US Business

Faced with exploding energy and ingredient costs, German baker Tobias Exner has installed new energy-efficient ovens, shortened his opening hours and even considered baking at lower temperatures.

But “it just doesn’t taste the same without a good crust”, he said, adding that in any case such efforts could do little to counter the existential crisis he and other bakers are facing.

“If the conditions don’t change, then sooner or later a large share of bakeries in Germany will simply no longer exist,” Exner told AFP.

Bakeries in Germany have been among the businesses hardest hit by the economic fallout from Russia’s invasion of Ukraine.

The war has sent energy prices spiralling across Europe, but especially in Germany, which was previously heavily dependent on Russian gas.

“Bakeries all have ovens. Seventy percent of artisanal bakeries have gas ovens and gas prices are going through the roof,” said Friedemann Berg, managing director of the German Bakers’ Federation.

And two of the main ingredients used by bakers — flour and oil — are among those that have been affected by blockades at Ukrainian ports. 

Exner’s business is relatively large with 220 staff and 36 branches in Berlin and the surrounding area, leaving it better placed than many to survive the crisis — but even he is struggling.

Wheat is now 2.5 times more expensive than before the crisis, he said, while the cost of a litre of oil has risen from around 82 cents to more than three euros ($2.91).

– Dough in the dark –

Energy bills for the business, meanwhile, have almost quadrupled compared with 2020. 

“You can see that the calculations no longer work,” Exner said to the hum of machines at the company’s main production site in the town of Beelitz.

But Exner is reluctant to pass the cost increases on to his customers, who he simply believes “would not pay those kinds of prices”.

In central Berlin, the mood on the ground appears to confirm his fears.

“Even more? No way. It’s getting extortionate,” said unemployed Gloria Thomas, 56, when asked whether she would be prepared to pay more for her favourite loaf.

Many bakeries in Germany have already gone under as a result of recent cost increases, with others staging protests to demand urgent help from the government.

And there is more at stake than just bread rolls, according to Exner.

“These businesses are often the most important institution in the village — they are at once grocery store, social centre, post office, etc.”

In early September, around 800 German bakeries served customers in the dark for a day to draw attention to their plight.

– Insolvency blunder –

Germany’s centre-left government has announced relief measures worth almost 100 billion euros to tackle inflation, but small businesses have so far been largely excluded from the help.

Worse still, they were left feeling insulted by controversial comments by Economy Minister Robert Habeck earlier this month.

Asked on a TV panel show whether he thought Germany was heading for a wave of insolvencies, Habeck replied: “I can imagine that certain industries will simply stop producing for a while.”

The comments provoked anger from bakers in particular, who accused Habeck of having no understanding of their industry.

“Habeck is probably not a stupid person, but the question is, is he qualified for the job he has right now? And I would say no,” said Exner.

The Bakers’ Confederation is calling for “quick and unbureaucratic” financial aid.

Bakeries can shave off costs here and there but they “can only do so much”, according to Berg.

If government help does not arrive soon “the future looks bleak,” he said.

“It could be that many businesses have to give up their operations or simply file for bankruptcy.”

Christos Charalambous might be 79 but he is several metres up a carob tree, harvesting a fruit known as “black gold” on the island of Cyprus as his grandson works below.

For some, carob has long been relegated to the status of a less appealing substitute for chocolate.

But in Cyprus, its thick brown pods are also eaten raw or ground up to make sweet syrups, spreads, toffees, drinks and as a sweetener, while its seeds have industrial uses.

“It’s one of the fruits that you use up entirely,” Charalambous said from his field in Asgata.  

Branches rustle and sway as he and his grandson, Theophanis Christou, 20, hit the pods loose with long sticks, sending carob raining to the ground.

The pair have been working for about three weeks in the late summer heat, collecting about three tonnes of carob by early September.

Christou, a shipping and finance student, is keen to join in his grandfather’s labours.

It’s “hard to do”, Christou said, but it’s “work that can keep the family together”.

– ‘Extra income’ –

In the nearby coastal village Zygi, individual growers bring bulging sacks of pods into a carob mill.

Zygi “started as a carob village” and its name refers to the weigh scale used for the fruit, said community representative Christos Konstantinou.

In Zygi and elsewhere across the eastern Mediterranean island where the carob tree is native, disused or repurposed carob facilities are reminders of the industry’s heyday last century. 

“Carob has been known as the black gold of Cyprus because many farmers used to have carob… it was the main occupation of the villagers,” said Stavros Glafkou Charalambous, from the Cooperative Carob Marketing Federation.

The federation, which runs the Zygi mill and other facilities, said it works with around 1,500-2,000 small producers, most of them harvesting carob for “extra income”.

George Pattichis, 75, from Vavla, said he has been coming to the Zygi mill for more than half a century.

