Chief executive officer, Bosch Group
Born: July 1, 1949, in Kenzingen im Breisgau, Germany.
Education: University of Karlsruhe, 1975.
Family: Married (wife's name unknown); children: three.
Career: Bosch Group, 1975–1976, trainee; 1976–1978, assistant in the Office of the Executive Management for Electrical and Electronic Engine Equipment Division; 1978–1980, director of Materials Planning and Logistics for Stuttgart-Feuerbach Alternator Plant; 1980–1982, commercial plant manager of Hildesheim Plant, Göttingen Branch; 1982–1985, vice president of Planning and Controlling; 1985–1989, vice president and executive vice president of Finance and Administration; Robert Bosch Corporation, Automotive Group (USA), 1989–1994, executive vice president of Starters and Alternators Division; 1994–1996, president of Starters and Alternators Division; 1996–1997, executive vice president of Finance and Administration for Diesel Systems Division; 1997–1999, president of Diesel Systems Division; 1999–2003, member of board of management; 2003–, CEO.
Address: Robert Bosch Industrietreuhand, Robert-Bosch-Platz 1, Postfach 10 60 50, D-70049 Stuttgart, Germany; http://www.bosch.com.
■ One of the largest of the German manufacturing companies and best known for its automotive parts, Bosch Group made power tools, telecommunication components, appliances, thermotechnology equipment, pottery, pipes, earthenware, and automated-assembly machines. As of 2004 Bosch ranked as the second-largest car-parts maker and supplier in the world—after Delphi—garnering annual sales of EUR 36 billion. Bosch employed 236,000 people worldwide, with fewer than half that total—about 91,000—working in Germany. In 2003 Franz Fehrenbach was voted chairman of the board of management (the company's chief executive officer) of Bosch. Compared to past Bosch CEOs, Fehrenbach was loud, bold, and diverse; he proved to be just what Bosch needed
to face the challenges of the global economy of the 21st century.
Since its founding in 1886, Bosch Group led the car-parts industry in labor-management relations and technical innovation. The founder Robert Bosch instituted the eight-hour day by 1906 as well as welfare and insurance programs for workers and their families. Bosch globalized early by establishing subsidiary plants in Britain in 1898, the United States in 1909, and Japan in 1914. Such plants were confiscated during World War I but recovered in peacetime. During World War II, Bosch, like all German manufacturers, provided armaments for the German army. Recovery from World War II was slow due to the pariah status of Germany, the death of the founder, and the near obliteration of the company's manufacturing facilities by Allied bombing.
After recovering from World War II, Bosch sought to implement the will of its founder by investing company profits in the social fabric of Germany. Thus, in 1964 Bosch changed from a private limited company to a privately held company: the Robert Bosch Foundation was given 92 percent ownership, the Bosch family 8 percent. Subsequently Bosch Group was run like a nonprofit organization—net revenues accrued by the foundation went to philanthropic causes. By 2004 $760 million had been contributed to medical research and education. Bosch CEOs were instrumental to the company's success; they were typically self-taught—like the founder—discrete, exacting in managerial and technical expectations, global in approach, and community minded. Hans Merkle, the third man to head the company, epitomized the Bosch CEO; his community spirit led him to make Bosch the leading maker of fuel-efficiency and emissions-control components.
After graduating from college, Fehrenbach found Bosch to be the ideal company at which to realize his aspirations—to improve the automobile itself as well as the society it served. Fehrenbach repeatedly emphasized his company's philanthropic orientation, high level of employee satisfaction, and reputation for engineering excellence as appealing factors for himself as well as for many other employees at Bosch. Following his training period Fehrenbach worked on Bosch's safety programs, most notably rollover-prevention systems. Fehrenbach soon began climbing the corporate ladder thanks to his mechanical aptitude, straightforward demeanor, and leadership abilities.
Bosch's leading position in the manufacture of components meeting the demands of environmental regulation allowed the company to charge high prices, set its own delivery schedules, and otherwise hold sway over its customers. In 1984, during Fehrenbach's second year as a corporate-planning executive, Bosch metalworkers struck, shutting down facilities. As few customers felt loyal to Bosch due to its past haughtiness, many explored alternative sources for parts during the crisis; some never brought their business back. After the strike Bosch resumed its old habits while Fehrenbach went to a Bosch subsidiary in the United States. From there Fehrenbach observed as General Motors (GM) cut its annual purchases of fuel-injector components from Bosch by half in 1991. GM had found a supply of fuel injectors that matched Bosch's in quality; additionally the parts were cheaper and the manufacturers more cooperative with delivery schedules. Other automakers soon followed GM's lead, dealing a severe blow to Bosch. Through this course of events Fehrenbach noted three things: the importance of building customer relations; how the spread of machine-tool skills coincident with globalization had enabled parts makers in Asia to rival Bosch; and the vulnerability that arose from dependence on a core line of products.
