Driving past half-dilapidated apartment buildings held together only by boards nailed to them, it’s clear the neighborhood has seen better times. Here and there car wrecks line the way to the largest and most productive automobile plant owned by the U.S.-European car company Fiat Chrysler.
Jeeps have been built at the factory here in Toledo, northwest Ohio, 60 miles south of the former car capital Detroit, since the Second World War. Currently it is the Wrangler and the Grand Cherokee, two of the company’s flagship models – 460,000 units rolled off the assembly lines in 2015, the third record year in a row. Fiat Chrysler also has its German supplier to thank for the high productivity in its plant here not far from Lake Erie.
In one part of the plant, the Augsburg-based manufacturer of industrial robots, Kuka, manufactures the body shells of the popular Wrangler model. In its own production hall attached to the car plant, 250 robots weld, shape and assemble with 345 human workers around the clock.
It is a ballet of heavyweights: a side section of the offroad vehicle weighs 60kg (132 pounds), but the R10-PS robot snaps it up, playfully swings about three axes and passes on to its colleague, R09, which then meticulously sets the welding spots, a couple of sparks fly and off it goes to the next step in the production. It’s a choreography of a smooth-running series of movements.
It isn't just for Kuka that the USA has become a land of unlimited possibilities, but the whole of German industry.
Some 43 chassis leave the hall every hour. “That is the highest productivity in the USA,” Jake Ladouceur, the Kuka plant manager, calls out above the noise in the hall. The quality, he says, is unique in the automotive world. There were only three defects in the 245,000 car bodies produced in 2015, he says. “Unbelievable!”
Kuka cooperates in collecting and analyzing data with the U.S. software company Microsoft. Each of the more than one thousand welding spots are carefully documented – should a defect occur anywhere, it can be instantly determined where the weak point is in the assembly line.
The revitalized U.S. carmakers have boosted the business of Kuka. The firm makes almost a third of its sales in the United States, primarily in the car and aviation industries. “The USA is a significant market for us,” confirms company head Till Reuter.
It isn’t just for Kuka that the USA has become a land of unlimited possibilities, but the whole of German industry. Between New York and Los Angeles, heavy investments are being made in the automation and digitalization of factories. Initiatives of Barack Obama’s government, but above all the rise of the oil and gas industries, have kindled the hunger for German investment goods.
Since 2015, America has once again become the most important export market, ahead of China, for manufacturers of machinery. The market is huge, and the opportunities are too.
That is just as true for the German electronics industry. There, exports to the United States leapt in 2015 by a solid 16 percent to just under €16 billion ($18.1 billion).
German companies are playing a leading role in the U.S. government-promoted re-industrialization of the country – Siemens, Festo, Rittal and the rest are outfitting factories with the most modern production equipment. No wonder that Mr. Obama will be opening the Hannover Messe, the world’s most important trade fair for industrial technology, on Sunday with German chancellor Angela Merkel.
The superpower not only took France’s place as Germany’s most important trading partner for the first time in four decades, but Germany is also the third-largest investor in the United States – behind Great Britain and Japan.
Kuka has been in the country since 1981: the factory-within-a-factory at Fiat Chrysler has been there since 2006. The partnership model that Kuka is operating with the carmaker is unique in the automotive industry. It could represent a trend that many producers of investment goods will have to adapt to in today’s digital age of the Internet of Things: no longer selling plant equipment, but rather capacities.
In Toledo that means Kuka is no longer selling robots to Fiat Chrysler but is managing part of the production. The firm is paid per assembled car body. But Larry Drake, the head of Kuka’s North American operations, plays down the halting of machine sales. He doesn’t see it that far along yet and thinks the partnership with Fiat Chrysler can’t be readily applied to other producers.
Mercedes and BMW have both been in Toledo already to take a look at this form of partnership, says Mr. Drake. “But the German carmakers don’t want to let their know-how in body making out of their hands for strategic reasons.”
A few hundred miles away in North Carolina, another car manufacturing problem has been solved – this time through augmented reality.
Just like other companies, Bosch Rexroth, the engineering subsidiary of Germany’s Bosch Corporation, is working on audio-visual headsets that will make assembly or maintenance considerably simpler by allowing remote guidance. The pilot country for this system, which has just reached the marketing stage, is the United States. “It makes the most sense here because of the great distances,” says Steffen Haack, a member of Bosch Rexroth’s board. “Besides, there’s a high affinity here for IT. That makes it easier to win over customers.”
The principle sounds simple but is technically complex as it involves the computer-supported expansion of human perception. If there is a technical problem with one of Bosch Rexroth’s gearboxes or electric drives anywhere in the world and the on-site mechanic can’t solve it, he just puts on the headset and glasses and is given assistance by an expert who can be sitting thousands of miles away.
The advantage for the customer is that the expert doesn’t have to sit for hours in a plane, the costs are low, and the down-time is shortened. The advantage for Bosch Rexroth: “The better the service, the more customers decide in our favor,” says Mr. Haack.
The involvement of the virtual world, the networking of man and machine, the analysis of huge amounts of data – the diverse know-how from Europe and Bosch work together in implementing these things. “The Europeans come from the machine base, the Americans from the side of IT and data,” says Mr. Haack. Combining both of them is ideal, he adds. Each needs the other’s knowledge.
