Jürgen Geissinger, Schaeffler chief executive, wants to take the German model of engineering global

June 23, 2013 7:14 pm

Jürgen Geissinger, Schaeffler chief executive

By Peter Marsh

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Managing many components: Jürgen Geissinger wants Schaeffler to become a ‘series of hubs’, with regional centres of production all using German-style technical training

Jürgen Geissinger looks a little shamefaced when he is asked about the two big pictures of engineering mechanisms that line the wall behind his desk. “It’s not really art, I know this,” he says of the technical drawings. “I stole them from an [engineering] exhibition. The sales guys pretended to look the other way.”The interest in mechanical artefacts is apt. Mr Geissinger is chief executive of Schaeffler, one of the world’s biggest makers of specialist components for cars and other items of machinery, from aircraft to papermaking equipment.

The 53-year-old remains best known for presiding over an audacious €12.1bn attempt to take over Continental, the much bigger German tyres and automotive parts group, in 2008. While the effort failed, and for a time threatened Schaeffler with financial collapse, it brought Mr Geissinger’s ambition into the open.

As a young man, he always appeared to be heading towards an engineering career. “I was driven by a technical passion,” Mr Geissinger says, recalling his early fascination with repairing motorbikes and cars.

In 1999 he was plucked from an obscure job running part of ITT Industries, the US industrial conglomerate, to take over at the helm of Schaeffler.

Then, as now, Schaeffler was one of Germany’s foremost “hidden champions” – large but secretive businesses that supply key parts to the capital equipment that keeps transport and industrial systems humming. Schaeffler – controlled by two family shareholders – makes 220,000 products from tiny clutch parts to large “block housings” for wind turbines. Among its 40,000 customers are all the world’s biggest car companies.

During Mr Geissinger’s tenure, annual sales, helped by a series of acquisitions, have risen more than fivefold to €11.1bn last year. Its operating margin over recent years has been in the 13-16 per cent range, well above the average in the capital goods industry. He also likes to point out that Schaeffler has filed the fourth-highest number of patents of any German company, behind engineering groups Siemens and Bosch, and Daimler, the carmaker.

The CV

Born:in Schorndorf, Baden-Württemberg, in 1959
Education: Studies mechanical engineering at the University of Stuttgart where he received his doctorate in 1989
Career: 1991 Starts as an engineer at Heidelberger Druckmaschinen, a German maker of printing presses
1992 Appointed director of manufacturing technology for European automotive division, ITT Industries 
1997 
Becomes vice-president of ITT Automotive.
1999 Appointed chief executive of Schaeffler (then called INA Holding)
Family: Married with twins, a boy and girl
Interests: Motorsport, running, motorbikes, keeps fit by playing handball

The company is also highly global, with almost three-quarters of its revenues coming from outside Germany. “Asia is now close to 25 per cent of our turnover and it’s going in the direction of 30 per cent,” Mr Geissinger says. “We are increasingly developing the company to make it a series of hubs – making items in a specific region for that region. We now have more than 40 R&D centres around the world – with one of the biggest being in China.”

Mr Geissinger is discussing his company in his unassuming office at Schaeffler’s global headquarters in Herzogenaurach. The small, sleepy town near Nuremberg is dominated by the company’s sprawling factory buildings, where 8,000 people are employed. It has been the centre of the company since it was started in 1946 by brothers Georg and Wilhelm Schaeffler. The business is controlled by Maria-Elisabeth Schaeffler, Georg’s 70-year-old widow, together with her son, also called Georg.

Its CEO sees plenty of advantages to private ownership. He welcomes, for instance, not having to talk to lots of outside investors. “I don’t have to be concerned with the share price – which can be a bad influence because so many public companies see the need to continually be trying to announce good news and this can harm long-term performance,” he says. But, he adds, conventional public companies also have something to teach private businesses. “I gained a lot when at ITT through learning about cash and performance control – something American companies are good at, even if sometimes this detracts from technical innovation.”

While Schaeffler is known for its large outlays on product development and capital investments, its chief executive has introduced some elements of US-style budgetary control. He has also retained some elements of the parsimony and quirky behaviour shown by its founders, who started the business amid the ruins of postwar Germany as a maker of items such as buttons, buckles and handcarts. Even now, Mr Geissinger keeps a beaten-up Volkswagen Passat outside his office, which he uses for short journeys within the plant, underlining the interest in reining back on unnecessary spending.

He brushes off such idiosyncrasies, highlighting instead what he regards as the strong points of the German traditions in manufacturing and engineering. He cites a commitment to “innovation and entrepreneurship … in developing [engineering] products for the future”.

The availability of skilled people is also important. “Finding a top-class manufacturing engineer in North America is more difficult than recruiting such a person in Europe or Germany,” he says. However, a reminder that German industry faces its share of financial pressures came with Schaeffler’s announcement this month of almost 600 job cuts at a bearings plant in Schweinfurt, Bavaria.

But it is the hostile effort to combine with Continental that has most marked Mr Geissinger’s time. The move would have created a giant auto parts business straddling high-technology engine and gear systems components, tyres and other auto systems made by Continental.

The effort fell apart after the start of the financial crisis. That led to investors dumping Continental’s stock and accepting Schaeffler’s tender offer for shares in much greater volumes than Mr Geissinger and Ms Schaeffler had reckoned, leaving the company with 90 per cent of its rival’s shares and an unsupportable €12bn debt load.

Thanks to deft discussions with banks and other financial groups, the company managed to reduce its stake to 49.9 per cent, leaving it with a much more manageable €6.5bn debt but with no control of its one-time adversary. That has left the company in an uneasy position of having a large stake in a big business but with minimal influence.

Some believe the original idea of creating an engineering “supergroup” – even though Mr Geissinger disputes that he ever wanted to bring about a full merger – was driven by hubris.

Mr Geissinger plays down such suggestions. Asked whether he is happy with the outcome, he says: “The answer to this question is based on where you start from. It did not work out in the way that we wanted, but then no one could have foreseen the way the financial crisis played out. We managed to overcome the problems by reducing the debt thanks to our strong profitability and help [from the banks] with interim financing. Now with the relationship with Continental we combine technologies, we swap ideas and we see a lot of benefits.”

Asked about future efforts to expand by other big Continental-type deals, Schaeffler’s CEO refrains from giving any details. But he insists the company is on an upward track. “If you look back to our progress since the financial crisis, I think you’d be satisfied. We have pushed through considerable cost-cutting, we went on increasing our global network by investing in Asia, eastern Europe and America.”

Not the least of his efforts has been spreading the German approach to engineering – a topic that remains close to Mr Geissinger’s heart. “You will find German-style technical training in all our facilities whether they [are] in Mexico or China. We are putting the spirit of Schaeffler into all our employees’ mindsets. We are practising real globalisation, at the level of a single company.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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