Ill wind

Turbine Giant is Reaping the Storm

  • Why it matters

    Why it matters

    At a time when many companies are chanting the mantra “Adapt or die,” one giant of Germany’s wind power industry is retreating into a 1980s management style, causing widespread unease among the workforce.

  • Facts

    Facts

    • Nicole Fritsch-Nehring, co-managing director of Enercon, will resign today and leave by the end of the year
    • Hans-Dieter Kettwig, Enercon’s CEO, is blaming her for the lacking innovative strength.
    • A nephew of company founder Aloys Wobben will take over Ms. Fritsch-Nehring’s reponsibilities.
  • Audio

    Audio

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Arbeiten an Windkraftanlage
Enercon workers disassembling a wind turbine near the city of Hannover. Source: Julian Stratenschulte / DPA.

In mid-September Enercon’s co-managing director, Nicole Fritsch-Nehring, sent four short, sharp sentences to her colleagues. Michael Strobel, the technical director of the wind turbine manufacturer, had left the company. Ms. Fritsch-Nehring said there was to be a “restructuring in the research and development department.”

The message came as a surprise to many. After all, Mr. Strobel was a recognized specialist who performed a key function in the business. Joachim Stilla, head of innovations strategy, had also just left. That meant many of the 600 engineers in Enercon’s innovation division were left with only Ms. Fritsch-Nehring in charge.

Yet the woman who Windpower Monthly had named the world’s most important personality in the wind energy industry in 2013 didn’t take charge of the engineers. She disappeared.

Since September 20th no-one’s seen her at work, according to employees. Her parking space is empty. Her appointments have been cancelled.

“Fritsch-Nehring wanted to transfer her approach to other branches of the company. It became a power struggle”

Enercon insider

“Ms. Fritsch-Nehring is on vacation,” the astonished staff read in an email on October 12th. Nobody believed it.

Since then, clarity has been restored. The vice-head of Enercon is relinquishing her office as of today, and will leave the company at the end of the year. According to Enercon, she’s departing of her own free will.

But, according to information the Handelsblatt has obtained from company circles, the Wobben family who pulls the company levers through a foundation, forced Ms. Fritsch-Nehring out the door.

Their loyal adjutant, Hans-Dieter Kettwig, Enercon’s CEO and the foundation’s chairman, is also thought to have been involved. The reason: disagreements over the future strategic orientation as well as cultural differences.

“We do not comment on rumours,” was the response of an Enercon spokesman. Ms. Fritsch-Nehring was not available for comment.

At Enercon, rumours are rife. The company had clearly pressured the co-managing director, and two top managers, to step down. In addition, the turbine company announced a restructuring, but hasn’t released any concrete details. The group’s 20,000 employees are anxious. Operational problems are piling up. Insiders and industry experts are asking whether Enercon is still able to continue its special path in the wind energy sector. The company’s business model has been a singular success story for more than 30 years.

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Aloys Wobben founded Enercon in 1984, in the East Frisian town of Aurich. The environmental pioneer and bright engineer quickly set new standards for the industry. Unlike all other suppliers, Enercon worked with gearless wind turbines, the advantage being that Enercon generators had fewer mechanical failures than conventional models, and operated almost maintenance free. The downside was that the initial outlay was significantly greater.

Mr. Wobben’s stubbornness built Enercon into the undisputed market leader in Germany. There is probably no company more innovative in the renewables sector. Mr. Wobben had to step back from the daily running of the company in 2012 on health grounds, but he had already become the richest man in Lower Saxony and has estimated assets of €7.5 billion ($8.2 billion).

While competitors like Vestas, GE or Siemens farm out various parts of their production, Enercon makes 80 percent of its components in-house, from the generators, to the towers, to the rotor blades. No company in the wind power sector has more patents, and no other is as profitable.

In 2014, Enercon had a turnover of close to €5 billion, an operating cash-flow of €1 billion ($1.1 billion) and a €490-million net profit. But the highly successful margin king of the wind energy industry is fighting against growing problems. Enercon’s market share has halved in the space of just two years. In 2013, Enercon was installing 9.8 percent of all wind power turbines. In 2015 it was only just over 5 percent. In the last year, proceeds fell by around €400 million.

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“The company has lost much of its innovative advantage,” said Dirk Briese, head of the Windresearch market research company. He said the business model which had been successful for decades is now in question. The group has been taking a back seat in both Germany and the rest of the world.