Mr. Haack has no fear of the much-cited dominance of American IT and software giants. “The best protection is a profound knowledge of the products. Others have no idea at all what to do with the data.”
Rainer Hundsdörfer also has no fears about the competitive ability of German industry. “We may not be the ones to develop the software,” says the head of the world’s largest maker of electric fans, EBM-Papst, based in Mulfingen, southern Germany, “but we are better at using it.”
That sounds self-confident, but Mr. Hundsdörfer knows what he is talking about. He has known the U.S. market and its customers for a long time. For five years in the 1990s he was U.S. general manager for the German laser specialist Trumpf. Its factory building was only a stone’s throw away from EBM-Papst’s base in Farmington, Connecticut.
EBM-Papst makes $200 million in sales from U.S. customers. “There is plenty of room for growth,” says Mr. Hundsdörfer. Depending on the product, the market share in the United States is between 10 and 15 percent, but in Europe it is more than 50 percent in some market segments.
“The willingness to take new paths and also occasionally fail is much more pronounced than in Europe.”
What makes the U.S. market special? “The Americans are cheapjacks,” comments Mr. Hundsdörfer. “Take energy efficiency. The realization that they have to do something takes a long time to set in. Anyone who walks past ventilation systems and air conditioning units in U.S. hotels knows the difference in standards in energy consumption and noise generation in Europe and the USA.”
The conclusion drawn from that is that “The USA is an independent market with its own rules,” says Mr. Hundsdörfer. Logistics are a challenge, he says, given that no American wants to wait for a delivery. But above all, “You have to offer products geared to the market.” Often, they are simpler, larger and use more energy than would be technically feasible.
“Good enough” – meaning the minimum standard – is often acceptable in the United States, says Mr. Hundsdörfer. But that isn’t often compatible with the German mentality, he adds. “You need development engineers in the USA to meet customers’ demands.”
Heading down to Texas and one look out the airplane window tells you what to expect. Oil tankers lined up one after the other, even before the skyline of Houston appears on the horizon. In Texas, everything revolves around the black lubricant that has pumped life back into the U.S. economy in recent years.
The state in the farthest south of the USA has benefitted magnificently from it: The cars are a model larger, the highways at least a lane wider than in the rest of the not-entirely modest country. The German companies here also concentrate on the business revolving around oil and gas. Siemens has even moved the whole of its energy division, with a good €30 billion in sales, to Texas.
Lisa Davis, a member of the Siemens’ managing board, raves about the many opportunities Siemens has, even if the business with U.S. energy companies appears rather slack at the moment due to the sharp drop in oil and gas prices. For her, a crisis is always an “opportunity,” as she stresses repeatedly. “The business model changes,” she says, “when you have less contracts because of low energy prices. Then service and improving efficiency become more important.”
Despite competition from firms such as General Electric, she believes Siemens is in a good position. “The energy companies must react to the low prices and search for solutions,” she says. When things were booming, hardly anyone was interested in subjects like standardization, automation and digitalization. Now it is all about lowering production costs. “This is where we can bring in our expertise,” says Ms. Davis. “You don’t need many millions of dollars for the investment, but it quickly pays off.”
Greg Scheu also likes to think positive. When the Americas head of Siemens’ Swedish-Swiss rival ABB reflects on the U.S. market and its advantages, he immediately thinks of a couple of differences to Europe. “It’s an optimistic society,” says Mr. Scheu, who has both German and Italian ancestors. “The willingness to take new paths and also occasionally fail is much more pronounced than in Europe.”
The motto: “It doesn’t all have to be perfect, let’s do it.” That goes as far as being ready to destroy the business model if needs be, says Mr. Scheu. The United States is now the fastest growing individual market for the energy and automation corporation with a strong foothold in Germany. ABB makes almost a third of its sales in the country. Production control, process automation, productivity and energy efficiency – those, he says, are the subjects most important to the customers here.
Mr. Scheu is standing relaxed in the Automation and Power Center that ABB set up in Houston for its U.S. customers. There, they can look at life-like, three-dimensional representations on wall-sized screens of the inner workings of modern factories, drilling platforms and refineries. But the infrastructure provider is also open to working with small technical solutions that can have a huge impact. Such as the Smart Sensor, a 15 x 10 centimeter plate stuffed full of sensors and electronics that can simply be stuck to common electric motors.
Such motors can be found by the millions in factories the world over to keep production running – ABB alone manufactures 1,000 of them daily. But many that have been dutifully doing their job for years are no longer equipped for modern times – because they don’t produce data.
That is where Smart Sensor, which ABB has developed in India and in the United States to the point of being market-ready, takes over. It measures temperature, vibrations, pressure and noise and it can quickly be determined from the data when the motor needs to be repaired. Taking timely action is of enormous benefit to customers because production need not be interrupted.
Americans and Germans have been working closely together at ABB for a long time already. Despite the growing influence of information technology and software, both sides have been struggling with problems from yesteryear. Getting accustomed to the differing measurements of length is just such a case. Meter and centimeter for the one side, yards and inches for the other. “You wouldn’t believe how much misunderstanding that still causes,” says Mr. Scheu. “It is still a major issue.”
Martin Wocher is an editor with Handelsblatt, focusing on the mechanical engineering and steel industries. To contact the author: firstname.lastname@example.org