The turnaround in mobility and digitization present the automotive supplier Bosch with a double challenge. Now there is the corona crisis. CEO Volkmar Denner explains in an interview how he wants to master all of this.
Mr. Denner, how is the Corona crisis affecting Bosch?
Around the Chinese New Year, production in China practically came to a standstill. Almost all of our 39 plants there are now producing again and the supply chains are working. But it will still take a while before we get back to old volumes. Outside of China, things look very different. The drastically falling demand for vehicles and the associated production stops of the automobile manufacturers affect us as a supplier. Since this week we are therefore severely restricting our production in the automotive supply sector. Individual foreign production sites are also affected.
Will you make use of government aid? How much is your annual account charged?
In Germany, employees affected by production restrictions will initially reduce or compensate for their time accounts or take vacations. In a second step, we will introduce short-time work from April 5 at the latest, for which we will use short-time allowance. We consider it very positive that the Federal Government is helping industry here. It is too early to say anything about the impact on our business.
Can Bosch help to overcome the crisis?
Within six weeks, our researchers developed a rapid test for the Vivalytic analyzer from our subsidiary Bosch Healthcare Solutions. It can be performed at the place of clinical treatment and can reliably detect an infection with the Sars-CoV-2 coronavirus in less than two and a half hours. In this way, infected patients can be identified and isolated even faster. In addition, another nine respiratory diseases such as influenza can be examined with the same sample. The test, developed in collaboration with Randox Laboratories, will be available in Germany from April, with other countries to follow. Our employees are also very actively involved with other ideas and initiatives to help overcome the crisis. I’m particularly proud of that. We are currently examining which suggestions can be implemented quickly.
Will you adjust your business model after the crisis, for example with regard to warehousing or procurement?
This is not the first time the automotive industry has faced supply chain challenges. The semiconductor factory of an important supplier was destroyed in the Fukushima disaster. You have to recognize such dependencies and decide whether you can accept them or, for example, need a second location. We will do this analysis again this time, but it is too early to draw any conclusions.
Even before the Corona crisis, you said that automobile production may have passed its zenith. What do you conclude from this?
We expect global automobile production to shrink for the third year in a row in 2020. We had a global economic slowdown even before the Corona crisis. Now the corona influence is exacerbating, which we think is temporary and which can be made up for. Structural change in mobility will have the greatest effect. On the one hand, because of the growth of the world population and the middle class, more people will be able to afford vehicles. On the other hand, not everyone will be able and willing to drive their own car in the cities. The result of these opposing influences is difficult to predict. Apart from the short-term corona effect, our planning assumes that vehicle demand will develop flatly in the next five years and will not reach the level of 2017 again in this period.
Has your group, which is one of the largest suppliers to the automotive industry, already reached its peak?
No, the opposite is the case. As an innovation leader, we always have the opportunity to grow faster than the market. This is also our aim. Although automobile production should have decreased by around 5% in 2019, sales in our mobility division remained roughly at the previous year’s level. Even with shrinking markets, Bosch can grow or at least maintain its level if there are more Bosch parts and Bosch sales in a car.
Climate protection leads away from diesel, from the combustion engine and partly from your own car. What does that mean for Bosch?
Our aim is to help shape the mobility of the future instead of being driven by it. We see them electrified, automated, networked and personalized. Accordingly, we invest heavily in order to maintain a leading position in the market. In addition, more than ten years ago, we made the Internet of Things (IoT) a core element of our strategy not only for mobility, but for all areas of the company. We also rely on artificial intelligence (AI). From 2025, all Bosch products are said to either have AI or have been manufactured or developed with AI.
How far is Bosch in the development of autonomous driving?
We are among the pioneers of automated driving. The first driver assistance products, as it was called at that time, came into being about twenty years ago. At present, a human-controlled drive without a hand on the wheel is technically possible. Unfortunately, approval is still pending in Europe. Perspectively, as a safety driver, people become completely unnecessary. We believe that in a few years, vehicles with such higher levels of automated driving will also be approved; Initially, of course, in less complex environments, such as on the motorway or on special routes in the city.
What role does electromobility play for you?
We are more diversified in electric mobility than any other company in the world. We are represented from e-bikes to 40-ton trucks and with products from the electric axle to batteries based on purchased battery cells. For years we have been investing € 400 million annually in car and truck electromobility alone. This year, including the fuel cell, it will be € 500 million. From the beginning of 2018 to the middle of 2019, we acquired orders of around € 13 billion in car / truck electromobility, so that this will be a rapidly growing business for us in the next few years.
