The elephant on the road

2015 could go down in history as the year globalisation redeemed itself. For more than half a decade, it seemed like the collapse of the US housing market in 2008 had also buried the buzz around the internationalisation of trade beneath it. But now research is picking up the concept again, saying it could be right on the brink of reinventing itself.

In late 2014, German logistics powerhouse DHL was the first to resurrect the old catchword in a move to evaluate just how well-connected the world still is after half a decade of recuperation – followed by ING, which recently declared that the next upsurge for world trade could be just around the corner.

According to DHL and ING, going global is now an option again for many businesses in the developed world – not because they haven’t learnt from the past, but because the opportunity is just too good to ignore. Many of them still have the infrastructure in place to take up business where they left off during the GFC, and many of them are still not quite back to where they used to be, making the prospect of entering a fast growing international market that much more compelling. 

But with international trade still subdued and a suite of unsolved political issues keeping the world in suspense, simply resuming a pre-GFC globalisation strategy is not an option anymore. To adapt to a changed business landscape, multi-national businesses are now reinventing the concept of ‘going global’ and adding a guiding set of values to the mix.

The most prominent trailer manufacturing business to portray that mentality is Schmitz Cargobull. The German family company has always approached the idea of global expansion a little more conservatively than everyone else, with continuity the driving force behind every business decision. Instead of rushing headlong into a new venture, it is known for committing 100 per cent to a project and not falling into panic mode easily. In fact, some argue that it was Schmitz Cargobull that inspired the current re-interpretation of globalisation as a business model – at least in a trailer-building context.

Especially during the GFC, the 123-year-old company proved that doing business the Schmitz Cargobull way is all about following through and not getting sidetracked.

Between 2004 and 2008, when the crisis struck central Europe, the company produced up to 180 semi-trailers a day and grew by an annual average of 18 per cent. The blue elephant, Schmitz Cargobull’s trademark, dominated road transport in Europe and Russia, and the company boldly invested in a €10 million R&D centre to be able to keep up with demand for new equipment.

But with the US market eroding by the day, demand in Germany suddenly began to plummet too. By Q1 2009, order volume was down a staggering 94 per cent. “It’s like seeing a horse break a leg at full gallop,” German broadsheet Die Welt wrote at the time. “Schmitz Cargobull is a prime example for a company suffocated by the crisis even though it was well positioned and hasn’t made any major management mistakes in the past.”

It was then that the company’s firm commitment to continuity shone through. Instead of hitting the panic button, the persistent family company sat out the crisis and survived without much collateral damage other than a painful financial setback. Benefitting from a prominent brand name and with ample manufacturing capacity to spare, sales started to bounce back from mid-2011 and annual turnover was back to €1.5 billion by 2012-13.

But that’s not the only standout quality that showed during the slump. What was different about Schmitz Cargobull’s mind-set was that management did not backpedal on the idea of international trade itself, even though globalisation had turned into somewhat of a taboo word by 2010.

Ever so considerate, the team leading Schmitz Cargobull knew that international collaborations and partnerships were necessary for sustainable success and actively tried to tap local know-how whereever it saw a promising market – knowing a global corporation would need a special kind of expertise to truly make an impact, not just economies of scale. As a result, it went straight back to work after the crisis and continued the brand’s expansion into Eastern Europe, China and Australia.

Today, that mind-set is widely seen as the beginning of a new phase of globalisation that is more value-driven and less short-sighted; but it took the global transport equipment community a while to embrace the idea.

The turning point came in late 2014, when the company was able to announce the official opening of a new plant in Wuhan, China – a project led by Board Member Andreas Schmitz. A Brown University and Kellogg Business School graduate, Mr Schmitz first caught the industry’s attention when heading up the company’s Spanish plant from 2001 to 2004 or as General Manager of the brand’s curtain-sider business in Germany. But it was the formation of the Chinese joint venture with Dongfeng that turned the spotlight on him as the embodiment of the ‘Schmitz Cargobull way of doing business’.

In mid-2013, the young executive moved to China to personally oversee the build of the new trailer manufacturing plant 800km west of Shanghai. The move was widely considered a bow to the new China – which is struggling with a slowing economy, rising labour costs and increased government scrutiny – and earned him far flung respect in Asia and Europe. Especially his announcement to employ and train local staff left a positive impression – next to his public commitment to not just recycle used machinery in the Middle Kingdom, but set up a factory just like the one in Germany. 

