Vorsprung durch Technik

Posted on 2 Jun 2010 by The Manufacturer

Business is getting greener, leaner and more automated. Transportation systems and buildings are becoming more energy efficient; electric motors are converting more power for the same input. Juergen Maier tells Will Stirling why, despite economic unease, Siemens Industry UK feels cautiously bullish about the recovery and urges British industry to take long term innovation investment seriously.

“Is the Carbon Reduction Commitment a big deal to Siemens?” I ask. Juergen Maier’s eyes light up. “Absolutely. The environmental agenda and the requirement for our economy to be more green is the single biggest opportunity for Siemens for the next five years,” says the managing director of Siemens Industry UK.

The green agenda should excite Siemens. Its Industry division, which in the UK covers three broad business sectors — mobility including transportation infrastructure, building technologies, and the manufacturing of automation and drive systems — provides end-to-end technology solutions that power, control and automate companies’ operations. An end-toend product portfolio is key to finding efficiencies, and Maier is emphatic about both the savings and carbon emissions reductions that organisations can make by operating these processes with modern, high efficiency motors, drives and systems. “We have calculated that we can reduce the energy consumption of both electric motors and buildings by between 30 and 40 per cent,” he says.

“Independently verified figures show that, if all the currently installed electric motors were replaced with the most efficient models, we could save 40 million tonnes of carbon. That’s not far off 10 per cent of the total carbon emissions of the UK.” He laughs at these bald facts, and we shake our heads wistfully. But this is not a sales pitch, Maier adds. “There’s no way we could supply that many motors! This is a huge opportunity. It’s a very competitive market, but there no other company has the spectrum and depth of solutions that we do.” Siemens Industry UK has strong footprints in all its markets in the UK. In the last 10 years, Maier says, the company has grown exponentially, from a turnover (for the UK division) of about £250m then to £1.5bn today. “In the last year, building technologies and automation took a slight downturn but the transport infrastructure side was pretty buoyant,” he says. “The overall market trend was down, but our main growth engines, buildings and manufacturing, were selling technology that enables customers to improve their carbon footprint which has been robust through the recession.”

From Meccano to MAG
Born in Germany of Austrian nationality, Juergen Maier has engineering in the blood – his father was an engineer, as is his older brother. As a boy he stripped down and rebuilt washing machines and household bits. “I was more interested in Lego and Meccano than playing music and singing,” he says. With this background, he was sponsored by Siemens through a manufacturing engineering degree at the University of Nottingham. There was no guarantee of a job offer, but he applied and got offers both from Siemens and other companies.

He joined Siemens in 1986 — “I made the right decision,” he says.

His first job was as a manufacturing engineer for three years, from where he went into shop floor management, production and materials management, purchasing, covering all the factory management functions. He was general manager of the drives factory in Congleton, Cheshire for six years. “I joined when it was first being established as a variable drives factory. I started the whole lean journey there in 1992, through total quality, six sigma, all those good things.” Congleton is now more efficient than Siemens’ German drives factories.

Why did Siemens chose to locate a high-tech electronics manufacturing factory in Cheshire, England? “Strategically, we always look for opportunities to add value and invest in markets where we serve our customers. We pride ourselves in not just shipping components in from overseas but doing our part to add-value in local economies. Of the total 17,000 people employed in the UK, 5,000 of those are directly in manufacturing. And we generate about £1bn of added value, in predominantly exported goods, through those factories. It’s evidence that we see the UK as, not the only, but one of the favoured places in Europe to manufacture.”

The Strategy and changing government
Maier was a member of the Ministerial Advisory Group for Manufacturing (MAG), a 19-strong panel of experts from industry, trade associations and Sector Skills Councils, established with the launch of the Government’s Manufacturing Strategy in 2008 to advise policymakers. MAG, the Strategy and its multiple-subordinate strategies (New Industry, New Jobs; Composite Materials Strategy etc) is in limbo, awaiting its fate from the new Department for Business under newly appointed Business Secretary Vince Cable MP. The department is deciding whether to carry on with that group. “We’ve already started lobbying, I was down in Westminster yesterday,” says Maier. “I doubt they will kill it – it would send out a very wrong signal compared with the message about business and manufacturing in recent months.” It’s plain that Maier is passionate about manufacturing and engineering and their contributions to society and the economy.

Has the Strategy performed? “I was very positive about it,” says Maier, who was with MAG for two years. “The most positive aspect was that a strategy document was created, I think it was the first time we had a formal strategy document for manufacturing. It created more focus within Westminster about the importance of manufacturing.

It’s important to make the point that several people – in Westminster and manufacturing activists – had begun this journey before the financial crisis, but the crisis accelerated this and gave it more momentum.” “The detail on how we were to execute the strategy was missing, but that didn’t concern me because you don’t make up 20 years of lost ground in two years. We had dialogue and action in the form of funds going into manufacturing technology centres, the Technology Strategy Board, MAS, initiatives into supporting areas like renewable energy and low carbon. My only criticism is that it ended up being a little bit ad hoc. With several initiatives running concurrently, it was difficult to strap these back to the original Strategy – it became activity rather than strategically-led. But I knew at some point we’d get back around the table and check that this was the right thing to do for UK plc.”

A new government – is the election result good for manufacturing?
“Vince Cable has voiced his support: in the Chancellors’ television debate he said manufacturing is an essential component of a strong economy. What is not encouraging is that the coalition Government Agreement document [published May 13] doesn’t mention manufacturing or engineering once. It covers debt reduction, spending, banking reform, tax, immigration, schools – important stuff, but business and industry is totally missing. That’s deeply disappointing.

Clearly reducing the deficit is important, but you can’t deal with deficit reduction alone without looking at value creation. In fact, if you just went down deficit reduction alone, you would destroy value creation. A key part of value creation is the manufacturing and engineering sector, so this was a gross omission.”