The former forester said some of his carob trees were planted by his grandfather.

“I am the last generation — my children have other jobs,” said Pattichis.

– ‘Increasing again’ –

In 2019, when the growers’ price was around 35 euro cents (now 34 US cents) per kilogram, carob represented less than 1.5 percent of the Republic of Cyprus’s crop production value, according to statistics provided by the agriculture ministry.

This year, carob farmers told AFP the price was nearing one euro per kilogram (2.2 pounds).

“I will sell to whoever offers me the best price,” said Anastasis Daniel, 65, in Choirokoitia village.

Bags of harvested carob were stacked by his house ready for the mill, though he said he would also keep some for animal feed.

Global demand for the seeds’ locust bean gum (LBG) — used as a food thickening agent — drives the carob price, said Marios Kyriacou from Cyprus’s Agricultural Research Institute.

Cypriot carob pod and seed exports were worth almost eight million euros last year, according to the official statistics. Egypt was the biggest taker of the pods fit for human consumption, and Italy of the seeds.

Cyprus had been ranked as the world’s third-biggest producer of carob in the 1960s, Agriculture Minister Costas Kadis told AFP.

Production then declined, he said, “but now it is increasing again”.

– ‘Drought-resistant’ –

Carob “is very important for Cyprus because it needs little insecticides, fertilisers and water — and this is important when we talk about climate change,” the minister said.

In late 2017, a University of Cyprus project planted almost 5,000 carob saplings and subsequently gave around 28,500 more to interested farmers, project scientist Chrysi Tomouzou told AFP.

Researcher Kyriacou said carob was “a very drought-resistant tree species” that has been used as a crop in Cyprus “for at least the past 3,000 years”.

“The carob pod is rich in sugars” and dietary fibres, Kyriacou said. It also contains a “rare type of sugar-alcohol” that is “recognised as an anti-diabetic agent”, he said, noting this was “of interest for further clinical research”.

Kyriacou and his team have been studying genetic and other variations in Cypriot carob.

They say their work could be crucial if Cyprus decides to ramp up production and processing.

But for now, both often remain a low-scale affair.

At a festival in Anogyra, where stalls sold everything from carob sweets to ice cream, Andreas Andreou from Polyxenis Carob Products said carob syrup was his family firm’s most popular product.

Despoula Georgiou, 61, demonstrated how to make pasteli — a kind of carob toffee that her village is known for.

It’s “only (made with) carob juice, no sugar at all”, she said.

“I’ve been doing it for 50 years,” she said. “I learned it from my mother and aunt.”

Sheltering from rain near Bangkok’s Grand Palace, scores of unemployed Thais queue alongside homeless people waiting for free meals as 14-year-high inflation sends living costs soaring — causing a headache for the government ahead of a looming general election.

The leadership came to power eight years ago under Prayut Chan-O-Cha, promising to provide stability after long-running protests started to hit the kingdom’s economy.

However, it struggled to live up to its pledges and the damage wrought by the pandemic on the travel industry has been compounded by a global inflationary crisis that has sent prices rising beyond many people’s reach.

And in a move seen as symbolic of the severity of the situation but likely to cause more pain for consumers, the government recently raised the price of instant noodles for the first time in more than a decade after manufacturers agitated for a rise.

For those waiting in the rain, the impact is already painfully clear.

“A few years ago, I was able to afford buying my own food but now food is too expensive,” said Somchai, who only gave one name, and who is unemployed.

“I couldn’t bear the prices so I have to come out and find food donation like this,” said the 42-year-old after he had collected his meal.

A general election must be called by March, giving the coalition government led by the military-friendly Palang Pracharat Party (PPRP) little time to turn things around.

– Unkept promises –

Adding to PPRP’s woes, Prayut was suspended from office last month while the Constitutional Court decides whether he has reached his term limit as prime minister.

In a bid to ease the pain for struggling Thais, the government has approved a proposal to raise the daily minimum wage to between 328 and 354 baht ($8.83 and $9.53) after earlier agreeing to extend a fuel tax break.

But political analyst Napisa Waitoolkiat at Naresuan University told AFP the measures were taken “for winning votes” but doubted they would turn many voters around.

“The damage is beyond repair,” she said.

The economy looks set to be a major factor in the election, and Napisa said voters would not forget the PPRP’s vows to improve it.

“Yet, once they are in power, they cannot keep the promise,” she said.

And while the minimum wage hike goes some way, Thammasat University international business professor Pavida Pananond suggested more was needed.

“What we now need to look at is more targeted policy measures that would help alleviate the difficulty from rising living costs among Thai lower-income households,” she said.

Growth remains sluggish — just 2.5 percent in the second quarter, dragged by high inflation despite the return of foreign visitors after the pandemic shutdowns.

