China is an important market for German suppliers. In an HANSA interview, Martin Johannsmann, Chairman of the Board of the industry association VDMA, talks about growing challenges, German strengths and the increased interest in political support
How do you currently rate the Chinese market for German suppliers?
Martin Johannsmann: The Chinese market has been[ds_preview] important for a long time, but is growing in importance. On the one hand, because the state continues to promote shipbuilding politically, especially by financing newbuildings. As a result, our traditional shipping customers are going to China to an even greater extent for their shipbuilding activities. We have to position ourselves as a supplier so that this industry does not get bogged down there but continues to have access to customers. As long as we are in competition, everything will be fine. If we see other disadvantages, we have to put the issues on the political agenda, as we did recently at the National Maritime Conference.
So do you call for more political support?
Johannsmann: For a long time, we did not want politics to be necessary, we wanted competition as such. When the discussion arose about getting political backing for the Chinese market, we said: wait a minute, that is not really our principle. But there is a point at which we must critically question this principle. If we are to be disembarked because financing from China is linked to a high proportion of Chinese suppliers, we see this as a danger. In this respect, we have adjusted the principle a little.
Chinese financiers such as BoComm and ICBC are now represented in Hamburg. Do you notice this to the extent that local shipowners are also increasingly working with such players and the pressure is growing to choose Chinese components?
Johannsmann: We don’t yet feel it in business figures or in day-to-day business. However, we are very aware that the question could be in the competition of the future: Can German or European industry hold its own against suppliers from China? The Chinese are fast, efficient, although not always cheaper. There will be a system competition that will challenge us, but in which we can hold our own well if we can position ourselves in a variety of ways and develop a dynamic. We have good employees, but we have to put our strengths to the test. In some areas we have been a little arrogant and careless.
Unlike shipyards, China has not yet overtaken Europe in the supplier market?
Johannsmann: I wouldn’t know of any major business that we have lost to Chinese competitors. Together with our customers, however, we are of the opinion that we have to be careful not to be overtaken in essential respects.
There are now local content rules for cruise shipbuilding in China. Do German suppliers have to think even harder about becoming active there with their own branches or cooperation?
Johannsmann: Many of the previous joint ventures were not as successful as hoped because the cooperation did not fit or the economic result did not turn out as planned. There are also companies that have come back. In addition to economic efficiency, another important factor is how strong the need for technology protection is and how well it can be protected under patent law in China. But: In Sales & Service we have to adapt more to the Chinese conditions. We also need a different speed, which is much more important in China. The German organization is not yet as strongly attuned to this.
Do you think there will be more cooperation or Chinese takeovers?
Johannsmann: I can imagine that, but we have to wait and see. But I don’t think it will be a broad wave, rather individual cases. And then let’s see what that means for competition.
What does the German supply industry need to do better?
Johannsmann: From my point of view, it’s about operational excellence. How do we bring the operational functions together in such a way that we can serve the customer seamlessly, highly efficiently and quickly? Family businesses often find it easier, but larger companies sometimes have departments that have a life of their own. It’s about creating value quickly and efficiently throughout, so that the customer gets exactly what he needs without wasting it. A lot has already happened, but are we already there where we need to be? If we can make this adjustment even better, we can become even better in competition with the Chinese. We can hold our own well in engineering and innovation, but others are sometimes better in customer orientation and the efficiency of value creation.
How confident are you that engineering will remain high quality?
Johannsmann: I really believe that we have a well-trained engineering base. But it is the task of the company to develop the know-how in the long term and to carry it through bad times. What is needed is a perspective of at least 20 years, not five years. Some managers take a different view because they think cyclically, but that’s no way to secure know-how in the long term.
Is there still enough young talent in Germany?
Johannsmann: There are VDMA colleagues who have difficulties getting the necessary know-how due to their specific situation.
What can you do?
Johannsmann: You have to bind your own people to you and, if necessary, train them further by gaining qualifications. If you have good employees in the workshop or in service, they have to invest. To expect the market to provide you with exactly the engineers you need is the wrong perspective. Another point is environmental protection, where the industry does not have the best reputation. But it is precisely these issues that we have to address, firstly because we are forced to do so, and secondly because it has a massive impact on our image as an employer. That still has room for development in the industry.
Are steps into new markets necessary?
Johannsmann: We are well positioned with specialists and niche activities. I can’t see a field where suppliers have to get into to survive. I believe there are a number of technology leaders in our industry. This sector will remain, the question is whether it will get bigger or smaller, probably smaller.
Obviously, there is some confidence…
Johannsmann: This industry has a lot of cycles and crises behind it, with a lot of cost control and flexibility. For me, that’s a strength. We will always have this cyclicality in shipbuilding. The question is: Can a Chinese system do that as well? If a market is no longer attractive, the state may cut massive subsidies there. We have seen that a long list of shipyards has only just begun to emerge from the ground, but has since been dissolved, and that also applies to suppliers. I experience us as storm-tested and solid. On this basis, also because we have long-term companies and a pronounced customer orientation, things don’t look so bad for us.
Interview: Michael Meyer
