Governments should let failing companies like GM and its European subsidiary Opel go under if they suffer from weak management that can't master a declining economic environment, a Fortune 500 CEO told DW-WORLD.DE.
If GM can't pull through a crisis, it's not for the state to intervene, Richenhagen said
Martin Richenhagen, the head of the AGCO agriculture company and the only German CEO of an American firm in the Fortune 500. He talked to DW-WORLD about the G20 financial summit and the global economic crisis.
DW-WORLD.DE: Most economists have called the G20 summit a success. What is your opinion on the summit as a CEO of a global company?
Martin Richenhagen: The most positive aspect of the summit for AGCO is that the political leaders first of all identified a problem and secondly started to harmonize and coordinate the action plan. For a global company, it is very important that you have stable rules and conditions. For me, it looks likely as that this will happen now.
Let's talk briefly about the global financial crisis. In the US, but also in Europe, increasing numbers of companies are suffering, and its not just banks. How is the agriculture industry affected by the financial meltdown and do you fear that the crisis will spread to more sectors of the economy?
Agriculture isn't like most other businesses, according to Richenhagen
First of all, the farm business is following a slightly different logic. The farm business is driven by the growing world population. About 70 million people a year are added to the population. Second, the sector is driven by renewable fuels and third by changing diets in emerging markets like China and India. Therefore, agricultural demand is actually higher than supply and will be higher than supply for many years to come.
As far as our company is concerned, we have managed things more carefully over the last few years and our debt-to-capital is down to zero. We also expect a cash position of $600 million for the end of this year. We work together with pretty good banks, and for many years we have had an AGCO finance bank helping customers with financing. With that in mind, I think we are pretty well prepared for this crisis and we will not suffer too much from it.
In the United States and in Europe there is a heated debate whether the government should bail out giant companies like car manufacturers. Should the government rescue giant companies or let them go bust?
This is a difficult one. The same managers who don't normally ask for state or governmental support or partial support are all of a sudden starting to cry for help. I personally believe companies that have not been managed well, like General Motors, should go bankrupt. Their problem is that they have a very bloated organization, they are really not lean enough and this has been the case for at least 20 or 30 years. They are just a weak management team and therefore the consequence is that they should go bankrupt.