“You will see that even the GDP growth rate of Thailand is the slowest in the region,” Pavida said.

– ‘You cannot survive’ –

Pavida also warned that price rises, like those of instant noodles, could be a precursor to further hikes in foodstuff.

“For lower-income people, whose majority of income is spent on food or energy, they would be even more impacted by this,” she said.

Veerayuth Sae-ung, queueing to buy a noodle lunch in central Bangkok, said his “way of eating has changed a lot”.

“I used to come down here and buy lunch like this daily, but lately I just couldn’t afford to buy from stalls every day anymore,” the 34-year-old said.

Greg Lange, co-founder of Bangkok Community Help Foundation which distributes 500 meals a day, warned they were helping more and more people.

“Even in spite of the rain, there are some times that the line goes two or three blocks,” he said.

“I think it was already very hard for the elderly to make ends meet,” his co-founder Friso Poldervaart added.

Poldervaart said many of the elderly people they helped had lost touch with their families and were unable to survive on the government support of between 600 and 1,000 baht a month.

“You cannot survive on that. That’s just the way it is,” he said.

“So it was already hard, but of course with increasing prices it just gets harder for everyone to make ends meet.”

Construction crews are back at Dearborn, remaking Ford’s century-old industrial complex once again, this time for a post-petroleum era that is finally beginning to feel possible.

The manufacturing operation’s prime mission in recent times has been to assemble the best-selling F-150, a gasoline-powered vehicle.

The truck plant churns out a new pickup truck every 53 seconds in a well-oiled process that will continue for the foreseeable future.  

But in September 2020, Ford broke ground on a smaller facility on neighboring land, tasking the new operation with building a battery electric cousin to the internal combustion engine (ICE) F-150. 

The F-150 Lightning is part of a growing fleet of battery electric vehicles (BEVs) hitting the roadways from established automakers and upstarts.

At the Detroit Auto Show last week, President Joe Biden proclaimed that “the great American Road Trip is going to be fully electrified.”

After racking up some 200,000 reservations for the Lightning, Ford has announced expansions to quadruple output over the next year.

Will there be a tipping point where the Lightning could overtake the ICE model? That is a question on the minds of officials at Ford and rival Detroit automakers that are investing billions of dollars in BEVs while still producing millions of ICE vehicles.

“The industry is changing so quickly, I don’t think anybody has a good prediction of where it’s going to be,” Ford’s Chris Skaggs told AFP.  

“But we are reacting and getting the right resources to build batteries and scaling so that we can meet demand whatever that is,” said Skaggs, a veteran Ford operations manager who is leading the BEV plant expansion.  

“I’ve been doing this for 29 years, and I thought I would be retired before we even got to this point.”

– Storied history –

The Lightning marks the latest reinvention of the Dearborn Rouge industrial complex south of Detroit near the Rouge River.

The Rouge factory was built between 1917 and 1928 and originally planned to comprise all the components in car production, including tire-making, vehicle assembly, steelmaking and engine building. 

Peak employment topped 100,000 in the 1930s, a decade that also saw visits by artist Diego Rivera for his famed murals of auto workers.

The complex was enlisted to build fighter jet engines for the Allies’ World War II before assembling such iconic Ford vehicles as the Thunderbird and the Mustang, which was launched in the 1960s and is now assembled at a different Michigan factory.

The Rouge site — long emblematic of the moving assembly line that changed manufacturing history — began to look like a white elephant as Ford streamlined later in the twentieth century and pollution rendered it a brownfield site.

But William Clay Ford Jr., the great-grandson of Henry Ford, refused to shutter it, authorizing a $2 billion upgrade soon after becoming chairman in 1999.

Dearborn Truck plant opened in 2004 following extensive environmental cleanup and the installation of a “living roof” to make heating and cooling more efficient.

– ‘Flex’ capacity –

The younger Ford, who identified Rouge as “our heritage,” faced pushback internally on the Dearborn investment, which coincided with a trying period financially.

But it would be difficult to find fault with the staying power of the F-150, which has been the best-selling vehicle in the United States for four decades.

Three shifts populate the 4,500-employee Dearborn truck assembly plant, working around the clock.

The vehicle assembly process starts when the aluminum coils are stamped into panels on-site. The panels are assembled at the body shop and then painted before making their way to the assembly line.

The truck then proceeds through hundreds of work stations where the engine and other components are installed, and is then put through testing including wheels and headlamp alignment, camera-based inspections and electronic computer once-overs before shipping to the customer.

Ford does not release daily output figures, but each vehicle is assembled in hours once it arrives at the factory, Skaggs said.

In contrast to the ICE truck factory, which clanks with activity, the BEV plant operates at a modest hum, a quality partly due to the company’s focus on ergonomics. 

