Head of Bosch in the UK Peter Fouquet talks about reindustrialisation through green technologies.
The UK represents industrial giant Bosch's fifth largest market, with the bulk of its sales split between automotive and consumer goods, including its gas heating appliances. Close to 400 engineers are dedicated to supporting the UK's vehicle manufacturers to whom Bosch supplies powertrain and engine-management systems.
From Bosch UK's perspective, recovery in the local economy has come faster than expected. Sales last year slid 15 per cent compared with 2008 and the initial forecasts were not good, especially for the badly hit automotive sector. But the picture has changed. 'We went through this big recession and everybody expected that we would have to deal with this downturn into 2012 or 2013 before we recover. Now we are quite enthusiastic that we will be able to shorten that period of recession,' says Klaus Peter Fouquet, president of Bosch's UK operations.
'We are seeing good growth in automotive, from original equipment sales and also the aftermarket. Some customers have a 100 per cent increase versus 2009. All of them have double-digit growth compared to last year,' Fouquet claims.
The drop in the value of the pound has helped UK-based manufacturing plants. According to the Society of Motor Manufacturers and Traders (SMMT), many of the vehicles built in the UK are exported to other countries; UK residents tend to buy vehicles built elsewhere.
This sudden surge has led to its own problems. 'Now we have better problems but it is an extreme one of how to deliver to satisfy demand,' says Fouquet, although he points out that the company decided to not take out production capacity during the recession and then suffer the delay of reintroducing it.
Long-term, Bosch is focusing its efforts on the environment - an effort that is likely to lead to expansion at the company's plant in Worcester, which specialises in gas heating. 'Some 80 per cent of households have gas heating appliances in the UK. There is much more use of gas heating in the UK compared with Europe because of the gas resources that were here,' he explains. 'People will stay with gas but we have to improve the efficiency of the boilers. We still have 4.5 million old-fashioned boilers here in the country.'
A small-scale scrappage scheme, similar to that introduced by the UK government to try to keep the car market moving during 2009, helped keep sales of high-efficiency gas boilers up. But Fouquet expects further government interventions to promote boiler replacement.
'Being the provider of high-efficiency technology is a challenge as well as a good opportunity.
'It's a little disappointing that the scrappage scheme stopped after 120,000 households got theirs. It was purely the financial pressure on the government. But I am confident that more incentives will be launched.'
Bosch in the UK sees domestic renewable energy production as a potential growth driver, although it is still early days. 'If you go to Germany, you see a lot of photovoltaic and solar panels on the roofs. Here, that is something you do not often see. We have to work on the image of renewables in this country so that people use them.'
Similarly, in automotive, Bosch's major push is into engines that produce less carbon dioxide than traditional designs. Manufacturers such as Jaguar Land Rover are investing in a switch to start-stop engine control to slash the amount of fuel consumed when the car is at a standstill, seeing this technology as the first step toward low-carbon vehicles, such as hybrids.
'To create a hybrid car, you have to combine technologies,' says Fouquet. 'We have a group of engineers, more than a thousand, working for our hybrid business, most of them in Germany. For several customers, that group is working out the most efficient combination of engines for vehicles,' Fouquet explains.
'The battery is the challenge for this technology, because we don't have a breakthrough technology. We are confident that, for the next 20 years we will have the combustion engine. We can compare the efficiency of diesel engines with hybrids very easily and, in many cases, the diesel is ahead.
'The downsizing of the engine is a major trend. Traditionally, you need a three-litre diesel engine for a public service vehicle. Today, we can use a two-litre engine that has the same torque. With a modern injection system, you can provide a two-litre engine with 500Nm torque.
'A good example is the 1.4l direct injection engine from VW. It is highly efficient and very powerful. You don't think you are sitting in a 1.4l car; it is like a Golf GTE from several years ago.'
Where manufacturers move to hybrid vehicles built in Europe, the company expects to build up production capacity. Bosch has a development agreement with Samsung for lithium-ion batteries. Today, almost all production of batteries is in Asia but the increasing use of batteries in hybrid and electric vehicles will shift that balance.
'The next project we get from a customer will force us to build capacity and that production capacity will be in Europe. Cost is the main reason. The production lines are very capital-intensive and do not involve many people. And batteries are very heavy. To transport them from Korea to Germany where they build the cars is not very cost-efficient and maybe not very environmentally friendly.
'Nissan has started with its own investment in battery technology in Sunderland. We will have a lot of capacity in Europe in the next few years.'
