CHEMICAL REACTION

Wacker on Refugees, Power and Innovation

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  • Why it matters

    Why it matters

    Like other companies that use a lot of electricity, Wacker is faced with uncertain power costs because of changes in energy policies. At its new facility in Tennessee, however, it was able to negotiate fixed power costs for over a decade.

  • Facts

    Facts

    • Wacker’s biggest factory is in Burghausen, near the Austrian border in southeastern Bavaria.
    • Its U.S. headquarters is in Adrian, Michigan, south of Detroit.
    • Wacker is spending $2 billion to build a solar-grade polysilicon factory near Chattanooga in southeastern Tennessee.
  • Audio

    Audio

  • Pdf

For more than 100 years, Wacker Chemie has produced specialty chemicals used in the construction, textile, auto and solar industries. The Munich-based firm is more than 50 percent owned by the Wacker family and has production facilities in Europe, Asia and the United States. Its U.S. headquarters are in Adrian, Michigan, just south of Detroit.

Rudolf Staudigl, who has headed the company since 2008, met with Handelsblatt in his office in eastern Munich. The Wacker chief executive is one of few German managers who doesn’t shy away from discussing political issues and takes clear positions – and the refugee question is no exception.

Handelsblatt: Your biggest production location is Burghausen, near the Austrian border, where thousands of refugees cross the border into Germany every day. How does it make you feel?

Mr. Staudigl: Yes, we are close to it. We even had some refugees enter our factory grounds. They thought they were climbing over a border fence into Germany. Our security people looked after them and then handed them over to the authorities.

“We have to give a clear signal: Accepting refugees in unlimited numbers will overextend us.”

Rudolf Staudigl,, Wacker Chemie chief executive

Chancellor Angela Merkel has been harshly criticized recently for her famous mantra concerning the refugees — “We can do it.” Are you also skeptical that Germany can handle the crisis?

As an initial reaction, she was absolutely right. But she should have reacted faster in taking the next steps. It became clear very quickly that we cannot let every refugee into the country without controls.

Do you also believe that Germany can manage it?

Yes, but it will take a much larger effort than we expect today. I haven’t seen a real concept from politicians about how they propose to integrate the refugees. That is the real challenge. It will take years and cost a lot of money.

Do we need to impose an upper limit on refugees coming in?

I have great understanding for the motivates of the many thousands coming into our country. I am convinced we would also hit the road if we found ourselves in a similar situation. But we have to give a clear signal: Accepting refugees in unlimited numbers will overextend us.

Many companies are hoping for new, motivated workers from among the immigrants – others doubt that refugees can solve our demographic problem.

The labor market will not profit immediately, but I do see good opportunities in the long term. But refugees who are entitled to stay here must learn our language and be trained and integrated into our society.

Is the business sector doing enough to help the refugees?

We have taken in 12 young refugees at our training center in Burghausen. They are living on the campus and we will give them vocational training. For me, it is one of the responsibilities of companies to communicate their values and not tolerate xenophobia. After the attacks in Paris, I sent a message to all of our employees stressing that outrage must not be allowed to turn into hatred.

Twelve young trainees are just a drop in the ocean compared to 1 million refugees coming to Germany.

Yes, but if this is done in many places all over the country, then we really can manage it. And that’s not all we are doing. For example, we are supporting the Schlau School refugee project with a donation of €100,000 this year. And beginning in 2016, we plan to donate €20,000 every year for five years. The project is aimed at helping young refugees learn the German language and find suitable training positions.

Are you afraid that European countries will put up barricades again? Not just because of the refugees, but also for fear of terror attacks – border controls are back in many places.

Crises tend to encourage this behavior. But at the same time, I am convinced we should use the difficult situation to promote European integration. Whatever happens, free trade in Europe is of inestimable value for all of us.

Federal government policies also affect Wacker Chemie in another way. Your company is a big consumer of electricity and you have to struggle with high energy costs. Have you gotten over your anger at the governing coalition’s energy policy?