Cultural differences
Taxation, contends Maier, needs to be more in tune with the long term investment decisions of manufacturers, where capital allowances need to be kept stable. “But the bigger problem [for manufacturing] is culture,” he says.

As a businessman having worked both in the UK and Germany, Juergen Maier is close to the cultural differences of business in the two countries. “The attitude to investing, both into and within manufacturing and engineering businesses, is very different. Generally, in this country we don’t invest for the long term, there is more short-termism. We don’t invest as much in capital equipment and innovation as Germany, and Japan for example, and our inventory levels are very low. This is not about taxation – in Germany tax is equally as complex. The difference is that within business management [in Germany] there is just a more long term attitude and a more positive attitude towards innovation and investment driving long-term productivity improvement at the board level.” “Do the managing directors and boards of engineering companies see innovation and investment as a necessity to drive up productivity and be competitive on a global stage? Often the answer is no – that’s the bad news. If the UK is really going to have a manufacturing renaissance, this needs to be addressed.” And the good news? “Despite our low investment levels, our productivity levels are damned good.

The question that raises is: how good could it be if we played our investment card even more? I think we could be even more competitive on the global manufacturing stage, if we use the things we have that are well established – very good, lean practices; generally a good culture towards manufacturing, flexibility of labour, and we’ve been much more practiced at managing upturns and downswings than our European neighbours.” UK manufacturing coped admirably with the recession, says Maier. “Frankly, we’ve been there, done that, got the T-shirt. In Germany it was mad panic; they weren’t as practiced as the UK at managing their way through it. So here we’ve got a really good manufacturing base without investing enough. If we really invest, and carry on doing the things we’re doing well, we should be world-beating.”

UK a tougher nut to crack on total integration
The investment attitude Maier refers to applies directly to his business. Siemens supplies automation systems and technology to improve productivity to the manufacturing and infrastructure industries. “In the UK more than in Germany there is less value placed on the technology solutions that we supply. In the UK there are not as many customers to whom Siemens can present the whole suite of integrated technology; from a top-level automation system down to some low level controls or drives, to whom we can say: “this is all integrated and if we get it right, we can make a real difference to the costs of your factory.” It often gets driven down to a purchasing department who will look for cheaper options. All that potential value is lost by going down a much more purchasing and commercially-driven more than strategically-driven and engineering-led way. That is a major barrier in the UK.”

Maier says Siemens is breaking that down, and the company has several strategic partnerships with large organisations where Siemens is the default technology partner and over a 10-year period “will work with that company to make sure that the best values are generated from the technology we’re supplying them. But it’s a culture thing at the end of the day – it is easier to convince board level people of this strategic approach in Germany than the UK.”

Lean – corporate HQ or local drivers?
Siemens made sharp cuts to its pan-European workforce in 2009, axing over 5,000 jobs outside Germany, as part of a programme to cut Eu1.2bn of costs between 2009-11. Lean manufacturing is a philosophy that runs through Siemens, which has a lean programme and a toolbox. But the programme has to be driven locally. Why are some UK factories more ‘lean’ than those in Germany? The answer is revealing. “In Germany, the general culture to do things systematically and of a high quality is almost innate. You have to do less to create the culture, there is a lower need to do it and hence many organisations don’t bother. Whereas here the start point is lower.

People here don’t come and work for Siemens to increase Siemens’ productivity – their prime objective is to earn some money, period. Therefore you have to work much harder with that culture to create that lean philosophy. We’ve had to put in more resources – but when we’ve done it, the results are fantastic.”

A word about wind
In March, Siemens said it would invest £80m in a new factory to make offshore wind turbines, which would create around 700 jobs. This followed pledges from other big companies like GE to invest in offshore wind manufacturing in the UK, and in the Budget the Government announced a £60m offshore wind infrastructure port development competition.

Less than a year earlier, Danish turbine manufacturer Vestas had shut its plant on the Isle of Wight, citing crushing red tape and planning delays in securing wind energy projects as the reason. Many in the wind industry thought this might ring the death knell for serious large wind system manufacturing in the UK. The move surprised Maier. “[Vestas] felt the environment for investment, especially planning for offshore wind, was too complex. We found this extremely strange because at the same time we were booking big orders for turbines and blades in the UK, both offshore and onshore. You can read into that what you like, but the market for wind energy in the UK is buoyant.” Siemens had also looked at sites in Denmark and Germany for the factory – why did the UK prevail? “The support we received from the Government was key to helping us. The Danish and German governments were also willing to invest, so you have to get on a level playing field and then the other factors matter, like being close to the customer, having the right skills, supply chain etc, which the UK has.”

Environment for opportunities
Despite the economic unrest in Europe, in the long term Maier says Siemens Industry UK is in a very exciting position. Each of its core business sectors face growth opportunities. “The UK has an old transport infrastructure by developed world standards, but there’s a massive opportunity there in the next 20 years.” There is a greater need to construct more energy efficient buildings, where the need for technology to reduce operating costs will benefit Siemens, and Maier expects a “mini-renaissance in manufacturing, not a boom but an uplift”, especially in energy efficiency, which will feed the company’s automation, drives and ancillary systems.

Looking beyond Siemens, as the recovery matures Maier sees the sectors which fell the most recover the most, like automotive and aggregates, and there will be a relative decline in some areas that were largely resilient through the recession, namely defence and aerospace, which have had fairly high investment cycles in last two years. “There’ll be ups and downs but net gains, and overall it will be quite good.” Whether or not factions of British industry can overcome their cultural reticence to end-to-end, high technology investment, Juergen Maier’s company is certainly wellplaced to serve it as business and transportation gets leaner, greener and simply better.