„We need to pull together in Europe“

Karl Haeusgen and Mathias Bihler talk about the mechanical engineering of the future

The Allgäu is a high-tech region. That is something that the head of the Supervisory Board of HAWE Hydraulik SE, Karl Haeusgen, and Mathias Bihler both agree on in their discussion. The venue for this exchange of opinions is symbolic. The new HAWE plant in Kaufbeuren impresses visitors with its streamlined architectural elegance and functionality and forms the structural framework within which state-of-the-art robot and automation technology show off their strengths. The halls are light, the noise level is very low and the atmosphere is pleasant. Welcome to the mechanical engineering of the future!

The HAWE plant in Kaufbeuren. After a tour of the site, two dedicated entrepreneurs, in the form of Mathias Bihler and Karl Haeusgen, find time to share their thoughts. It will be very exciting to find out what the President of the Verband des Deutschen Maschinen- und Anlagenbaus (German Engineering Federation - VDMA) and majority shareholder in the long-established company HAWE, and Mathias Bihler, responsible for the management of a family-owned company, have to say to one another. It is easy to see how both men are driven by a passion to work for the future of Germany as an industrial center both in Europe and throughout the world.

Mathias Bihler: This glimpse of your production facilities has been most impressive: the systems with their high level of vertical integration, the innovative automation solutions and the use of robot technology. I was particularly struck by the depth of value-added contributed in-house that I saw during our tour.

Karl Haeusgen: We naturally operate a very capital-intensive business model. That means that if you, like us, have blocks of elements that represent high fixed costs then these must constantly be used at full capacity. We are convinced that we are on the right path because we have our value chain under control and are able to achieve very stable qualities and quantities. We will remain faithful to this concept of high in-house pre-production inputs. This is something that investors and bankers do not always understand, but it is consistent with our clearly defined strategy.

Mathias Bihler: I can understand that lenders might not initially see the value of this approach. During a downturn, it is always a burden but you nevertheless have to see things in the round. This is something we have in common. We also have a high level of inhouse pre-production at approximately 75 percent. And we are doing as much as we can to promote automation in our own activities. The clear objective is to be efficient in the way we manufacture our products in order to strengthen the earnings situation and, in turn, reinvest in new developments In the fields of stamping, bending and assembly, we are undoubtedly leaders in many markets when it comes to the level of automation. We aim to combine flexibility, standardization, scalability and economic efficiency with the digital world: We are very well positioned compared to other market players. But we want to go further. During our visit, I was able to see a large number of interesting initiatives, in particular with regard to digitalization. For example, we are working on the issue of the “digital twin”. The great benefit of this is that, for example, if optimizations are made to a system’s process sequences in the virtual world, then production machines do not have to be shut down for the optimization activities and the improvements can instead be undertaken by means of simulations at the digital twin. If the process is successful then we transfer the optimizations to the real machine. This enables us to minimize production losses. And that is a decisive advantage for our customers. Machines are capital-intensive products. They have to produce 24/7! However, we not only invest in equipment but also in the people who are vital for a company’s efficiency, productivity and success.

Karl Haeusgen: That’s just the way we see it. You have your own comprehensive in-house training department that covers many different areas. We have a similar concept. We have a trainee rate of ten percent. The labor market in the Allgäu is very competitive. Within a radius of 20 minutes by car, we have Agco Fendt, Grob and other large companies that are all proactively recruiting. We have to make ourselves so attractive as an employer that people want to come to us – whether as an apprentice or a young professional – and then want to stay. We started by conducting a survey in which we asked exactly what it is that is important to our employees at their workplaces. The results revealed the issues of light, noise and climate – far ahead of all other aspects. That is why we have invested so much in these issues, as you are able to see in the building. And this isn’t just a subjective impression. Studies have clearly shown that, for example, reducing background noise significantly increases productivity.

Mathias Bihler: For us, the workplace and the company culture also play a vitally important role. In the face of the skilled labor shortage, that is one of the levers we can pull...

Karl Haeusgen: That is one thing we can do when we look at the issue of the shortage of skilled labor in Germany. I am one of those people who is quite forthright about the issues of working hours and the overall working lifetime. In the long term, we will not be able to manage with a 35-hour week and retirement at 63. We need a longer working life, at least in those sectors where the work is not physically demanding. We must have the 40-hour week as standard, as the reference point, just as it is in other industries. Finance Minister Christian Lindner is the first to have dared to raise this issue.

Mathias Bihler: That is the reality. There are many areas in which Germany drives technology forwards. However, that is underpinned by many hours of work on the part of highly qualified individuals. And if these hours fall away then this technological leadership will also suffer.  Demographic change means that not enough new blood is coming through to take up the slack.

Karl Haeusgen: And if you want to be fit for the future then it is also important to actively address the crucial topic of sustainability. For decades, the way in which climate change was managed was truly inadequate. For me, one of the great successes of “Fridays for Future” is to have moved this topic into the public eye. That was a true wake-up call. Then, however, the pendulum swung. In particular, in the form of detailed political regulation. That’s the problem. It’s not that we're introducing CO2 targets; it's the way that we're doing it. One example is the EU regulation on sustainable investment. It defines what is considered to be green technology and what isn’t. That is then what gains the favor of the banks and insurance companies and receives finance. The catalog has more than 1000 pages. How is that supposed to work? How can I think of drawing up a list of green technologies that then forms the basis for a law if just four weeks later new technologies arrive that the European Parliament has never even heard about? The aims are right. But the way there – Will I get there with swarm intelligence and entrepreneurial freedom or with regulations worked out in granular detail? That is precisely the question.