Where to put production or intellectual capacity is a problem that faces every multinational - and comes down to a trade-off between critical mass, access to supply and to customers, says Fouquet.
'The site has to be of a certain capability and have a location near the customers. The sites have to be a certain size; it's not possible to have many smaller ones. You have to create synergies and you have to look at where to source engineers.
'That is good for us in India; they produce so many engineers. In India, we are able to support customers such as Tata with a whole range of development activities. We can develop a whole engine management or chassis system for a customer such as Tata in India.
'We can do that in China. For companies such as Toyota or Nissan, we can do that in Japan, as well as for Nissan in Europe.
'We decided to invest in a new site near Stuttgart, not for development but for research. We bought the old airport site near Stuttgart and we will invest there. We have to be near our European customers, who I'm sure will keep their R&D effort here - and so we serve them in their local markets.
'You can't move all the manufacturing base out of the country and use it still as a big market to sell your goods.'
Anticipating long-term growth in markets such as gas heating in the UK, the company's manufacturing plant in Worcester is likely to see expansion in the coming years.
'For Worcester we issued an outline planning application for new ground of 35ha. At this stage, it is only an outline planning application. But the intention is clear: the time will come that the capacity that we have at Worcester will not be enough,' Fouquet explains.
'What we did not decide is how big this facility or the workforce will be. But it's clear that if we build a bigger plant we will need more people. We are not sure about the development of the market. But we see a trend in improving business in thermal technology.'
Bosch's other key UK market, automotive, helped encourage the young Fouquet to join Bosch in 1987, moving from academia into industry. His interest in cars helped with the move as well as Bosch's corporate structure: the company has an unusual ownership structure in industry.
'The company is owned by a foundation which is based on charity. And it had a good career development scheme that is still in place today. This trainee programme takes you to your first leadership position. In industry, this type of programme was not so common then.'
Fouquet adds: 'Today we are much more focused on leadership skills. This was a programme that involved 'learning by doing'. In my case it was quite successful. It offered the ability to do a very broad range of jobs. I was a personnel manager, in purchasing, logistics, merges and acquisitions. In Bosch you can do many, many things. And do that in many regions.
'It brings a broad perspective, and a good challenge. You have to be more a leader than a technical manager, or an expert. Bosch is a technical company. But we do not have only technicians on our board. The CEO is an MBA and an engineer.'
Fouquet contrasts the typical management style at a company such as Bosch with that prevalent in the UK: 'If you get outside the company, the management style in the UK comes more from the direction of the American than the European or German style. With this style, you tend to have quicker decisions and take more risks in decision making. And you want to see a quicker profit. We say we are long-term oriented. It's not just for the next year,' says Fouquet.
Bodies such as the Automotive Council in the UK, of which Fouquet is a member, are trying to deal with the consequences of some of those decision processes. In some ways, the approach at Bosch in the UK has been to merge the long-term perspective of mainland European manufacturers with the culture that has become embedded in the UK.
'In the UK, the manufacturing base has eroded in the past years. Now we are discussing in the Automotive Council: how can we reindustrialise this country? Support the manufacturing base of the OEMs. What can we do to encourage people to be engineers and not financial guys hoping to earn millions in the City? It's not easy to find good engineers compared to in Germany, France or India.
'If you do find good engineers they say: 'I'll go first to the City because I have the chance to be rich in a few years'.'
The drift towards consultancy also concerns an engineering employer such as Bosch. 'We are very careful in hiring people from the lead universities. They say 'I'll go to Bosch but in two years I will be in a consulting company'.
'We want to encourage them to make a career in Bosch, not necessarily for their whole working life but we want to have a long term relationship with the employees, so they can make a contribution to the company.
'It does not mean we want the average. We have very well-qualified people but we want to keep them and develop them.'
The big challenge is leadership within the group, Fouquet says: 'We make a big efforts also in the UK regarding the leadership development of our management people,' says Fouquet, who points out some of the biggest problems that tend to afflict people in management.
'The biggest missing factors in leadership are feedback and information. We have to give feedback: inform people about the future and the current situation. You have to take care that they have transparency and can make their contributions.
'One of the biggest challenges we have is that everybody in our leadership team is able to do that properly and professionally. We can provide the instruments and inform them how to give feedback to people. Leadership is a big issue. And we have improved a lot over the years.
'Bosch prefers a participative style of leadership. Our leadership style is not a very tough one. You need intelligent and good people and you should deal with them as though they are intelligent and good human beings.'