In 2015, he repeated the same strategy in Australia, where his personal involvement in the formation of new partnership with trailer manufacturing business Krueger Transport Equipment left the local market deeply impressed (read more on page 60). As did his openness towards the media: “After visiting several local manufacturing businesses, it soon became obvious that Krueger Transport Equipment was the one we wanted to be associated with,” he said at the launch in the city of Brisbane, north of Sydney. “It does a good, precise job and should be recognised for its commitment to local manufacturing excellence. From the cleanliness of the facility to the finish of the final product, everything just seemed to fit. For us it’s extremely important to have all bases covered if we lend our name to a product.”

Under the new agreement, Krueger Transport Equipment will be responsible for both chassis production and final assembly, while Schmitz Cargobull will provide the refrigerated box body – custom-designed for the Australian market and produced in Europe. It’ll be the first time the blue elephant will be seen on a multi-trailer road train combination – a sight unthinkable just half a decade ago.

With both projects now well underway, 46-year-old Andreas Schmitz (pictured) seems predestined to take on a leading role in the German family business going forward – especially since multiple current Board Members are expected to retire from office soon. As the executive who has driven the brand’s post-GFC expansion, he has gained valuable international experience in a high growth environment and refined his instinct for economic change – as proven by guiding the business toward international growth without losing sight of the core values that made it succeed during the Eurozone slump.

What’s more, he sensed early on that globalisation would only stay a taboo word for so long. Even global consultancy McKinsey* recently picked up the term again, saying it had transcended the exports and the lightning-quick global flows of money that characterised it until now, with substantial economic changes looming on the horizon for those who interpret it correctly.

In line with that, Mr Schmitz is acutely aware that despite all restraint, he has to move fast to stay abreast of the pack. “Most multi-nationals are still underweight in emerging markets, which represented only 19 per cent of their revenues in 2013,” McKinsey found. “Yet trade in developing markets will continue to swell – by 2025, it will represent 47 per cent of global consumption. [As a result,] multi-nationals should accelerate their inroads to secure a strong position in global commerce.” 

Schmitz’ success in China and Australia is a sign that by sticking to a set of long-standing guiding values – even if they seem conservative at first – mult-national businesses can proactively influence the revitalised globalisation process. By seeking opportunistic positioning in hubs bursting with talent and know-how, for example, he has taken full advantage of intangible assets that can help Schmitz Cargobull differentiate itself and become better attuned to the emerging new cross-border competition. Bby firmly embedding foreign projects within the respective target markets – backed by the economies of scale of a global corporation – he ha also given them added stability so they will prove less prone to economic volatility moving forward.

What’s different about Schmitz Cargobull to other mult-nationals is the mindfulness that has been visible all throughout the process. “Acting dependably and reliably to both customers and partners does not warrant quick in and out, but rather a long-term perspective,” says Andreas Schmitz – demonstrating just how differently globalisation can be interpreted, despite being inherently capitalist in nature. Maybe that’s why the distinguished European brand did not pull out of Russia and will only aim at a conservative 10 per cent share of the Chinese market for now, with room to improve over time, when the environment is right for it.

What’s important to note, adds Schmitz, is that the world didn’t stop turning after the 2008-09 crash. In fact, the company has probably never been more proactive in preparing for the future than during the recession, and it never stopped believing in its own, unique approach to doing business internationally.

Behind the scenes, for example, Schmitz Cargobull reviewed the entire manufacturing process in Altenberge to be prepared for the continued global rollout of the brand after the crisis – culminating in the unveiling of a new production method last year that enables l-beams to be cold-formed from a single beam without welding. The €40 million investment now allows the company to form an I-beam in about 2:30 min, reducing the length of the manufacturing process by 60 per cent. As part of the introduction of the new process, Schmitz’ development team has also reduced the number of main beams from 280 to about 20 without limiting the vehicle variants on offer.

The new technology will be used to construct all chassis across every range by bolting instead of welding them, according to Schmitz, who sees the development as somewhat of a metaphor for the company’s way of doing business: “You never know where a crisis may lead you, but it’s safe to say that standing still will mean you go backwards, even if the market is flat. That’s why we remained proactive during the crisis to ensure our production processes are the best they could possibly be,” he explains – and McKinsey agrees. “Companies that have seen their global activities struggle in the wake of the financial crisis can take heart that what they have witnessed is likely to be only a pause and not a break in the progress of globalisation,” the consultancy found, as if referring directly to the Schmitz Cargobull example. “Yet they’ll need to up their game – and quickly. Traditional competitive engines are proving ill adapted to a world of flows moving at digital speed.”

That’s also why Andreas Schmitz is not just working on the Chinese product launch at the moment and pushing the Australian partnership, but also prying the situation in Russia. As soon as the current conflict ceases, production in the company’s small St Petersburg plant is bound to be ramped up again. After all, “Schmitz Cargobull is all about following through.”

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