Mathias Bihler: We need more courage and pragmatism and not political overregulation. What we’re also lacking is young people capable of getting to grips with technology. But the universities and technical colleges are telling us that there’s been a massive drop in applicants for technical courses. Without a new generation of technology-loving engineers, the objectives of sustainable climate change will be beyond our reach.

Karl Haeusgen: As a young person, the best thing you can do to combat climate change is to become an engineer. Then you can help develop the technological solutions. If we look at the huge field covered by mechanical engineering, it doesn’t matter what energy choices you make, what mobility choices, they will always involve components and systems from the mechanical engineering industry. For example, we have reduced the CO2 footprint of one of our hydraulic controllers by 70 percent. Let me give you an example. In China, Apple is building a new production facility for iPhones and has specified that this must release 30 percent less CO2 than in the past. The machine manufacturer, in this case a Japanese company, then turns to us. That’s the right way, the pressure comes from the market. Apple is put under pressure by its consumers and passes this pressure onto the machine supplier and the result is a hydraulic component whose CO2 footprint has been reduced by 70 percent. That is the perfect mechanism. That is something that State regulation cannot hit upon by itself. You can define CO2 prices and CO2 quotas and that helps move things along. Of course, it’s clear that you can’t do completely without regulation, but it’s important to keep it at the right level. What we need is clear goals and perfect framework conditions, that is to say the right infrastructure. After that, it is vital to leave it up to the actors in the market how they achieve these goals. The way we contribute to achieving these climate goals is also important when it comes to attracting skilled workers. When we recruit young people nowadays, they look very closely at the issue of sustainability. For example, do we have solar panels on the roof, do we publish a sustainability report, do we really act sustainably?

Mathias Bihler: This new level of awareness is something that we have also noticed. At our factory in Füssen, we also have a solar power installation and a cogeneration plant and are therefore able to cover a large part of our energy needs ourselves. Our buildings are also progressively becoming more energy efficient. When it comes to using materials efficiently, we make sure that we are responsible in our resource consumption. We understand that if we develop products that stand out from the others available on the market through their innovative qualities, that are customer-oriented and can be produced using efficient process technologies, then there’s no need to relocate abroad because of cost considerations. But the various constraints at the level of bureaucracy or energy issues are burdens that make businesses wonder whether they are still in the right place? However, proactive individual initiatives are being launched. We are seeing a desire to return to “local to local” among some of our customers. Some businesses are leaving Asia and focusing on developing their manufacturing platforms in Europe again in order to make goods transport shorter and more efficient and consequently change their CO2 footprint for the better.

Karl Haeusgen: When I put on my VDMA hat, I can only agree. We have 3,600 member companies with an average of 200 employees each. Due in part to the resources at their disposal these companies are incredibly faithful to their local roots. Something which often goes completely unmentioned in this debate is the technology cluster. If you set off in a truck from here in Kaufbeuren then you’ll find every technology you need in less than a four-hour drive. Whether that is sensor technology, optoelectronics, hydraulics or mechanical engineering. Every technology is available to you. This technology cluster made up by Southern Germany, Vorarlberg, Northern Italy and Switzerland is unparalleled.

Mathias Bihler: How do you see the situation in Asia?

Karl Haeusgen: China accounts for 23 percent of HAWE’s turnover; what’s more with quite high margins. The corresponding value for the German mechanical engineering sector as a whole is ten percent. The largest export market is the USA with approximately 13 percent. So China is the second-largest market. It’s clear that we have to think about things very carefully. The greatest risk is the nationalizing industrial policy of the Chinese. They look very closely at what is strategically important for China. The companies in these sectors are then protected by the State against any WTO rules. When these businesses have developed to the point that they can compete in terms of both cost and quality, the market share of the international market players is reduced. As a result, Chinese companies have a cost advantage when it comes to entering international markets due to the volumes in their domestic market.

Mathias Bihler: That’s something I can definitely confirm. China is building up know-how that the western world often unwittingly transfers to it by doing business with China and failing to think about the long term. If we do conduct projects with China then it’s not at the technical level as in the case of customers in Europe. However, you can’t shut yourself away from the Chinese market and so we act in a measured, sensitive way because we don’t want our customers in the western world to come under pressure.

Karl Haeusgen: Here again, we make sure that we differentiate ourselves at the technological level. And that’s not easy.

Mathias Bihler: Globalization is important for us. However, many people haven’t yet understood what Europe is supposed to achieve here. The single currency is important but it is only a means to an end. We need to be an economic counterweight to America and Asia. However, that will only be possible if Europe is united, acts together and doesn’t become fragmented.

Karl Haeusgen: What annoys me is that the individual governments are once again able to hand out larger subsidies and that is what they are doing instead of acting at the European level. There is a type of ingrained conservatism here.

Mathias Bihler: The European idea has been lost. The task of politics is to unite Europe again because only a united Europe will be able to re-establish the economic balance with America and Asia…

Karl Haeusgen: … and I would add that it’s also the task of industry. Because many decision-makers in industry do not think at the European level. But the only way to move forward is together!