“This is not a cold capitalism”

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Stuttgart, Dusseldorf
Social peace is endangered in the family business Voith. The workforce in Sonthofen has been on strike for several weeks. Voith CEO Toralf Haag and Chairman of the Supervisory Board Siegfried Russwurm want to close and merge turbo gear plants. The talks with the employee side go into the final round.

The case of the machine builder is reminiscent of Siemens and the plant in Görlitz, which should also be closed. CEO Joe Kaeser revised his decision after massive pressure from politicians and employees. The difference in this case is that Voith will remain tough: “There are levels in the workforce and among the workforce representatives that have moved in the meantime, others are hardened,” said CEO Haag in an interview with the Handelsblatt.

His chief overseer adds: “If we cannot agree, even if the settlement process fails, then our legal system provides that the owner decides in the end.” The top management, unfamiliar with the family, sees no contradiction to his image as a caring family company. There are fair offers. No job will be relocated abroad.

“We have to make the group and the 20,000 jobs sustainable for the future. This is not a cold capitalism. That is our real social responsibility as an entrepreneur, ”emphasizes Haag. The family is supporting the course. At the same time, the strategic development will also continue with acquisitions in corona times.

Read the full interview here:

Mr. Russwurm, Mr. Haag, since it is known that Voith wants to close the turbo drive plant with 500 employees in Sonthofen, the social peace in your family company has gone. Did you expect such resistance?
Toralf Haag: To be precise: we really want to move production from Sonthofen to other German plants. We want to maintain around 170 engineering jobs in the region. We expected resistance and of course we know that the planned relocations are drastic for the employees. However, we have offered alternative jobs to all employees.

Really? The workforce apparently sees it differently and has been on strike for over three weeks.
Haag: There are levels in the workforce and among the workforce representatives, they have moved in the meantime, others are hardened.

Siegfried Russwurm: In fact, not everyone has yet found the way to a constructive solution. There are parts of the workforce who apparently want to signal that they can prevent production from being closed. There is no legal basis for this.

What do you mean by “legal basis”?
Russwurm: If we cannot agree, even if the settlement process fails, then our legal system provides that the owner decides in the end. That should be noted there. We offer many fair alternatives on how we can mitigate the consequences of the relocation of production for those affected, but the resistance in Sonthofen is clearly hardened.

Vitae Toralf Haag and Siegfried Russwurm

In agreement with IG Metall, the employee representatives claim that the plant has been operating at full capacity for years, and also works in three shifts. If that’s true, why is there no other solution?
Russwurm: The utilization of a single plant is only apparently proof of economic efficiency. It is the profitability of the entire division that counts, and it is not competitive compared to our large competitors. We have to focus and concentrate much more than before.

Haag: Sonthofen is all about saving potential in the low double-digit millions. We simply have too many plants in Germany that are too small in the drive division.

But isn’t the entrepreneurial and moral price very high? On the one hand, the belts are not standing still because of Corona, but because the workforce is stubbornly on strike. On the other hand, even the Bavarian state government is now alarmed. The case now also draws political circles.
Russwurm: I understand that the emotions on site need a space. But at some point there has to be a turn towards communication. We want fair solutions. We will take care of the trainees and ensure that they can complete their training. We offered all employees a job in another Voith plant in Germany. We would also use our good contacts to other companies in the region and install a transfer exchange – and much more. But from Sonthofen it only says: “We are preventing production from being closed.” There is hardly any willingness to talk.

The employees complain of a deterioration in the moral customs at Voith, according to which the procedure fits to coolly calculating stock corporations, but not to a 153-year-old family company that prides itself on its special social responsibility.
Haag: We have to make the group and the 20,000 jobs sustainable for the future. This is not a cold capitalism. That is our real social responsibility as an entrepreneur.

As the family’s emissary, Ophelia Nick gave a speech at the company’s 150th birthday celebration three years ago, in which she said the following sentence: “We are not shareholders, we are keepers” …
Russwurm: That is exactly our guiding principle to keep the company permanently. We really didn’t make the decision easy. But it is 100 percent correct strategically and economically, and that is why we are right with ourselves.

How does the family feel about the decision to close Sonthofen? In addition, the plants in Zschopau and Mülheim are also scheduled to close.
Haag: We discussed our concept intensively last October in the Shareholders’ Committee and with the family. And also prepared the shareholders for resistance. In addition, not a single job will be relocated abroad, but only relocations between the domestic plants are planned.

Now, as you say yourself, the resistance has turned out to be much stronger than you expected in autumn. Have you spoken to the family about it since then?
Russwurm: We have. We have also presented the alternative suggestions and explained why they are not a permanent solution. The shareholders confirmed the plan and signaled to us that they are committed to the decision, for one reason only: because they can understand our reasoning. She agrees with the family’s long-term interest in the company.

The case is reminiscent of your former employer Siemens’ plans to close the factory in structurally weak Görlitz. Then politics got involved when the workers took to the streets, and CEO Joe Kaeser revised his decision. How do you judge that?
Russwurm: Please understand that I am not commenting on other companies. In general, however, the following always applies to far-reaching decisions for the workforce: as an entrepreneur, you have to have fully calculated and checked all possible alternatives before deciding to close a plant or relocate your production to be sure that there is no better option. After all, they plunge entire families into emotional crises when jobs suddenly disappear. You can’t suddenly get up and say: “We have re-calculated and have now come to a different result.” This is not responsible management.

Have you considered explaining the plan to the angry workforce yourself?
Haag: Of course we thought about it. In the past few months, representatives of the divisional management have repeatedly asked the staff in Sonthofen personally and their questions. But the fundamental decision to relocate production is not negotiable. We naturally like to talk in detail about how we can cushion this important decision for the entire company.

In addition to the trouble with the plant closings, there is also the management of the corona crisis. How challenging is the situation?
Haag: The most important thing: Our liquidity has remained stable in the three-digit million range because our operating divisions work well and the supply chains have remained intact so that we were able to fulfill our customers’ wishes. The paper business, especially packaging, is doing well, as is our energy technology. In the powertrain division, on the other hand, we are more affected by the consequences of the pandemic, because customer demand has plummeted in some industries.

How do you take countermeasures?
Haag: We have of course adjusted the costs, we work with an average of 20 percent short-time work across the Group, and we also cut internal investments by a third.

Is that enough to cope with the crisis?
Haag: We are getting through the crisis well. The company is in a stable condition. The first half of the year was robust. However, sales will decline in the full year. But all three major divisions have so far been in the black.

Your credit rating with the agencies could be better. The junk status, where investment is discouraged, is not particularly far away.
Haag: We feel comfortable with this investment grade and could raise money if necessary, and at very reasonable terms.

What amount do you have to pay out to around 40 owners?
Russwurm: Voith’s owners receive a dividend that, compared to the usual practice in industry, corresponds to a relatively modest dividend.

Sufficient liquidity therefore appears to be available, and at the same time possible purchases due to the crisis may have become somewhat cheaper. How do you see the current strategic potential?
Haag: We have recently made several small acquisitions that have brought us new sales of over 300 million euros. We have strategically expanded our service business and closed our gap in electric drives. We are also keeping our eyes open.

Russwurm: First: The money from the sale of the Kuka shares has remained entirely in the company and is still largely available. Our equity ratio is still around 30 percent. Second, we want to make our existing business future-proof, with additional acquisitions if necessary. Third, rest assured that Voith’s strategic development will continue unabated even during the Corona period.
Mr. Russwurm, Mr. Haag, thank you for the interview.

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