“We have to tackle the restructuring more consistently”

Schulte shows understanding for the position of some investors who had recently complained about the slow progress on the return targets. “Investors and shareholders will always say things could go faster,” said the CEO. At the moment, for example, the company is only underutilized at the Porz location due to supply bottlenecks and is therefore unable to meet the high demand. “Overall, however, we are on the right track.”

Read the entire interview here:

Mr. Schulte, the ongoing dispute between the CEO and the supervisory board helped you to take a career leap. Are you happy with that?
The circumstances were certainly a bit unusual, but I’m glad that the change has calmed down. I want to look ahead with the new team and the new chairman of the board.

Do you really think things will calm down before the Annual General Meeting in April? There is considerable resentment among shareholders and investors.
I see things a little differently – at least with regard to the operational business and our strategy. This is exactly why I am in close contact with shareholders and investors as CFO and in my new role. The entire Management Board concentrates on the operational business. At the same time, we know how important a trusting exchange with the capital market is right now. Business at Deutz is going well, we will close the 2021 financial year within the guidance given. It is understandable that questions will be asked at the Annual General Meeting about the events of the last few days – and will then essentially be a topic for the Supervisory Board.

What was your first official act?
Today, in a large group, I answered the managers’ questions. We communicate with the key stakeholders and will also talk to investors, customers and suppliers this week and next.

>> Read here about the management crisis at Deutz: Deutz boss Frank Hiller has to go – chief supervisor Bohr changes to the second link

Deutz is the oldest engine factory in the world. As an economist, you lack important technical expertise. Does it matter?
We have a strong board of directors and management team that stands for the innovative strength and progressiveness at Deutz. After 13 years in industrial companies, I feel like a very tech-savvy, willing to learn all-rounder, I see that more as an advantage.

In what way?
Of course, I’m a trained businessman – but I’ve always worked in technology-oriented companies, most recently for three years as CFO of Thyssen-Krupp Marine Systems. My view of the job has always gone beyond accounting and bookkeeping. I’m known for going into the factory and getting an overview for myself. At Thyssen-Krupp, I pushed ahead with the restructuring of the steel business in Brazil before the plant was sold. That was also very technically driven. There are also plenty of examples of technically driven companies that are not run by engineers and are successful. Think, for example, of Elring-Klinger, Norma or even Schaeffler.

You are now CEO and Deutz will soon need a woman on the board to meet legal requirements. Will the departments remain as they have been up to now?
That’s not correct, in the current list with three male board members we are set up in accordance with the law. It is correct that the Supervisory Board deliberately wants to appoint a woman. It is up to the Supervisory Board to decide how responsibilities will be allocated after a woman has taken office, but we will be involved.

“The implementation of the strategy must be faster and better”

And what distribution of tasks do you have in mind?
No matter how the cut will be in the end, we will get it done as a team. In terms of teamwork, however, we at Deutz can get even better in the future. If we work well together as a team on the board, then the importance of the strict separation of departments disappears. The supervisory board will find a suitable solution, and then it will not be decisive which person performs which task. With regard to our products, we are in a very exciting phase of technological transformation.

From the time of your predecessor, is there a need for impairment in relation to acquisitions that were made, for example, for the electrification strategy?
No, not from today’s perspective.

Will the current strategic direction remain? Your predecessor had recently focused the company heavily on electrification, but also wanted to play an active role in the consolidation of the diesel engine sector.
The strategy is right, but the implementation needs to be faster and better. We will continue to vigorously pursue our sustainability strategy, ranging from electric and hydrogen engines to fuel cells. We don’t have the auto industry’s pressure to adapt, but it will also increase in our engines for construction machinery, agriculture and ships. But we have to make sure that our classic engines don’t fall by the wayside. Our goal is for half of our engines to be fossil-free by 2030. We have to do this. But that also means that we still need classic engines for the other half.

But that doesn’t sound like new impetus.
Last year, we worked out the strategy for our new green segment together in the Management Board. It is correct and important for Deutz. But we have to approach the restructuring more consistently in the future and at the same time increase profitability. Because we have to pay for the trip. In addition, we must strengthen the service business, because our customers in the off-highway sector will still be using combustion engines for a long time to come, despite the drop in new business. You can still make good money with engine maintenance for a long time to come. We stay on the ball there, also through acquisitions.

Your Dutch investor has complained that the return targets are not being achieved quickly enough. What do you think?
We have a medium-term target of seven to eight percent for the EBIT margin. Deutz has never done that before. So we set ourselves ambitious goals. We are currently not working to capacity here in Porz due to delivery bottlenecks and are therefore unable to fully meet the higher demand. Overall, we are on the right track.

Is the criticism unjustified?
Investors and shareholders will always say things could go faster. It is certainly true that there is always potential for optimization to become even better. With the actions taken over the past few years, we should achieve continuous operational improvement as demanded by our investors.

“We are positioning Deutz in such a way that we do not become too dependent on China”

Deutz has significantly expanded its involvement in China under your predecessor. What role will this play for your company in the future?
We have our own small production facility in China and the joint venture with the Chinese construction machinery manufacturer Sany. We are building a joint factory with a capacity of up to 200,000 engines, which should be ready by the end of 2022. We get very good access to the market through Sany, who are also our biggest customer. This offers us opportunities, but also risks.

Which?
Sany also builds our engines into trucks and this market has cooled off in the last half year. But we are positioning Deutz in such a way that we do not become too dependent on China. Overall, the economic areas are no longer connected in the way they once were. That’s why we’re very happy that we have independent supply chains in China and India that allow the individual locations to be self-sufficient.

Sany has bought the concrete pump manufacturer Putzmeister for one billion euros. When you look at Deutz and Sany, you wonder if companies from China can get the technology for free.
That’s not the case. These are tough but orderly negotiations. The margins are in line with what we otherwise get on the market.

Really?
Yes, we were even doing better operationally than planned before the truck market cooled down so much last year. In order to be successful in China, you should work with a strong local partner. With Sany we have such a partner. The car manufacturers also usually work in joint ventures.

Mr. Schulte, thank you very much for the interview.

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