US President Barack Obama’s drive to reindustrialise his country offers German companies huge opportunites if they are able to negotiate certain hurdles. EURACTIV’s new partner WirtschaftsWoche reports from the Hannover Messe.
“Buy made in America!” Obama could not resist a cheeky dig at Angela Merkel, speaking Sunday (24 April) at the Hannover Messe. The German chancellor opened the trade fair, which will promote business opportunities between German companies and the US, adding: “Buy German is also nice.”
Existing trade barriers were high on the agenda, including tender procedures that still favour US products. Obama’s sales pitch extended through Monday (25 April) as his European tour continues and he seeks to renew the momentum behind the TTIP negotiations that the outgoing president is keen to see finalised before the end of his final term in office.
Merkel and Obama traded pleasantries during a joint press conference in which the latter called the chancellor a “trusted partner”, with Merkel welcoming him as a “friend”. German and American companies could learn from their amicable exchange.
The two economies are building a strong partnership, and last year the US replaced France as Germany’s most important foreign trading partner. China has also lost its number one place in the engineering sector to the Americans.
However, the differences between the two trading partners are becoming clearer and more pronounced.
Rainer Hundsdörfer is someone who knows the US market well, having served as laser technology specialist Trumpf’s chief of US operations in the 1990s. Now chairman of the world’s largest fan and motor manufacturer, ebm papst, Hundsdörfer said that his experience across the Atlantic had convinced him that “the US market is a completely different one with its own rules”.
In a country where the cheapest product is still king, he added “the realisation that they need to do something about energy efficiency is slowly dawning on them”.
His company does not manufacture cheap, mass-produced goods; however, “in the US, you have to offer commerically-viable products. Minimum standards are often enough, even when that is not compatible with our own mentality.”
His solution is to have their own development engineers in the US, as for them the “good enough” approach is not actually enough.
The appetite for cutting-edge German tech is large though and Obama’s push for reindustrialisation has only increased it. The market is huge and is only equalled by the amount of opportunities on offer. But to take advantage of them a company must be prepared to adapt to certain idiosyncrasies, as Hundsdörfer has.
One such example of this is delivery times. Greg Scheu, Swiss technology provider ABB’s head of American operations, used a biscuit factory as an analogy: “If a client can be convinced that robots can sort the product into their packaging, then they’ll want the machines installed within a few weeks. But in a European car factory, the use of robotic machinery is planned years in advance.”
Scheu also highlighted that these specific demands are paying off, as the US is ABB’s fastest growing single market and it makes nearly a third of its turnover there. He added that “America has a very optimistic society. The willingness to break new ground and even fail, is much stronger than in Europe.”
It has also meant that a European-influenced business like ABB has managed to become even more agile in the US and its own willingness to put its business model on the line has increased.
The alternative is industrial companies that are only prepared to sell services rather than machinery: a fundamental change. Frank Riemensperger believes that this paradigm shift could pose a risk to German industry. “In Germany, we have based Industry 4.0 on our production capabilities,” said the director of Accenture, a professional services company. In the US, the Industrial Internet Consortium (IIC) has prioritised services and “factories and machines are not the focus like they are in Germany”, adding that it is services that are “the real attack on our added value”.
Bosch Rexroth is one such company that could provide these services in the US. The subsidiary is testing a pilot project on the other side of the Atlantic with augmented-reality glasses. The project is intended to provide technicians with solutions to problems by giving them a heads-up display created by an expert, an expert who could indeed be sitting thousands of miles away.
“In the US, there is a strong affinity with IT,” said Steffen Haack, from Bosch Rexroth. “That makes it easier to convince the customer.” The system being trialled would not only reduce waiting times and simplify maintenance, but decrease costs as well, as an engineer would not have to been flown in to help, assisting via an internet connection instead. “The better the service, the more clients will opt for us,” Haack added.
The fact that a German company has gone in this direction is a good sign for industry-expert Riemensperger. “German industry has now woken up and realised the potential in the services sector,” he added.
Mindset and business mentality are also important factors in succeeding in the US for Haack. “In the land of data, companies are wired differently. There, we have to give our national companies free hand to adapt to changing circumstances. This includes the handling and exchange of data,” Bosch’s man added.
Haack has no worries about the American tech giants either, commenting that “everyone needs each other’s knowledge. The best defence is a deep understanding of the products.”
For a medium-sized company that sees its product as a status symbol, life could be difficult in the US, as the technically-better solution is still a hard sell over the cheaper option. Anyone wanting a piece of the €114 billion export-cake will have to jump through a number of hoops. The market-entry barriers are substantial and the market itself fragmented. It is not a land of unconditional opportunities for machine manufacturers, but there are prospects for those willing to play the game.