In business, half a year can feel like a lifetime. When Jan Willem Jongert, Dutch-born head of Austrian OEM Schwarzmüller, addressed the global truck media at a pre-IAA press conference last September, he was visibly excited to announce that the 140-year-old brand was gearing up for global expansion. Although Austria is not exactly known as a low-cost manufacturing base, Jongert planned to capitalise on the country’s reputation as the gateway to central and Eastern Europe and its then-burgeoning domestic economy, which generated the second-highest economic output per head in the EU.
Half a year on, however, Austria’s export-led Wunder-economy is slowly losing its gloss as productivity slows and deficits rise, threatening to throw a spanner in the works of Jongert’s master plan to grow by 10 per cent in 2014.
According to London-based Financial Times journalist Robert Anderson, one reason for the setback is Germany. He says Austria’s export-orientated industrial sector is so interconnected with the powerful neighbour in the north that an issue in Berlin can have an immediate impact on Austrian businesses like Schwarzmüller, which only six months ago had been hoping to piggyback on German growth for a while. Instead, the Austrian miracle took an unexpected hit as German exports slowed towards the end of 2014, causing a knock-on effect on corporate confidence and investment.
But that’s only half the story. Given Austria’s strong links with central and eastern Europe, the Russian economic downturn and stand-off with the west also had a noticeable impact on business confidence in Vienna. As a result, Jongert has more than one issue to attend to in 2015 if he is still to meet the ambitious growth target he set himself in Hanover.
But it’s not all doom and gloom in Europe, and Jongert is well aware that the tide can turn quickly these days. After all, Austria is still a very successful economy, with high GDP per capita, relatively low unemployment and a long-term current account surplus, making it highly likely to bounce back strongly once Eurozone growth stabilises again. And judging by his IAA speech half a year ago, Jongert has no doubt that time will come as soon as the EU’s stand-off with Russia is resolved and Germany’s economic engine will stop sputtering. Until then, his aim is to not let the public debate about whether Austria is losing competitiveness affect him.
Luckily, there’s a whole range of data to help him focus on the positive. For example, research and development spending, at 2.8 per cent of GDP, is the fifth highest in the EU and the Government aims to ramp this up to 3.76 per cent by 2020, Reinhold Mitterlehner, Austria’s Vice-Chancellor and Minister for Science, Research and the Economy promises. Then there’s the local workforce. Native workers are said to be high cost but also high quality; they have strong skills and motivation, while a well-established social dialogue and a flexible labour code minimise strikes and keep wage increases low.
According to business journalist Robert Anderson, small and medium-sized enterprises, in German often referred to as the ‘Mittelstand’, are key to the nation’s success, and Schwarzmüller is one of them.
When Jongert joined in 2013, he instantly managed to boost the company’s revenue by three per cent, from €229 to €235 million. Even though overall profit was still down that year, the ex-Jungheinrich executive brought with him a strong vision for the Schwarzmüller brand and its 1900 staff, which revolved around constant innovation and customised product development. As a result of the change to Euro VI, for instance, he predicted a need for lightweight, more versatile transport equipment in the market and re-positioned the company accordingly.
For 2014, revenue is expected to hit the €270 million* mark, with all three production sites in Austria, Hungary and Czech Republic running at full steam. “We are very happy with the path we have embarked on,” he says, seemingly unfazed by Austria’s current economic faintness. “The figures already reflect that our strategic realignment is coming to fruition.”
But, he also says his determination should not be mistaken for ignorance. According to Jongert, Schwarzmüller’s management team has long acknowledged the need to prepare for economic volatility. “We have implemented a three-fold strategy focused on product innovation, streamlining and globalising our production, and on expanding our service network. We are also exploring new opportunities in the construction market as well as in the oil, food and timber industries to expand our footprint.”
While Jongert’s renewed focus on innovation is supposed to help Schwarzmüller grow its market share, the re-organisation of the business is meant to set free additional synergies between Schwarzmüller’s sites in Hungary and the Czech Republic to make production processes more efficient. The new, value added service offering is then meant to position the brand at the upper end of the market. “We won’t get involved in market segments that would force us to compete on price,” says Jongert.
The goal, Jongert adds, is to turn over around €450 million and sell more than 10,000 units annually by the end of the decade. Capitalising on the company’s long and proud history, the new CEO would like to see Schwarzmüller close the gap to German trio Schmitz Cargobull, Krone and Kögel, and challenge Kässbohrer for fourth place in Europe, a spot also claimed by Spain’s Lecitrailer brand.
“Admittedly, those goals are ambitious, but realistic. We already see ourselves as the number four in Europe – the hidden champion of European trailer building, if you like. But now we need to capitalise on that position more systematically,” Jongert said at Schwarzmüller’s IAA press conference in Germany last year.
“140 years in the industry have helped turn a classic Austrian family business into a European technology leader,” he added. “We’ve taken stock of the know-how in product development, design and manufacturing we accumulated over time and will systematically utilise it to grow the brand. Combine that with a network spanning more than 20 countries and acknowledging our status as an international brand is just a logical result.”
Schwarzmüller’s vast expertise in manufacturing and design is also the reason why Jongert is still reasonably optimistic about the future, despite widespread concern about a new slowdown in Europe.
He is convinced that intelligent commercial vehicles are the future, with Schwarzmüller being “perfectly placed” to lead the way. “I’d like to think the Schwarzmüller organisation was made for such strategic challenges,” he says. “With three production facilities in three countries, we have the ability to cater to a whole range of industries, but also take a very individualised approach.”
To demonstrate that resourcefulness, Jongert not only unveiled a new Thermo tipper model and a telescopic semi-trailer called Tele-Mega at the IAA Commercial Vehicle Show half a year ago, but also a new Ultralight model fitted with a new kind of quick opening curtain.
But what seemed even more indicative of Schwarzmüller’s rise in relevance at the time was the fact that the company took over the spot formerly occupied by up-and-coming brand CIMC Silvergreen, which has recently taken a step back and does not seem to compete for a top five spot anymore, at least for now.
According to Jongert, all three novelties have been perceived well by the market and will help Schwarzmüller continue its growth story going forward. More importantly, with the EU sanctions against Russia automatically expiring in March and July, he says an end of the current economic lull in Austria is now conceivable – and with it growing demand for Schwarzmüller equipment.
And even if Russia will restructure its economy and adopt a more Asian growth model over the current free-trade model – involving more protection for domestic industries, more control over international capital flows and less reliance on imports – Austrian-based businesses like Schwarzmüller are still likely get off with a slap on the wrist, given their close ties to Eastern Europe.
According to Robert Anderson, the number of companies established by east European groups has grown from 567 in 2003 to 2,751 last year. In 2013, investment from central and east Europe represented almost half of the €9.3 billion inflow.
More controversially, Russian investors in particular have been drawn to Vienna recently, appreciating its stable legal environment. Gazprom, for instance, has set up its gas trading headquarters in the city, allegedly because Austria is considered more neutral than other western European countries in the current conflict. In that sense, Schwarzmüller is ideally placed to service both east and west and defend Austria’s reputation as an unlikely, yet highly inventive manufacturing hot spot.