During the first half of the 1990s Bosch struggled to cope with competition from Asian automakers who were perfecting cheaper manufacturing techniques as well as achieving greater savings through innovative supply handling—such as Toyota's just-in-time system. Taking over in 1984, Marcus Bierich diversified Bosch's component line, concerns, and interests to thwart sales declines. The antilock braking system (ABS), launched in 1985, eventually became a standard feature on most automobiles. When Bosch's ABS proved insufficient to thwart the competition, Bierich trimmed the workforce and acquired smaller companies in order to further diversify the product line. The acquisition of Allied Signal in 1996 enabled Bosch to take the lead in complete brake systems; by the late 1990s Bosch was healthy once again. Bierich maintained Bosch's position as a global giant through acquisition and the introduction of new core products but did very little to reform Bosch's internal operations.
Continuing the company's role in ignition development begun by its founder, Bosch developed the fuel-injection system during the energy crisis of the 1970s. Fuel injection would deliver a spray of fuel directly to the cylinder, allowing for greater control over the amount of fuel consumed; in a world of increasing oil costs the system was an important technological achievement. First placed in the Volkswagen Beetle, fuel injection was a standard feature in 50 percent of cars sold in the United States by 1984 and later became nearly universal. Fuel-injection systems were Bosch's most important product until 1991.
While Bosch as a whole struggled during the 1990s, the divisions under Fehrenbach prospered. As head of the diesel division he led Bosch's entry into common-rail diesels. His timing was excellent, as car buyers were seeking higher mileage and lower fuel costs; diesel engines delivered both. Thanks to Fehrenbach, diesels helped European drivers accommodate soaring gas prices—by 2004, 43 percent of cars sold in Europe operated on diesel fuel. In 1998 Fehrenbach played an instrumental role in helping Fiat bring to fruition the 3L car, named for its fuel economy of 100 kilometers per 3 liters, or 83.4 miles per gallon.
Bosch's common-rail technology—the industry's best and already a 20 percent improvement over previous diesel fuel economy—would have meant nothing if Fehrenbach had not been willing to actualize platform sharing in 1997. Historically platforms had been unique to manufacturers—a GM platform was vastly different form that of a Mercedes. Fehrenbach understood that only the allowance of a global platform for the highest-quality components would lead to an improvement in the automobile and decreased differentiation. In short Fehrenbach acted on a belief in customer-driven development, changing the ways in which the Bosch divisions under his control operated. He understood that in a global economy Bosch would succeed if Fiat did—and if Bosch were more agile in its production techniques, supply, and labor force.
In environmentally conscious Germany, only a bold thinker who understood the science and technology of the internal-combustion engine would have encouraged the diesel shift as Fehrenbach did. Unlike in the United States, where the profusion of the sport-utility vehicle (SUV) reversed gains in automotive efficiency, Europeans remained committed to a cleaner automobile. However, few people truly understood the complexity of automobile problems: from pollution to space consumption and from acceptance of auto fatalities to deleterious lifestyles, problems associated with automobiles could only be resolved through a reconstruction of lives and communities. Such a reconstruction would entail an unlikely revolution in governmental thinking and would end, for example, the construction of communities hazardous to the pedestrian. Even ending emission pollution through a changeover to hydrogen-based fuels would demand a radical reform of Western governments, opined a Ford director in the November 7, 2003, issue of Design Engineering .
