Covid 19 | An Industrial Evolution? An Interview with Arndt Kirchhoff

In a new world marked by COVID-19, industry is facing unprecedented pressure from all sides to maintain production, job stability and wealth creation. Politically and socially that pressure often takes on a protectionist, national focus. But for some leaders this is the moment to reinforce the progress made by globalization in recent decades.

KIRCHHOFF is a family-owned multinational founded in 18th century Germany, whose business, with 13 000 employees, is spread across 60 production plants and facilities in 5 continents and 21 countries. KIRCHHOFF Automotive, its largest business unit, is a world-leading supplier of the vehicle manufacturing industries.

Amrop spoke with CEO Arndt Günter Kirchhoff about his practical and optimistic perspective on productive life during and after lockdown.

Covid 19 Industrial Evolution - Interview Arndt Kirchhoff

COVID-19 | An Industrial Evolution? Key Messages

Mr. Kirchhoff is Vice-President of the Federal Association of German Employers’ Associations (BDA), a member of the Executive Committee of the Federal Association of German Industry (BDI) and Vice-President of Gesamtmetall. He is also President of the Cologne Institute of Economics and Vice-President of the Association of the German Automotive Industry (VDA).

Don’t lose sight of pre-Covid agendas

The Lisbon treaty, with its emphasis on sustained growth and jobs, as well as important sustainability and digital agendas, were all in intensive development pre-crisis. As fundamentals for a strong future, it is essential to pursue these agendas, post-Covid

Maintain your business philosophy and values at all costs

KIRCHHOFF is a strongly values-driven organization with global standards for employees and management systems. Whilst respecting local cultures, these enduring values will continue to apply across all of the organization’s global locations, sown and cultivated via discussion and training. As a global player, Kirchhoff’s value system also dictates its health and safety standards in its operating locations. Divergencies, such as child labor, do not fit in the frame.

Given its socio-economic benefits, globalization will intensify

KIRCHHOFF was founded in 1785, and as an active participant in globalization has witnessed the positive effects first hand. The first and second globalization phases (from 1880 to 1910, and over the past 30 years, respectively) were instrumental in lifting hundreds of millions of people out of hunger and into education. Given the impact on buying power and an expanding middle class, globalization, (with the exception of some large outliers), is firmly set to continue.

The German automotive engine is still (softly) humming

Supply chains have been kept open during the crisis — essential for an industrialized nation such as Germany, that imports around 70% of its components and raw materials from other European countries. Should one border close, the whole supply chain is compromised. Even if supply chains have been kept running, it may well be a challenge to restore capacity after a dramatic drop.

A diverse portfolio and customer base support business immunity

Despite a dramatic drop in production levels, KIRCHHOFF has continued to supply component divisions for a variety of manufacturing types, in a wide spectrum of countries including China. It is in part thanks to this diversity that demand and supply has been maintained throughout the pandemic.

Post-Covid production scenarios differ dramatically

In one scenario, consumer caution may keep demand at 50% pre-pandemic levels. In a diametrically opposed scenario, a release of pent-up demand due to underspend may swing the pendulum in exactly the opposite direction. It will be necessary to plan — and budget - for both.

Virtual technology will intensify, but not replace the face-to-face

The next phase of industrial life will involve an increase in virtual technology — however face-to-face meetings have distinct social benefits and will need to be part of the mix.

The pandemic will only confirm the drive to re-organize supply chains

Sustainability and climate change were already top of mind pre-Covid. Europe, a region with few raw materials, may need to re-think the current levels of transportation. Global cooperation is, however, the way forward in terms of job and wealth creation. Opportunities exist for the EU to invest in weaker economies, and increase its competitiveness with the US and Asia.

Some companies are quietly well-positioned to ride out the storm

The favorable economic weather over the past years has allowed forward looking companies to build up high liquidity in preparation for a downturn. KIRCHHOFF is one example. Its resultant financial strength is even enabling it to support more vulnerable suppliers at the current time.

Globalization will continue to drive a talent strategy without borders

The company’s strategy to operate in multiple geographical locations will be reinforced by intensifying globalization. And it will translate into an ever more international workforce. Key executive roles can easily be occupied in markets at the other side of the world.

Interview facilitated with the support of Ulrich Beckendorff,  Managing Partner of Amrop in Germany.

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