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As the head of one of Europe's most powerful industrial companies, Franz Fehrenbach is far from being a household name. And while the 54-year-old chairman of Bosch Group has no discernible plans to raise his profile, it seems likely that in the next few years he will become a lot better known.

Mr Fehrenbach took charge six months ago of Germany's sixth biggest manufacturer. An engineer by training, he is only the sixth person run the privately owned group since it was founded in 1886 by Robert Bosch, a master mechanic responsible for a stream of innovations in fields such as ignition systems for early cars.

While it is early days for Mr Fehrenbach, in an interview at the company's imposing headquarters on a hill overlooking Stuttgart he appears prepared to be a lot more forceful in public than most of his predecessors. And if history is anything to go by, Mr Fehrenbach will have a decent period of time to make his mark, since none of the people who have held his job in the past has spent less than nine years in the post.

With annual sales of €36bn ($46bn) and 236,000 employees, more than half of these outside Germany, Bosch is - after Delphi of the US - the world's second biggest independent car parts supplier. It is Europe's leading maker of central heating boilers and has a half share (with Siemens) of BSH, the continent's second biggest producer of domestic appliances. Bosch also manufactures a wide assortment of industrial equipment, from packaging machines to control systems for robots.

For all its size and influence the company has also been keen, for most of its history, to stay out of the headlines. Much of this is to do with Mr Fehrenbach's predecessors, who have generally been known for their discretion. Hermann Scholl - from whom Mr Fehrenbach took over, and who had been chairman since 1993 - was famously taciturn in public and became animated only when the conversation turned to engineering, his favourite subject. After the founder himself, probably the most eminent of Bosch's six chairmen so far has been Hans Merkle, who held power in autocratic fashion from 1963 to 1984 and was known as "the godfather".

Mr Fehrenbach comes across, in contrast, as a fairly outgoing individual, interested in a debate. Describing himself as "open and straightforward", he says he is "keen to eliminate any impression that we [Bosch] are too conservative and slow-moving". Since taking over as head of the company - which he joined in 1975, becoming a member of the management board in 1999 - Mr Fehrenbach has promised to increase profitability, partly by being "more focused" on research and development spending.

He is anxious to step up the company's activities outside vehicle components, partly by acquisitions. While vehicle parts - covering such products as spark plugs and braking systems - account for two-thirds of Bosch's sales now, Mr Feh renbach suggests that within five to 10 years the proportion could fall to half.

Another subject Mr Fehrenbach is happy to debate is Germany - and, in particular, how important the country should remain as a place for Bosch both to sell to and to be based in. Both these questions are linked to the broader discussion about how much Europe's biggest economy needs to change to reinvigorate its sluggish performance and to reduce its high labour costs, which have led in recent years to many industrial activities leaving the country for lower-wage nations.

He insists that Bosch must "globalise" even more than it has already. In 2003, only about 30 per cent of Bosch's revenues came from Germany, with Europe as a whole accounting for roughly two-thirds. Within the next decade, sales in Europe will probably account for no more than half of Bosch's total turnover, he says, with Asia and the Americas, in roughly equal proportions, taking up the rest.

Bosch has 103,000 employees in Germany, many in manufacturing processes that, says Mr Fehrenbach bluntly, are too expensive. "We have to be more innovative in processes as well as products . . . We have to become more cost-competitive." One way to reduce the company's high manufacturing wage costs in Germany - which at €28 an hour are among the highest in the world - is to persuade more of Bosch's German employees to work 40 hours a week rather than 35, while being paid the same wage. Bosch is now talking to unions, chiefly IG Metall, Germany's main engineering union, to introduce this change at selected plants. It would lead to a 12 per cent reduction in unit labour costs at the factories affected.

And if no agreement can be reached?

Bosch already has more than 40,000 workers in low-wage countries such as China, the Czech Republic and India and no doubt will increase this figure anyhow, as part of the effort to make products close to emerging markets. But Mr Fehrenbach warns - in a statement that differs from the conventional fairly soft approach by German employers on labour issues - that the move to employ more workers outside Germany is likely to "accelerate" if Bosch cannot forge an agreement on the weekly hours issue.

In the past, employers in Germany have been able to compensate for the high costs of manufacturing at home with heavy use of automation. That has helped to increase productivity and has guaranteed a certain level of employment in manufacturing, mainly in fairly skilled jobs - for instance operating complex machines. But Mr Fehrenbach says there is a limit to how far this can continue. "The opportunities for substituting [automation] for [labour] are becoming less . . . And at any rate, installing automation is not cost free. It can be an expensive way to keep productivity levels high."

The weak state of demand in Germany has been one reason for Bosch's relatively poor commercial performance in recent years. Pre-tax profits as a percentage of sales in 2003 will be no more than about 4.5 per cent, the third year in a row when they have been in this range - well below Bosch's target of 7 per cent. Mr Fehrenbach is, however, more hopeful about 2004. Helped by the plan of Gerhard Schr¶der's government to stimulate the German economy through tax reform, a programme Mr Fehrenbach thinks is vital, Bosch's sales should increase by 5-6 per cent in 2004, making it possible that the company will hit its 7 per cent target for profitability in 2005, he says.

For this to happen, Bosch will have not only to hope for the general uplift in the world economy that most commentators think likely but also to continue its efforts to speed up its growth outside Germany.

Mr Fehrenbach says the image many people have of Bosch as an insular German company does not quare with the facts. "We have been [operating] in Japan for 90 years," he points out. Bosch opened its first non- German office, in Britain, in 189 and its first factory outside its homeland - in the US - 11 years later. "I don't think there is a lack of international orientation in the company," he says. But he is clear that this needs to be stepped up, both through greater investments in countries with a good sales potential and by an acceleration of Bosch's efforts to push more senior managers from Germany into positions of responsibility abroad. (Mr Fehrenbach gained his main international experience during a four-year spell in Bosch's US vehicle operations in the 1980s.)

"China is an especially good opportunity. Already we have several important ventures covering, for instance, diesel injection, hydraulics and power tools. We have annual sales in China now of about €1bn and I envisage increasing this [by] five times in the next 10 years. India represents another big opportunity. In the past the Indian economy has had its ups and downs. But India is now starting to invest seriously in infrastructure. The new road-building programmes there will have a positive impact on an auto component company such as Bosch. Our sales in India now are €350m a year and these will grow."

The company spends heavily on research and development, putting 7 per cent of sales into this activity. Mr Fehrenbach is keen to continue with this record, which has led to innovations in fields such as anti-lock braking systems, high-efficiency central heating boilers and diesel injection, which helps cars achieve greater fuel economy.

Mr Fehrenbach is especially proud of a safety system for cars, devised by Bosch, called the electronic stability programme (ESP). This stops cars rolling over in accidents, potentially reducing fatalities. But he says the company must be better at making sure its innovations solve real problems.

"We should be more customer-driven. For instance, in automotive components we should perhaps be focusing technical efforts more diligently at different parts of the car market, since high-performance cars need different types of technical advances [from] vehicles in different parts of the product spectrum."

Although he remains committed to Bosch's traditional values, including its unusual ownership structure, the chairman is clearly prepared to see big changes in the company over the coming years as it seeks more international growth and strives to remain competitive in cost terms. He is also prepared to spend less time than his predecessors trying to stay out of the headlines.

In 2005, thanks to a change in German accounting standards, Bosch will for the first time be forced to break out the profits of its different business divisions. "That will mean more external scrutiny," says Mr Fehrenbach.


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