Is the combustion engine a relic of the past?
No, the internal combustion engine still has potential. According to our market research, two out of three new cars will be diesel or petrol in 2030, with or without hybrid drive. In addition, half of the cars then driving on the street are already sold today. Therefore, climate protection must also apply to the vehicle population. CO2nd-reduced fuels would be ideal for this.
The production of electric drives requires little personnel. What does that mean for your employees?
To manufacture a diesel injection system, we need ten employees – three for a gasoline system and one for an electric drive. This has an impact on employment. We also have to respond to the declining demand for diesel engines. But we will not announce a flat-rate number for downsizing. Each location should adapt individually. We try to implement the necessary measures as socially acceptable as possible. We invest in training and internal mediation in growth areas. We also encourage all diesel locations with “innovation budgets” to think about using existing skills for new business. We also assign the production of components for the new fuel cell activities to the diesel sites in Feuerbach, Bamberg and Homburg. This gives prospects, even if you can never compensate for the drop in employment one-to-one.
In 2019, Bosch announced that it would become climate neutral by 2020. Do you achieve the goal and, if so, how?
We already reached the target for the German locations at the end of 2019, and it will be so far worldwide by the end of 2020. By 2030, we will have up to € 100 million a year in CO2nd-Invest neutrality. The first starting point is to increase energy efficiency. The energy consumption saved also significantly reduces our costs here. Second, we are increasing the supply of renewable energy. Thirdly, we are consistently switching to green electricity. The compensation of CO is only the last lever2ndEmissions. Since we are progressing faster than expected, we will probably only have to compensate for around 25% of the emissions in 2020 instead of the planned almost 50%.
Bosch is not listed on the stock exchange, but largely belongs to a non-profit foundation. Is that an advantage or a disadvantage?
For me, this corporate constitution is a great advantage. It allows us to invest a lot in research and development and to keep topics going long-term. Without this staying power, many of our pioneering achievements such as the electronic stability program (ESP) would not have existed. In these circumstances, we can also balance the triangle of economy, ecology and social responsibility. The focus is still on high profitability. We do this by basing our goals on the best in the industry. The high profitability, in turn, feeds our good rating and thus makes it easier for us to raise funds via the capital market if necessary.
Companies like Bosch have brought German engineering to the world. However, digitalization is driving corporations from the USA and China. Can German industry still prevent relegation?
We have to reflect on our strengths and combine them with something new. What we are very good at are physical products and systems. That is why the T in IoT also plays a central role at Bosch. We complement products with networking and software so that a thing becomes an IoT device. With AI, it would not be very promising to compete with Internet companies. But as a strong industrial location, we have a very good basis for industrial AI. I see a huge opportunity for German industry and also for Bosch.
Climate, environmental and industrial policy set framework conditions for you. Do these policies have the right goals and the best tools?
Technology neutrality is important to us. Politicians should set ambitious goals in climate protection, for example, but leave the solution to the innovative strength of the industry. We are currently running the risk of unilaterally overemphasizing electric mobility. We have to be careful that extremely sharp CO2nd– Specifications for the vehicle that are important for the climate, such as the sustainability of energy production, are hidden. Politicians should also create incentives for CO2nd-reduced fuels are placed on the market. We need this to help CO2nd– Reduce fleet emissions.
The physicist at the top of the group
Ht. · Anyone who speaks to Bosch boss Volkmar Denner quickly realizes that this man is not only concerned with annual balance sheets, but also with a burning interest in solving technical challenges. Denner was born in 1956 in Uhingen, a town near Stuttgart. He studied physics in Stuttgart, where he did his doctorate in physics in 1985 after a research stay in the USA. In 1986, he joined Bosch as a specialist for power semiconductor development. A long career to the top of the group followed. Since the 1st July 2012 is Denner CEO of Robert Bosch GmbH
The Bosch Group managed by Denner is one of the largest German groups with around 400,000 employees and sales of € 78 billion last year. The Stuttgart-based company, founded in 1886, produces a great deal from drilling machines to medical technology to large thermal systems, but the largest of the four company divisions is the automotive supply business Mobility Solutions.
You can contact the Berlin business correspondent René Höltschi Twitter consequences.