The BEV assembly process is also organized around production lines, but there are fewer work stations in an operation that is still gearing up for bigger things. The Rouge Electric Vehicle Center currently employs about 500.

The expansion will double the size of the BEV factory and add more workers and work stations, taking output to 150,000 annually by next fall, Skaggs said.

But the added productivity will be “flex,” Skaggs said, meaning it could be used for either ICE or BEV depending on demand.

“If we don’t call it right, we can build more ICE units… or if BEV really takes off like we all expect it to, we can scale this up.”

The emerging fleet of electric vehicles (EV) provoked fascination at the Detroit Auto Show, but many consumers were not yet ready to take the plunge to own one themselves.

Some, like Justin Tata, wanted a first-hand look at new EV offerings, saying “it’s embracing the change that’s coming because I think the internal combustion engine (ICE) is on the way out.” 

But Tata, who works in the packaging industry, still has questions about EV battery disposal. He came to the Detroit show, which concludes Sunday, to survey the state of play, but doesn’t foresee buying an EV for another five to 10 years.

Among other attendees, the less-EV enthused included Tim Stokes.

“I think eventually that’s going to be the only option,” said Stokes as he admired a new gasoline-powered Ford Mustang, adding that he wants to “prolong (driving ICE vehicles) as long as possible.”

Friends in the auto industry have advised waiting three or four years for the industry to “work out the kinks” with EVs, said Stokes, who works in telecommunications.

– Mainstream options –

Long considered a niche sideshow in the auto world, the prominence of EVs at this year’s Detroit gathering underscored their new mainstream status as big automakers respond to rising concerns about climate change and government policies promoting EVs.

Chevrolet’s showcase highlighted EV versions of three of the GM brand’s top-selling products: the Silverado pickup, and the Blazer and Equinox, both SUVs. Chevy expects to begin deliveries on the vehicles in 2023.

Ford too has targeted its EV campaign towards its most popular vehicles, unveiling a battery-powered version of its best-selling F-150 pickup truck and launching the Mustang Mach-E, a new SUV that has also attracted strong interest from consumers.

A 2022 Consumer Reports survey showed 14 percent of Americans saying they would “definitely” buy or lease an EV if they were searching for a vehicle, up from four percent in 2020.

While the vehicle launches have brought unprecedented attention to EVs, auto experts say that a meaningful transformation of the ICE-dominated US fleet is still years away. 

Price remains a big problem, with the average price of an EV nearly $67,000, according to Cox Automotive.

Experts also cite the lack of EV charging stations as a concern. President Biden signed into law a bill to provide $7.5 billion to build more stations, as his administration announced the first tranche of funding in parallel with a presidential address at the Detroit show.

– Can the industry deliver? –

Auto insiders also point to doubts about the availability of critical materials such as lithium and cobalt needed for batteries. 

These issues have come to the fore during the Covid-19 pandemic, when shortages of semiconductors and other supply chain woes forced automakers to restrict vehicle production and store tens of thousands of partially-built autos.

Ford said on Monday that it expects to have some 40,000-45,000 mostly built vehicles in inventory at the end of the third quarter due to needed parts. On Friday, the Wall Street Journal reported that the company had delayed some vehicle deliveries due to a shortage of badges with the company’s blue oval logo.

Don Lamos, who works for auto supplier, had placed an order on a Ford Lightning, but is backing off after Ford raised the price on that version to above the $80,000 cap that would allow car buyers to qualify for a $7,500 tax credit under new US legislation.

Lamos and his wife, Janice, were drawn to the Chevy offerings, including the Equinox, which starts at $30,000. 

“If they can hold that at $30,000, then awesome,” he said. “I don’t know if they’ll really be able to meet production next year, so we’ll see.”

Don Lamos cited cost savings as the main impetus, while Janice Lamos described climate change as a priority. The couple are sold on EVs, but pondering how much to spend now when battery technologies will likely improve in the future.

Many of the vehicles being released are touted for being able to travel 300 miles without being recharged, but the capacity is much lower if the vehicle is towing cargo.

“You know when you need gas you can go to the corner and there’s a station. I don’t think there’s enough (charging) stations for one of these,” Carlos Rubante said when asked about the Lightning.

Consumers at the show described climate change as a worry, but were not necessarily convinced that EVs were the solution. 

Besides battery disposal, another concern is the unwanted consequences of the mining boom in critical materials, such as the use of child labor in the Democratic Republic of Congo to produce cobalt, said Cristian Damboiu, who works for an auto supplier.

“When you’re considering all these things, maybe they aren’t as clean as they seem,” said Damboiu.

“I understand (EVs) have some advantages, so we’ll see how it plays out.”