On the domestic market, Enercon missed the trend towards low wind-speed turbines, Mr. Briese said. In Germany, competitors like Nordex have scored points for years with highly specialized windmills which promise reliable power yields even in the often calm interior of the country, Enercon only brought a similarly capable model onto the market in 2016. On the world market, Enercon is being squeezed by ever tougher competition.

The wind energy boom has peaked. Around the world, the once-rising demand for green power has reached a plateau. In the future, Enercon will have to fight tough competition for dwindling subsidies.

Contracts for new wind parks are being awarded to the company that’s prepared to take the lowest state subsidy. In this bidding system the price is the most important factor, and the competition usually tenders lower than Enercon. Insiders say Enercon is missing a competitive turbine suitable for the growing market in threshold countries. They fear that because of the bidding system, Enercon will very soon be suffering.

The company chose former co-managing director, Ms. Fritsch-Nehring, as a “sacrificial lamb” for this developmental failure, company insiders have said.

Hans-Dieter Kettwig, Enercon’s CEO, is blaming her for the lacking innovative strength. But according to insiders there could also be another reason why the relationship between him and Ms. Fritsch-Nehring is supposed to have become so poisonous. She had tried to establish a modern company culture. The company’s old guard preferred to discuss problems in the atmosphere of an elitist men’s club, an open affront to her.

Ms. Fritsch-Nehring guided specialists from outside into Enercon, experienced people from companies like Airbus and BMW, created previously unthought of training possibilities and opened the firm up to cooperation with research institutes like the The Fraunhofer Institute. The result was highly qualified people from Finland, Brazil and Colombia strolling around the company headquarters in Aurach, East Frisia. For the established troops, it was a culture shock. The situation escalated.

“Fritsch-Nehring wanted to transfer her approach to other branches of the company,” one insider said. “It became a power struggle.”

Since then the company has been divided into two irreconcilable camps – the progressives who wanted to open up the secretive company, and the establishment who want to retain the status quo.

Meinhard Geiken from IG Metall knows just how status quo defenders are wired. The trade unionist has been trying, unsuccessfully, to establish social partnerships at Enercon for years.

“Enercon refuses to conclude collective agreements and to allow a group works council,” he said. He described Enercon as a global company that still tries to manage itself like a small enterprise with an old-fashioned patriarchal management style.

Mr. Geiken said he was also bothered by the compartmentalised structure of the firm.

“This is probably to circumvent the legal co-determination of the employees,” he said.

CEO Hans-Dieter Kettwig manages the company in the same way as the founder did: strict, uncompromising, and if possible, in secret

The Enercon group is a broad empire. At the core of the firm is UEE Holdings GmbH, with nine subsidiaries and more than 350 other companies. Then there are more than a dozen unconsolidated production and service firms, which produce parts exclusively for Enercon and service their wind parks – but which are owned by mail box companies in tax-free areas such as the Bahamas.

“That’s a perfectly normal system,” Enercon chief executive Hans-Dieter Kettwig told Handelsblatt. Mr. Kettwig explained that Enercon has works councils “in almost every service company and almost every production plant.”

These are absolutely not “remotely controlled” by IG Metall or other outsiders, he said.

Mr. Kettwig manages Enercon in the same way as the company founder did: strict, uncompromising, and if possible, in secret. He’s considered a gifted lobbyist who has become more powerful than ever before since the departure of Ms. Fritsch-Nehring.

In an email to the workforce, Mr. Kettwig announced that Simon-Hermann Wobben, a nephew of the company founder, would be taking over Ms. Fritsch-Nehring’s responsibilities “until further notice.” That includes marketing, IT and personnel. A steering committee has been set up to implement the restructuring and coordinate the “expansion of our innovation strengths.”

In Enercon’s innovation department, people have read between the lines and fear the worst. Is the restructuring simply on order to reestablish a strict regime in which contradiction and critical discourse will be frowned upon? Company insiders say that all approaches to modern management structure will be successively dismantled.

That belief is bolstered by the fact that the steering committee which will carry out the restructuring is made up of six men, all part of the company’s bedrock. It all seems to justify the suspicion held by some that the company is retreating into its previous “cult-like” management culture.

 

Franz Hubik covers renewable energy for Handelsblatt in Düsseldorf. To contact the author: hubik@handelsblatt.com

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