Medium-sized companies in the corona crisis: the fear of an l-curve

Business is still going well at fan manufacturer EBM-Papst. But here, too, sales have slumped: A company visit.

Only with a mask: fan production in Mulfingen, Baden-Wurttemberg Photo: EBM-Papst

It’s not the masks, not the closed canteen or the home office that cause the employees the greatest difficulties. Anja Burkhardt knows this because she talks a lot with her colleagues at EBM-Papst. No, the most difficult thing is that you are no longer allowed to shake hands and have to keep your distance. There are always those situations where, in the past, you might have tapped each other on the shoulder to say hello or given each other a quick hug.

When they meet in the hallway, their hands still twitch briefly toward each other and then quickly back again, followed by an embarrassed laugh – oh well, it’s not allowed at the moment. Even months after the first security measures, Burkhardt observes such situations again and again in the corridors or in the plant halls during shift changes.

Actually, it is already the 16th Corona week for the employees of EBM-Papst in Mulfingen in the very northeast of Baden-Wurttemberg just before the border to Bavaria. Anja Burkhardt still remembers when the first bad news came from China in February. When many in Germany still thought respiratory illnesses were a phenomenon in the Far East, they had already been warned at the large medium-sized company by their China boss Thomas Nurnberger: a virus could get the company into trouble.

"There was this disbelief among us at first," Burkhardt says. There had been a discussion among the staff as to whether it would still be possible to go on a skiing vacation to Austria at carnival. It’s only a few hours’ drive from Hohenlohe to Tyrol.

It would have been better if they had not gone on vacation to Ischgl. On the map of the Robert Koch Institute, the Hohenlohe district turns deep red: almost 670 corona cases per 100,000 inhabitants, that is a peak value for Germany, surpassed only by the Fichtelgebirge.

Until then, Hohenlohe had attracted little attention nationwide. At most, the building society Schwabisch Hall or the screw multinational Reinhold Wurth, the largest employer in the area, have a greater degree of recognition. With its lettering, it dominates industrial areas, but also museums and foundations. And now because of the high infection figures.

15,000 employees worldwide, only 15 infected

Fan manufacturer EBM-Papst has nevertheless been able to protect its employees quite well in the middle of the red zone, says Anja Burkhardt. As early as the end of February, visitors were no longer allowed on the plant premises, the bus drivers on the plant lines wore masks, then came the home office and everything else that is now almost taken for granted.

The first balance sheet: a 25 percent drop in sales in April compared to the same month last year.

Now, four months later, the company’s sickness record is impressive. There are just 15 infected people among the 15,0000 EBM employees worldwide. Almost all of the infections occurred in Germany, but none at the plant in Lombardy, the Italian region with thousands of corona deaths.

Now the openings are beginning. Visitors are once again being received on the plant premises, and proper cooking is once again taking place in the canteen. People are feeling their way toward a new normality. A normality in which masks are compulsory not only in the plant but also in the administration, and handshakes remain strictly forbidden.

But the economic consequences for the company are also gradually becoming apparent. EBM press spokesman Hauke Hannig connects by telephone with the head of the company and clears his desk for this purpose – after all, the safety distance to the reporter must be maintained. On this day, Stefan Brandl is in his home office like most of the administrative staff. He has been running the family business for two years. He talks about the successes: How his employees managed to secure the supply chains during the crisis. He talks about the good fortune that EBM-Papst is so broadly positioned with its fans and electric motors that it has always been able to continue producing even during the crisis. Above all, demand was suddenly high for ventilators for respiratory equipment, which the company manufactures at a branch plant in the Black Forest.

However, even these successes cannot wipe out a crucial red figure: 25 percent lower sales in April compared to the same month last year. The plant in Herbolzheim in southern Baden, which supplies the automotive industry, suffered the most losses, says Brandl. There, the drop in sales is as much as 60 to 70 percent. It is the only plant where management has had to put workers on short-time work.

If a quarter of sales are missing, how long can a company survive that? Well, says Brandl, with savings such as short-time work, investment stops and loans, you can bridge a fiscal year to some extent. Stefan Brandl has already experienced the financial crisis of 2008 as a manager at EBM. At that time, sales were down 6.6 percent, but the next year they suddenly grew by 33 percent. Such an upswing after a crisis should actually be a blessing for a company. But this exponential growth in sales created enormous stress in the company, the CEO recalls. It demanded more of everything, and it demanded it immediately: more production, that is, more employees, more materials, overtime, and thus the risk of error.

V, U, W or L: The thing with the curves

Brandl describes this stressful development of yesteryear as a U-curve. A deep fall and then a steep unchecked rise. If he could choose, he would prefer a somewhat gentler rise after the corona crisis, say in a V curve. But first of all, things have to get going again, says Brandl. The worst would be if growth proceeds like an "L," a steep crash like right now and then a long stagnation at a low level. And he is also afraid of the "W", i.e. the consequences of a possible second shutdown after an initial brief upswing. But the economy is not a concert of wishful thinking, and at least Brandl’s companies, unlike smaller SMEs, are not yet facing an immediate threat to their existence.

"No one is going to be laid off here anytime soon," says works council member Anja Burkhardt with conviction. First of all, the overtime account is being reduced. Another factor contributing to the confidence of the workforce was the fact that during the crisis, employees in sales and administration were the first to be put on short-time working, while production continued at full speed – and on salary. "Until now, I’ve only known this the other way around," says the works councilor.

Of course, in these times of crisis, there was also some noise between the employee representatives and the management, says Burkhardt. It was about home offices and the monitoring of performance. But that, too, has been resolved, he says. "I think the home office has made it, even for the time after the crisis," Burkhardt says. The region is rural, with people often living 10 or 20 kilometers from the plant. Women in particular can often only afford to work if they don’t have to be present at the plant every day, says Burkhardt.

So the working world in Mulfingen, as perhaps in the whole country, will have changed to some extent after the crisis. The company’s strategy will also change. At least in the near future, supply chain security will certainly take precedence over cost optimization, Brandl estimates, although he immediately qualifies: "You never know how long a trend like this will last."

Globalization not taken to extremes

The great advantage of EBM-Papst: Here, the global division of labor has never been taken to extremes. The idea was always to produce as close to the markets as possible. Thus, the Chinese parts of the company produced fans for the Chinese market and plants in the USA produced fans for the American continent. Only the electric coils for the drives of the rotors, for production worldwide, come from a company in Tunisia.

That was fortunate for the Tunisian manufacturer, but a problem for EBM-Papst when productions and ports were closed in North Africa. "That’s when we really started sweating," says company spokesman Hannig. Without coils from Tunisia, the entire production would have stalled. After the crisis, the Tunisian company should certainly consider setting up a production line in Europe and the USA, close to EBM-Papst’s plants. Unit labor costs would then certainly be higher, but the supply chains would be more secure.

A piece of globalization backwards, so to speak.

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