Putzmeister was a paragon of the German Mittelstand—family-owned
companies with innovative technologies and high-quality manufacturing that
become worldwide players in niche markets that they dominate. They’re at the
core of the German export economy. But in early 2012, like so many other Mittelstand companies, it was acquired by a
Chinese giant. And now, a year later, Putzmeister CEO Norbert Scheuch reveals
just how impossible integration is, and how pessimistic he has become not only
about Europe, but the rest of the world, particularly China.
The company was founded by
Karl Schlecht in 1958. First product: an automated mortar machine, ideal for
the post-World War II construction boom. Soon Putzmeister expanded into
concrete pumps—truck-mounted equipment with articulated masts that can pump
liquid concrete. Over time, it developed larger pumps with unique technologies
and record setting performances. In the 1970s, it expanded into the rest of Europe;
in the 1980s, into the US; in the 1990s, into Japan, China, Russia.... It had
become a worldwide player. In 2012, it had about 3,000 employees, but only
1,100 in Germany.
Yet the company had been
losing ground to a scrappy Chinese upstart, Sany, that grew in leaps and bounds
during the construction boom in China to end up with 70,000 employees
worldwide. Then Putzmeister slammed into the financial crisis: sales plummeted from
€1 billion in 2008 to €440 million in 2009.
“I rarely experienced a
business screeching to a halt in quite the same way,” said CEO Norbert Scheuch. Survival had become an
issue. While sales picked up in 2010, it had trouble competing with Sany. So
Scheuch quietly began shopping for a buyer, and found... Sany, which forked
over €525 million. And Karl Schlecht, at 79, had found his exit.
When the deal was
announced—shock! 700 employees gathered in front of the factory to protest the
sale... to the Chinese, of all people. But Schlecht saw it differently. “We
must come down from our arrogance,” he said. Meanwhile back at the Putzmeister plant in Shanghai,
when employees found out that the company had been sold to the Chinese, they
organized a general strike and shut the place down for 10 days.
CEO Scheuch, the only
German board member of a Chinese company, admitted in an interview with Manager Magazin that the concrete pumps were “completely
overlapping products.” So they separated them regionally, except in China,
where they had a “two-brand policy.” They were vague hopes for synergies in
product development and components. But there was “minimal” personnel exchange.
“We tolerate only a very limited number of Chinese engineers, because we only
have 180 engineers ourselves,” he said. And none of the German engineers were
sent to China.
Sany had bought
Putzmeister for three reasons: internationalization, brand reputation, and
technology transfer, he said. The latter was about quality. The goal was to
raise the quality of Sany components to Putzmeister standards so that
Putzmeister could use them, while benefiting from lower manufacturing costs in
China. To make that happen, Putzmeister was recruiting experts in Germany. “We
know where we can find good people,” he said. And as Germans, they had easier
access. They’d be sent to China “to advance processes and technologies there.”
What did Putzmeister learn
from the Chinese? Scheuch dodged the question. “I don’t think such a discussion
about similarities and learning from each other is appropriate.” Why? Because
“there are huge differences in management, problem solving, and social
structures” that could not be transferred. “We will never be able to turn a
German company into a Chinese company, and vice versa. Nobody wants that
anyway.” And integration would not be possible, he said. The differences were
too large. So they’d limited themselves to a “strategic cooperation,” he
said—and at the factory, nothing has changed.
But the industry was in
trouble, even in China. In 2011, about 10,000 concrete pumps were sold
worldwide, he said, of which 8,000 went to China—80%! In 2012, the rest of the
world was recovering a little, and about 3,000 pumps were sold. But sales in
China fell from 8,000 to 5,000—a 37% plunge.
To explain why the
business was better in developing countries, he listed three parameters: growth
of the population, growth of per-capita GDP, and growth of government
indebtedness. If all three are lined up just right, the country becomes “an
excellent breeding ground for our products.”
Europe had none of the
parameters, and he saw “no good prospects.” The Americas were progressing, he
said, but he didn’t “dare” give a forecast for the US. India was in a
recession; though the population was growing, the other two parameters were
not. And China had just gone through a 37% plunge.
So he did not have a
scintilla of optimism for 2013. Growth? “I cannot say if it’s going to be 0% or
3%,” he said. The company would reduce temporary work and fixed-term employment
in Germany this year, he said. “Globalization is carrying us away from Germany
and Europe to other regions.”
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