Klaus Rosenfeld was making a routine visit to a potential supplier in the fall of 2018 when, unexpectedly, a big opportunity presented itself. Executives at the company let it slip that it was about to be sold. The terms hadn’t been finalized, and Rosenfeld’s Schaeffler AG could cut in if it acted fast.
On the drive home to Frankfurt, Rosenfeld called Georg Schaeffler, the son of one of the company’s founders and now its chairman and main shareholder, to brief him. Before hanging up, the two men agreed to sleep on it. Less than 12 hours later, Rosenfeld had the green light to make a bid for Elmotec Statomat, a world-leading supplier of equipment used in the manufacture of electric vehicles. “We’ve never turned around a deal so fast,” says Schaeffler’s chief executive officer. “It was clear the technology would accelerate our transformation—a small step with a big impact.”
Impulse buying runs against the grain of German capitalism, which is more measured and methodical than the U.S. version. Yet in boardrooms from the Black Forest to the Baltic coast, a sense of urgency is taking hold with the realization that the German economic model is reaching its limits: Precision machining bits of metal down to micron levels of tolerance and assembling them into cars and other complex mechanical systems that are then shipped to all corners of the globe can no longer guarantee affluence for the country’s 83 million people.
Germany’s auto industry has been on the back foot since the 2015 emissions-cheating scandal involving Volkswagen AG, and it faces an existential threat from the looming extinction of the internal combustion engine. Yet Europe’s largest economy is ill-equipped to make the transition into cleaner, digital technologies. The country’s carbon dioxide emissions are the sixth-largest in the world, and it ranks 30th in mobile broadband speeds, with download rates less than half as fast as in China.
Even a success such as BioNTech SE’s development of one of the leading Covid-19 vaccines is tempered by the fact that the Mainz-based biotech needed Pfizer Inc. to bring the shot to the world. Then there’s the sensational collapse last year of electronic-payments company Wirecard AG, which was seen as a rare homegrown digital champion before being outed as Germany’s biggest postwar fraud.
The Sept. 26 election, which will mark the end of Angela Merkel’s 16-year tenure as chancellor, adds to the collective sense of unease. Her successor, whoever he or she may be, will inherit a nation that’s reliant on the U.S. for security, China for growth, and the European Union for clout. Finding Germany’s place in the world while guiding an economic makeover will be a monumental task.
Central to that effort will be building on Germany’s manufacturing prowess, which was on full display at Schaeffler’s headquarters in Herzogenaurach, a hamlet in northern Bavaria, when Bloomberg Businessweek visited this summer. Inside one of the plants, the air is filled with the smell of lubricants and the clang of machines pounding metal bands into precisely contoured rings that will be fashioned into bearings. The friction-reducing parts are the company’s mainstay, ranging from thumbnail-size ones found in car transmissions that sell for less than €1 ($1.18) apiece to others for wind turbines that are so big you could drive a van through them and cost upwards of €100,000 each.
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