Munich It was a very turbulent year at Knorr-Bremse. In March, Heinz Hermann Thiele, the patriarch and major shareholder of the supplier company, died. In July, CEO Jan Mrosik failed in his attempt to buy Hella and to establish himself alongside Bosch, ZF and Conti as the fourth major power among the suppliers. At the end of October, truck boss Peter Laier finally announced his early departure at the end of the year.
Time to run forward for Mrosik. The former Siemens manager has only been CEO since January and is alien to the industry. He is now promising investors prospects: Knorr is expected to grow by 5.5 to 6.5 percent every year until 2025, and an operating margin of 14 to 16 percent is possible, Mrosik said at the capital market day at the end of November.
That’s a lot for an industry in which more and more suppliers are struggling to survive. But Knorr is in a different league and will make a return of up to 13.5 percent this year as well. “In the truck business with its comparatively small series, different laws apply, and trains are low numbers,” Mrosik told the Handelsblatt.
“Demand in the commercial vehicle sector is high again. Due to the delivery problems, however, many orders will be postponed until the next year. Currently, 20,000 vehicles cannot be delivered in Europe due to missing parts, ”says Mrosik. Steel, plastics and chips will remain in short supply for some time.
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Nevertheless, Mrosik was unable to compensate for the massive drop in price after the failed Hella takeover with the Capital Markets Day, a good three billion euros in market capitalization has been gone since July. The price is bobbing up to the emissions level of 2018, when Thiele, who has since passed away, put his life’s work on the stock exchange.
The self-driving truck is changing the rules of the game
Back then, the highly specialized world market leader from Munich was welcomed, Knorr is considered to be well positioned. Half of the business is done by train brakes, doors and air conditioning systems from the German ICE to the Japanese Shinkansen – the world market share is 50 percent.
The second part of the business is braking systems for trucks, here too Knorr is number one globally. However, the rules of the game are changing: “We expect the first highly automated trucks to hit the market in 2025,” says Mrosik. “A truck is easier to drive autonomously on the highway than a taxi in Manhattan,” explains the Knorr boss. “Today we are a system supplier and want to play a leading role in automated driving.”
There is a shortage of drivers worldwide, and the pressure to allow autonomous trucks is growing every day. Technically, at least on motorways, that’s no longer a big problem. However, approval would be a turning point for truck manufacturers and the supplier industry. For Knorr this means: cameras and sensors replace the driver’s senses, brakes and steering become one system. Knorr is no longer alone here. In May 2020, the ZF Group took over the US brake manufacturer Wabco and can thus offer a complete system.
The supplier for trains and commercial vehicles is banking on growth in the coming years.
Knorr had previously allied with Conti. The large supplier from Hanover supplies the sensors and cameras, Knorr the brakes and the software. When the Lippstadt-based auto supplier Hella came onto the market at the beginning of the year, Mrosik saw a good opportunity to buy radars and sensors for itself; the Handelsblatt published the plans at the time. But the attempt failed.
Because the seven billion euro takeover threatened to blow not only the financial strength of the group, which can lift a maximum of five billion without a capital increase. At the same time, Knorr would have had a car supplier division with lighting technology, which would have generated significantly less margin than the core business.
The maneuver did not go down well on the capital market. Knorr, which has only been on the stock exchange since 2018, lost 20 percent of its market value within a few days. “Everything has been said about the failure to take over Hella,” Mrosik closes the chapter. The collaboration with Continental remains.
“We have a stable partnership with Conti,” emphasizes Mrosik. “We are still looking for acquisition opportunities, but with manageable sizes.” Ten to 15 potential takeover targets are constantly being observed, specialists in artificial intelligence, data integration, energy efficiency, but also companies that could advance Knorr’s core business are sought.
The supervisory board, led by Klaus Mangold, is still behind Mrosik despite the botched takeover. At Knorr, continuity in leadership has become a value in itself. After the departure of Klaus Deller (2019) and Bernd Eulitz (2020), Mrosik is finally the third CEO in three years.
Thiele’s legacy: heirs should rule like the Quandts
The former acted too briskly for the late major shareholder Thiele, the latter too timidly. Mrosik is also controversial with his edgy management style, not everyone agrees with the new and his course.
Truck boss Peter Laier will leave the house early at the end of December – he is said to have calculated his own chances for the chief position. A successor is still unknown.
So the future of Knorr depends more than ever on Jan Peter Mrosik, a stranger to the industry. Thiele had ruled heavily into the company right up to the end and leaves a vacuum that also gives Mrosik leeway. Thiele’s heirs, who recently sold their stake in Lufthansa, want to hold onto Knorr in any case. With almost 60 percent of the shares, they have a greater weight than the neighboring Quandts at BMW.
Thiele has always seen the role of the Quandts at BMW as a role model for Knorr. There the motto applies: The share price is secondary if the long-term perspective is right. Mrosik still has to prove that he has the necessary strategy.
More: Knorr-Bremse is getting ready for growth – headwinds from China