In heading both the fuel-injection components and diesel divisions at Bosch, Fehrenbach employed a ruse first used by U.S. manufacturers. U.S. car-makers had mastered the art of manipulating an environmentally conscious public to buy cars that appeared far more environmentally friendly but were in reality offered only incremental improvements over past models. Fehrenbach pushed the diesel engine in part by touting the facts that it produced less carbon monoxide, a poison to living creatures; less carbon dioxide, a greenhouse gas; and fewer hydrocarbons, which are carcinogens, than cars fueled by ordinary gasoline. However, diesel engines produced similar amounts of nitrous oxides, contributing to smog, and more particulates, noticeable as small black clouds issuing from tailpipes. Evidence mounted throughout the 1990s that particulates from diesel melted ice caps—the black particulates came to rest on white snow, decreasing the snow's reflective ability and increasing its rate of heat absorption. From a scientific perspective, in other words, the environmental improvements promised by diesel could instead prove to have been global-warming accelerants. Fehrenbach's success in the late 1990s enabled Bosch to continue employing the ruse of the "environmentally friendly" car by producing components suited to new, stringent emission standards, masking the shift in pollution streams toward particulates.
Along with his engineering expertise Fehrenbach's reputation stemmed from his approachable and down-to-earth nature; success followed every department he touched. Following the announcement of his ascendancy to the head of Bosch, one analyst commented in Automotive News Europe , "His division has been the star performer of the Bosch group. It got a jump on the rest and is still growing. They've not been caught" (December 16, 2002). Fehrenbach's ability as a mechanic, his success as an administrator during a strike crisis in the late 1990s, his prosperous guidance of Bosch's core technical divisions, and his awareness of vulnerability stemming from dependence on core products all made him an obvious candidate to succeed the outgoing CEO.
When Hermann Scholl, Bosch's chairman since 1993, announced his semiretirement, the search began for a new chief executive officer. Analysts and commentators at first assumed that Scholl's deputy, Tilman Todenhofer, would take charge; the two other leading contenders for CEO, Fehrenbach and Siegfried Dais, were unripe, as both had become limited partners in the late 1990s—too recently for Bosch conservatives. Many further assumed that Scholl would become chairman of the supervisory board and then revive Merkle's practice of conducting "chief meetings" with Todenhofer and as many as two other top managers—that is, Fehrenbach and Dais. In this way Scholl would effectively remain in control of Bosch in spite of his "retirement." Instead, the departure of Wolfgang Eychmueller, a full partner, prompted the remaining partners to vote Scholl and Todenhofer to the supervisory board, Fehrenbach to CEO, and Dais to the number-two position.
Fehrenbach changed the role of the Bosch CEO. Far from the traditional, quiet, conservative, discrete leader, Fehrenbach brashly placed Bosch on a new road, firm in his plans for reformulation. His first goal was to take Bosch back to its historic operating margins of 8 to 9 percent, with a near-term goal of 7 percent. When challenged about the audacity of this plan in light of the reported 2004 level of 4.1 percent, Fehrenbach, as quoted in Automotive News Europe , responded unblinkingly, "We will reach the target" (April 21, 2003). The low level of profitability in 2004 reflected a number of unfavorable macroeconomic conditions, including the slow rate of recovery from the post-9/11 economic downturn in both Europe and the United States. Bosch would reach its profitability goal by writing off costs from acquisitions in 2001 and 2003. Fehrenbach's departure from past CEOs became starker as the world economy recovered. Instead of resuming past practices or boasting of the company's 2003 sales record, Fehrenbach pushed ahead with structural reform to make Bosch Group profits less susceptible to sudden economic shifts in any particular regional economy, specifically Europe but also the United States.
From his first day as Bosch's chief Fehrenbach used tactics polished during his career at the company and by which he had built his reputation as manager. He sent an email to all employees—characterizing his use of direct communication—outlining his views of Bosch, its workers, and his position. He asked employees to maintain Bosch's tradition of excellence and to communicate directly to him both affirmative and critical views. He was not disappointed in the response and continued to employ means of open communication with Bosch associates.
The new attitude of Bosch's CEO as well as his new strategy, which reflected the input of the supervisory board, took its first form as Project 2005. As Fehrenbach told Peter Marsh in an interview for the Financial Times , Bosch conceived of the company's mission in two words: "globalisation and balance" (January 9, 2004). Fehrenbach based this mission on an expected wave of economic change similar to that of the decade before the global downturn of the early 2000s. The new wave would show Europe as a slow-growth area and India and China, with their road-building programs, as large-growth areas. Bosch, therefore, would emphasize operations in the latter regions. In essence Project 2005 changed the Bosch culture in both small and large ways in order to ensure its role in future global economic growth. Fehrenbach implemented benchmarking in each division, transparent account reporting, and just-in-time production techniques in manufacturing. These apparently minor changes had far-reaching consequences—and had been a decade overdue.