Anger is the wrong word. Justified concerns are what motivate me. What is lacking most of all in Germany is planning reliability. We have to be able to calculate how electricity prices and basic conditions will develop – at least for a three- to five-year period. But that is hardly possible in Germany.

Do you have more reliability elsewhere?

Yes, for example in the United States. At our new location in Tennessee, our partners have contractually assured us of fixed power costs until 2028. So we know how much our electricity consumption will cost us until then. And that is what we need for a robust business plan.

But up to now, surely Wacker has come through energy reforms relatively unscathed?

There has been success in not overburdening energy-intensive industries. And we certainly recognize the achievements of politicians in this respect. But we have to agitate permanently for this to remain the case. Meantime, we employ specialists who do nothing else but focus on regulation of the electricity market.

What concerns do you have?

How network charges develop, for example. We need the new power lines from northern to southern Germany. But expansion with underground cables is bound to be enormously expensive.

Do you worry that the renewable energy tax exemption for energy-intensive industries will be lifted in 2017?

That has to stay. After all, it is not a gift to us – it is important to keep companies in Germany or Europe. But at the moment, in view of signals from Brussels, we have to assume there will be no more complete exemption in the future.

There is also discussion about imposing the renewable energy levy on companies’ own electricity production. What would that mean for Wacker?

We generate about 40 percent of our electricity in Germany. If that becomes more expensive then the consequences are simple: We would have to compensate for the extra costs somewhere else. And in the final analysis, that always affects jobs, among other things.

Wacker is a major manufacturer of polysilicon for the solar industry. The European Union just extended punitive tariffs on the import of solar modules from China for the time being. Was that a mistake?

What is going on there is completely grotesque. We helped promote the Chinese solar industry with our energy reforms, and now that companies there have dramatically reduced their prices, we are putting up E.U. tariff barriers. A small number of European manufacturers will profit from that, but the majority of firms in Europe will become uncompetitive. The number of companies and employees harmed by the tariffs will be far greater than the questionable benefits for just a few.

But for many consumers it’s understandable that European industry should be protected against illegal dumping.

Consumers in Europe would profit from lower prices. In addition, tariffs provoke counter-tariffs. We are shooting ourselves in the foot, because China is one of the most important sales markets for many key German industries – just take the automotive or machine construction industries, for instance.

Wacker has invested heavily in America recently. Is the United States now preferable to Germany?

Not necessarily, but in the last 15 years we have globalized our company. We now have three locations in China, and two new ones in the United States. But we have also invested around €2 billion in eastern German factories. And in Burghausen we continue to invest hundreds of millions every year. We now have an outstanding global presence with production locations in all major regions.

Even so, competition is increasing. An increasing number of firms are moving into your area, specialty chemicals — particularly chemical companies from the Middle East and China. Do you fear the new competition?

I have no problem with competitors, providing they also want to earn money. But, of course, we too have to constantly change. In the future, we will have to develop products in much closer proximity to clients.

What does that mean exactly?

We speak with textile manufacturers, but also with suppliers of medical technology. We want to offer them tailor-made products made of silicone, for example, in the area of mobile electronics — the so-called “wearable” devices. What you see today in the way of fitness bracelets or sports watches is just the beginning of a huge development.

You now even offer a 3-D printer. Isn’t that a long way from your core business?

Not at all. We have developed an entire 3-D system – printers and silicon, which we now want to sell. We are thinking of selling it either as a complete solution, issuing licenses, or producing components in 3-D print for other companies as a service provider. For example, tailor-made shoe soles can be manufactured with this process. For sports companies and medical technology, that is extremely important — it gives them a competitive advantage.

That is an unusual initiative for a traditional chemical company.

But it shows what a European manufacturer of specialty chemicals can do. If we can always stay one step ahead — by staying close to our clients and giving them innovative applications — then I have no worries about our companies and the entire industry.

 

Bert Fröndhoff covers the chemicals industry for handelsblatt. Joachim Hofer covers the high-tech industry. To contact the authors: froendhoff@handelsblatt.com and hofer@handelsblatt.com

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