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eyes on the U.S.

The German Car, Europe's Last Stand Against U.S. Corporate Hegemony

In 2015, Apple earned more than the five most profitable companies in Europe combined.

Apple Store, Regent Street, London
Apple Store, Regent Street, London
Stefan Beutelsbacher

BERLIN — Save any last-minute delays, Apple will open an outlet next month on Orchard Road, Singapore's glittering shopping mile. It will be the California company's first foray into the Asian city-state, which earns as much in annual tax revenue, $38 billion, as Apple did on sales — in just the past six months.

Apple, as the number suggests, is in a league of its own as far as global corporations are concerned. It's the yardstick of all things commercial. It's also a reminder that Europe is lagging well behind, and not just where smartphones or technology are concerned. In 2015, Apple earned more than the five most profitable companies in Europe combined.

Europe's 300 largest companies, from a broad range of sectors, saw revenue drop by 4.6% between January and July. Profits are down even further: by a staggering 9.6%. U.S. companies, in contrast, fared much better. Revenue fell 3.5% with profits slipping just 0.4%, according to a study by the consultancy EY (formerly Ernst & Young), exclusively available to Die Welt.

"European companies are suffering due to the strong euro," says Mathieu Meyer, a member of EY's management board. The economic situation continues to be difficult despite the decision by banks to offer low-cost credit, a policy that was supposed to provide impetus. In addition, companies on both sides of the Atlantic suffered from a drop in raw material prices. Oil, for example, sold for just half of its 2014 value.

Europe's most successful companies had a turnover of approximately 3.25 trillion euros while posting profits of 272 billion euros. Their U.S. counterparts, in the meantime, had a turnover of 4.15 trillion euros and profits of 438 billion euros. That's a major difference.

But there is a silver lining for Europe: Germany. While profits nosedived everywhere else, they increased (by 7% on average) for the 44 German companies EY researched for its study. Germany's owes its success, according to EY, to the strength of its auto manufacturers. Daimler and BMW performed extremely well and even VW, despite its emissions scandal, ranked among the top five car makers. In Europe, VW actually ranks first with regards to turnover.

Near the Porsche factory in Stuttgart — Photo: Andrew Davidoff

Those positive numbers, however, also point toward a structural problem, according to EY. "Europe is suffering from the severe predominance of its "old economy,"" says Meyer. In fact, the region's top 300 companies are all situated within traditional sectors such as mechanical engineering, electronics or car manufacturing. By contrast, the share of comparative U.S. companies in these sectors is only one-third. Sectors that will gain in importance in the future, such as IT and service providers, are twice as strong in the U.S.

Gloom and boom

Europe is especially lagging when it comes to technology companies. Apple is still the most valuable brand ($178 billion), according to the market research company Interbrand. Google ($133 billion) is in second place, followed by a more classic company, Coca-Cola ($73 billion).

And what about Germany? Mercedes-Benz ranks among the top 10 companies, with BMW not too far off. VW, on the other hand, slipped after the emission scandal, and currently ranks 40th among global corporations, with an estimated value of $11.4 billion. Facebook, now worth $32.6 billion, grew the fastest, soaring 48%. Amazon also saw its value climb significantly, up 33% to $50.3 billion, according to Interbrand.

"The U.S. is leading the pack where IT is concerned," says EY expert Meyer. "Companies such as Apple, Google and Microsoft are highly profitable and drive digitalization forward, not just economically, but in all areas of life. The European companies barely have any influence as designers of the technologically-led change."

Google, Apple, Facebook and Amazon, or GAFA, as they're sometimes called, have so much collective power that some observers are beginning to issue warnings. Of particular concern is the growing political influence of GAFA lobbyists. Keep in mind that the market value of these four companies now amounts to more than $1.5 trillion — nearly equivalent to Russia's GDP.

Things could become even more difficult for Europe in the second half of this year, with rather gloomy forecasts for the global economy. The U.S. presidential election and the possibility of a victory by Donald Trump, an adversary of free trade and advocate of protectionism, isn't helping matters. Nor does Brexit and the growing influence of populists in Eastern Europe, France and Germany, all of which could dampen enthusiasm for investing not just in Europe's old economy, but also America's new economy.

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Society

Who Is Responsible For The Internet's Harm To Society?

A school in the US is suing social media giants for damage done to children's well-being. But fining tech giants is a feeble response to their attacks on society's welfare.

a young boy looking at a smartphone

Are parents, website owners or government oversight bodies for to blame for the damage done to children and young adults?

Mónica Graiewski

BUENOS AIRES - In January 2023, schools in Seattle in the United States took court action against the websites TikTok, Instagram, Facebook, YouTube and Snapchat, seeking damages for losses incurred from the psychological harm done to their pupils.

They maintained that behavioral anomalies such as anxiety, depression and eating disorders were impeding pupils' education and had forced schools to hire mental health experts, develop special educational plans and provide extra training for teachers.

Here in Argentina just days after that report, two teenagers died from taking part in the so-called "blackout challenge" on TikTok.

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