While committed to the charitable dispositions of the firm, Fehrenbach wanted to change its ponderous nature, which often led to progress by inertia alone. He maintained the traditional rate of investment in research and development—7 percent of sales—but directed those efforts more toward customer-driven approaches, which he had previously employed in cooperation with Fiat. Thus, instead of focusing exclusively on high-performance components and the needs of the car, Fehrenbach wanted Bosch to take into consideration customer satisfaction across the entire spectrum of car consumers.
With respect to internal operations Fehrenbach remained committed to Germany but not to the traditional forms of German management-labor relations. His position reflected an emerging consensus on labor among European capitalists in general. In Germany the government and the industrialists had been trying to lower worker benefits and worker pay as a mitigation of unemployment, the lingering problems of German reunification, and the pressures of globalization. For example, the tire maker Continental took the hitherto unheard-of step of increasing its workweek to 41 hours. Workers responded with action, like the wave of strikes in 2002 that affected Bosch plants in Baden-Wuerttemberg.
John Naisbitt, the renowned author of Megatrends , was wrong to predict the wholesale migration of car manufacturing to the third world as the first world became postindustrial with a monopolization of knowledge-sector jobs. While a few countries, like Britain, where postindustrial policies hollowed out industrial power, followed the paths predicted by theorists like Naisbitt, Germany and Japan did not. In particular heavy manufacturing—of, for example, cars and car components—remained the economic backbone of those two countries. They bucked the "megatrend" because the capitalization required per worker by high-skill manufacturing was viewed in those countries as the basis for a high standard of living. Fehrenbach, however, questioned the German paradigm by challenging the Bosch workforce to increase its productivity without receiving increased pay and threatening to move jobs to lower-wage countries if unions did not cooperate. In other words Fehrenbach decided to put Bosch through the kind of downsizing that the automobile industry had implemented in the United States, which championed postindustrialism, savaging the communities of Michigan unless workers agreed to concessions.
On average German workers earned an hourly wage of 28 euros over a workweek of 35 hours (38.2 hours in eastern Germany). The shortening of the workweek had occurred through cooperation between German labor and industrial management, like that of Bosch, over the past century. Fehrenbach planned to achieve his profit goal for Bosch though a 12 percent reduction in labor costs, reneging on that history of negotiation. He proposed to the unions—mainly to IG Metall—that workers keep their wage packet but increase their week to 40 hours. The increase in hours per week would in turn necessitate a decrease in the workforce by one of every seven of the 103,000 workers in Germany; an IG Metall spokesman stated in the Financial Times , "That is completely unacceptable" (December 16, 2003). When outright acceptance proved unfeasible, Fehrenbach began the transition to 40-hour workweeks by implementing the increase on specific projects. With respect to automation and the capitalization of the labor force, Fehrenbach acknowledged, "The opportunities for substituting automation for labour are becoming less. And at any rate, installing automation is not cost free. It can be an expensive way to keep productivity levels high" ( Financial Times , January 9, 2004). Fehrenbach thus admitted his belief in post-industrial theory and indicated the rationale he would use to cut labor costs. Moreover, Fehrenbach dismissed criticism of global postindustrialism, like the one articulated by Financial Times writer Eamonn Fingelton, based on decades of performance data showing that such investments in productivity do pay off.
The bold initiatives contained in Project 2005 were comparatively small. Since the 1960s Bosch had built its reputation and global position on heavy investment in research and development and on the acquisition of smaller companies or portions of larger ones—Bosch owned half of BSH, for example. Fehrenbach intended to maintain that tradition by continuing to spread the diesel gospel and by standardizing the electronic interfaces in engines. With respect to the former approach, Fehrenbach set a modest goal: that 10 percent of new cars sold in the United States by 2010 would be diesels—despite closure of the California market to diesel due to environmental regulations. Fehrenbach was confident that Bosch was better positioned to profit from such a shift than Delphi, which had only recently begun to consider the proliferation of diesel consumer cars and trucks in the United States to be a possibility. With respect to acquisitions Fehrenbach moved Bosch toward halving the percentage of car-component interests in its portfolio—to one-third—and greatly diversifying its manufacturing and geographic interests.
See also entry on Robert Bosch GmbH in International Directory of Company Histories .
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—Jeremy W. Hubbell