munich, for example, currently has only 50 charging stations.

The Auto Giants' Dilemma

Like all German manufacturers, BMW is trying to perform a balancing act. The company wants to continue selling gasoline and diesel vehicles while simultaneously preparing for the electric age. It has announced 25 electric vehicle models for 2025, but the startup costs are massive. BMW has already invested sums in the double-digit billions in sustainable drives. The Munich company is making a bet on the future. At the moment, it is losing money on every electric car it sells.

The auto industry's dilemma is that its new business, which is still losing money, is cannibalizing its profitable, existing one, creating incentives to delay the necessary change.

Some of the companies' efforts to prepare for the future seem half-hearted. In late 2016, Daimler, Ford, BMW and VW announced a joint initiative for rapid-charging stations. The project was scheduled to begin in 2017, with about 400 locations across Europe planned in the first phase.

Nine months have passed since the announcement and the current number of charging stations is still zero. The first charging station is expected to open this year, allegedly with charging technology superior to Tesla's. By comparison, Tesla has already installed more than 6,300 of its so-called Superchargers worldwide. It aims increase that number to 10,000 by the end of the year.

The U.S. company still isn't making a profit on its electric vehicles, but unlike the German automakers, Tesla does not have to worry about a massive existing car business. This helps explain Tesla's aggressive approach to marketing, which makes it seem like the company is less interested in selling cars than in changing the way the world uses energy.

That doesn't mean it's true. Tesla founder Elon Musk is, of course, pursuing uncompromising economic interests. But his message sounds more convincing than that of the German auto industry, which constantly fluctuates between commitments to electromobility and statements of loyalty to the internal combustion engine. Their mantra is that the diesel engine is far from finished.

The industry spent decades resisting overly substantial changes. Anyone who talked about electromobility or car sharing in the 1990s was immediately mocked.

VW offers the most prominent example. Top executive Daniel Goeudevert wanted to reform the brand back in 1991 by introducing smaller, more fuel-efficient cars, but failed. He was also working on a car-sharing joint venture with German national railroad Deutsche Bahn. His conclusion, at the time, was that fewer and fewer people wanted to own their own cars in favor of using shuttle services.

When Goeudevert predicted the demise of the diesel engine, the Volkswagen leadership decided it had had enough. In his last meetings with VW, Goeudevert was told something he never forgot: "You will be amazed at all the things we can still get out of diesel."

The 75-year-old now lives in a town near the Swiss capital Bern, rides an e-bike and regards the vehicle industry from a distance. "Because of its great successes, the auto industry has become blind to the true needs of customers," he says. "For much too long, Volkswagen and the others were only interested in speed and luxury."

In his view, German carmakers' only hope is to drum up enthusiasm among young people. Many teenagers feel more of a connection to the Apple logo than the Mercedes star.

A quarter of a century after his departure, Goeudevert's ideas are now treated as common sense. His former employer, Volkswagen, wants to become hipper. Designers and futurologists run riot in its Future Center in Potsdam outside Berlin, in an idyllic location on the Havel River. People wear sneakers, speak a lot of English and reject formality.

Its latest development is a concept vehicle called Sedric, which VW hopes will serve as a driverless robot taxi in urban areas sometime in the next decade. The designers are especially proud of its futuristic interior, which includes a large display for multimedia applications, such as karaoke, a tool that is meant to appeal primarily to Asian customers.

New Ways of Working

The VW employees in Potsdam are also trying to come up with new ways of working. In conversations with retirees, for example, they discovered they had to simplify the process of ordering a robot taxi as much as possible. The designers developed a remote control with only one button, aptly named the One-Button. VW is even seeking the advice of small children. The Future Center recently played host to the neighboring kindergarten.

"We are just getting started at establishing direct contact with our retail customers," says Thomas Sedran, who has been the chief of strategy at the Volkswagen Group for about two years. This is "a real challenge for a company that has before now primarily been shaped by its focus on engineering." As absurd as it sounds, for years Volkswagen had almost no idea who was driving its cars and what services VW drivers would like to use. Volkswagen interacted mainly with its authorized dealers.

The company is now painstakingly trying to approach its customers through apps and shuttle services. Starting next year, VW plans to offer a kind of on-call bus service in Hamburg. The new service, which will initially consist of 200 electric shuttles, is a test to determine whether VW can make money with taxi services. Most of all, though, it is an attempt to create long-term brand loyalty among customers.

Chief strategist Sedran believes that VW can no longer afford to miss out on any new development. He predicts a "major shift in the entire auto industry," which could even include the disappearance of individual brands.

Whether Volkswagen, Daimler, and BMW will be among the survivors depends on whether pioneering thinkers like Sedran prevail. Many managers remain unconvinced that deep-seated reforms are truly necessary. Some even believe that the diesel crisis is somehow over.

They feel persecuted by their critics, including Deutsche Umwelthilfe, an environmental group fighting in court for diesel bans. And by the politicians who are sharply critical of the automakers' manipulation of emissions values. And, finally, by the press for its reporting of these stories. "A key industry is being criminalized here," is a sentence often heard at the auto companies. VW Chief Executive Officer Matthias Müller believes that there is an "ongoing campaign against the diesel engine."

Many managers also express the hope that the Tesla problem will eventually resolve itself. They argue that their U.S. rival's battery technology isn't mature, which keeps Tesla from producing its cars in a cost-effective manner. "A company like that, which is only losing money, could never exist in Germany," said a top executive with a German automaker.

His analysis is not exactly wrong. Investors could in fact lose patience and cut off Tesla's funding. But would that change anything? Even a Tesla bankruptcy would not stop the transformation, because other manufacturers, especially from China, have also discovered the appeal of electromobility. And they are doing their utmost to achieve global market leadership.

Ten years ago, another technology sector made the mistake of underestimating its challenger: the mobile communications industry. Manufacturers like Nokia and Blackberry had long been the undisputed market leaders, but success made them sluggish. New, more innovative competitors had hardly appeared on the scene before the former pioneers were forced from the market.

One anecdote from an executive meeting at RIM, which produces the Blackberry, has now become legendary. It is said that when managers delicately passed around an iPhone, most of those present just shook their heads. The phone with the large screen would not make it, the managers believed, because the battery performance was insufficient.

The good old mobile phone, they argued, was far from dead. more