youhe winding road through the German countryside from Stuttgart to the small town of Mulfingen gives little clue that this southwestern region is home to several companies that are world market leaders in their field.
But the northeast of Baden-Württemberg has several successful specialist firms that make up the middle classthe foundation of the small and medium-sized engineering companies that are the backbone of the German economy and are envied around the world.
Fan and ventilator manufacturer ebm-papst is still headquartered in Mulfingen, a city with a population of about 3,600, but its products are found around the world in automobiles, home appliances, and data centers.
However the energy crisis caused by the Russian invasion of Ukrainecombined with labor shortages and post-pandemic disruption to supply chains, is piling pressure on these companies, which are traditionally family-owned, and without the deep pockets enjoyed by Germany’s corporate giants.
With Germany is preparing for recession this year, how this industrial heartland responds and adapts to multiple crises will help shape not only the future of the country, but also the eurozone as a whole. Germany is expected to be the third-worst performing G20 country (-0.3%) this year, according to the Organization for Economic Co-operation and Development, behind Russia and the UK. Manufacturing accounts for around a fifth of Germany’s economy, more than double the 9% seen in the UK and France, and well above Italy’s 15%.
The largest industrial employer in the region, around 4,000 work for ebm-papst in Mulfingen, the majority producing fans and motors for ventilation, refrigeration and air-conditioning technology.
Founded in 1963 by Gerhard Sturm, the company, which calls itself a “hidden champion”, is still family-owned, but has been run for the past year by CEO Klaus Geißdörfer.
Under his leadership, the company decided to end the production of automotive fans. Instead, he has changed staff to focus on new technology, such as making fans for heat pumps and fans to cool data centers.
“We said it would be better if we concentrated on the things where we really are the best in the world,” says Geißdörfer from his office at ebm-papst headquarters.
“We decided to significantly increase our capacities, which we will increase next year, because at the moment we cannot keep up with the demand.”
Despite benefiting from booming sales of fans for renewable technologies, the past few years have not been easy for ebm-papst. The Covid lockdowns in China and the resulting supply chain disruption occasionally halted its German production lines, which Geißdörfer says “doesn’t make sense.”
As a result, the company has worked to source more parts locally, near its large factories in Germanyas well as in the US and China.
Just down the road, in this economic heart, is the nearly 80-year-old headquarters of screw and fastener manufacturer Würth, which is located near Bürkert, a manufacturer of measurement and control systems for liquids and gases. .
These companies have helped southern Germany become an industrial powerhouse, bringing prosperity and a sense of local pride to the area.
“The region has many world market leaders,” says Donata Lell, who runs a local guest house and restaurant. She believes that the industrial base increases the purchasing power of her customers: “People here make more money.”
Geißdörfer, a native of neighboring Bavaria, is convinced that the small community of Mulfingen is a good place to run a manufacturing business.
“We have smart people here. I like the spirit that the people here have, they are very enthusiastic,” she says.
But does the company have enough of these people to meet the growing demand? Despite Geißdörfer’s positivity, ebm-papst is having difficulties finding staff with the right skills, as well as problems sourcing components such as semiconductors.
Ebm-papst has tried to solve its worker shortage by offering remote work to staff in administrative roles, plus free bus rides to work for employees who live within a 40 km (25 mile) radius, a benefit they currently use. about 1500 people.
Amid cost pressures from the company and higher prices demanded by its suppliers, staff say they are struggling with the cost-of-living crisis.
Employees at the plant have raised their personal financial difficulties directly with Geißdörfer.
“I had people come up to me and say, ‘I can’t buy any Christmas presents for my kids anymore,’” she says. “I talk to people and they tell me: ‘I can’t afford vacations anymore.’”
Over the summer, the company paid staff an additional €2,500 in living expenses payments, which were made in five monthly installments of €500 starting in October.
“We stick together with our people, we support them in difficult times and we go through crises together and try to find a way to deal with it,” says Geißdörfer, describing this as a strength of the middle class.
“That is the positive of this type of family business structure that we have in Germany. I also see other companies doing similar things.”
However, that might not be enough. Metalworkers’ union IG Metall, the country’s largest, already represents workers at other ebm-papst manufacturing sites in Germany, but not at its main site in Mulfingen, as a result of a landmark labor agreement. There, too, he is working to get his foot in the door, says Uwe Bauer, IG Metall representative for the Schwäbisch Hall region.
Bauer says the union has recruited several hundred members in Mulfingen in recent months, as workers realize that full employment at the local level has created “an employee market.”
“Companies have to rethink what to do with skilled workers,” Bauer says.
“We receive many requests about which companies are subject to collective wage agreements. Wages play a role, but so do regular work hours,” says Bauer.
The ebm-papst salary offer at the national level is broadly in line with the collective labor agreement reached between IG Metall and employers in Baden-Württemberg at the end of November, although the Mulfingen workers are not subject to this agreement.
The wage agreement, which sets the benchmark for wage increases for almost 4 million workers in the metal and electrical sector throughout Germany, increases workers’ wages by 5.2% from June and by 3, 3% from May 2024. In addition, they will also receive an inflation of €3,000. bonus”, as the union calls it, which is tax-free and payable in two installments in March 2023 and 2024.
The deal is generous by historical standards, but it still drew some criticism for being below inflation, when the annual rate stood at 10% in November. according to official statistics.
While payment issues are resolved for now, sourcing parts remains a challenge amid a global shortage of semiconductor chips since the start of the pandemic.
In the race to obtain these vital components, middle class companies find themselves unable to compete financially with the country’s largest manufacturers, particularly automakers.
“As a company, we can grow faster if we can get more semiconductors,” says Geißdörfer. “In a way, we compete. But the industry competes with the auto industry, the solar industry, and the renewable energy industry, and we all need the same type of electronics.”
The government should do more to support the country’s vital network of small and medium-sized businesses, he says, particularly with high energy costs, which Geißdörfer believes are making European companies uncompetitive globally compared to their rivals. Asian or American. The recent declines in wholesale energy prices have offered only a glimmer of hope.
“I am really concerned about German small and medium-sized companies that are highly dependent on energy. They have real problems right now to work to deal with those huge increases in energy costs.”
while welcoming you government support with energy billsGeissdörfer and others middle class The bosses fear that Berlin does not have a clear industrial strategy, particularly as wean the country off cheap Russian gas. The decision of the Government of Angela Merkel to turn off its nuclear power plants after the Fukushima disaster in Japan in 2011 left it open to the Kremlin’s use of gas as a weapon.
“In Germany, we need to reinvent ourselves,” Geißdörfer says, acknowledging geopolitical challenges, including the energy transition and Brexit.
“We are still strong enough to have enough money and we can afford it, but we need to do it fast, to think about how to have a stable economy in the future. But it’s a minute to midnight.