ZF gets creative juices flowing at new headquarters

Friedrichshafen is almost picture perfect. Situated on the shore of Lake Constance in southern Germany, it is comfortably accessible to both Austria and Switzerland. Its population is barely 60,000 and among its high profile corporate residents is ZF, better known for its expertise in making transmissions, chassis components, shock absorbers, clutches and other auto components.

ZF was founded a little over a century ago in this over 200-year-old city, which is equally famous for its aviation history that are part of the archives in the Zeppelin Museum. ZF Forum, which was set up last September, presents the more contemporary side with its focus on mobility in a changing global landscape.

ZF Forum represents an initiative to usher in a new work environment that is expected to do its bit in boosting creativity. This change in mindset is also a result of the growing impact of digitalisation in today’s world. The new office concept is intended to foster greater team spirit and make the work place more flexible.

It was at this venue that ZF hosted its annual press conference last week in less than six months since its November 2016 inaugural. “This building has the latest digital infrastructure and is ready for the modern world of working,” said Stefan Sommer, CEO.

Apart from the local media, there was a fair degree of global representation from the US, India, China and the UK. Amid the sublime surroundings at Friedrichshafen, the ZF chief was rather candid about the changing global environment that posed ZF its own set of challenges.

For one thing, there were geopolitical realities to contend with like Brexit, which was now ushering in a wave of protectionism across Europe. On the other side of the Atlantic, Donald Trump has made no bones about the fact that his top priority as President is to ensure optimal investments in the US. The target of his ire has been Mexico and it is no coincidence that top car-makers such as Ford, Toyota, Fiat Chrysler and many others have announced big investments for the US while steering clear of Mexico.

During his election campaign, Trump had even spoken of building a wall to separate the US and Mexico. Replying to a journalist’s question at the press conference, Sommer said a wall was no solution to an issue and protectionism would only hurt nations eventually.

While steering clear of any direct references to the US, he spoke of Germany’s own experience where the Berlin Wall was broken down in November 1989. For decades, it represented the worst face of human oppression and with its demolition came the birth of a stronger and united Germany. As Sommer reiterated, people who build walls would finally be the losers.

It remains to be seen now if Trump will carry through his threat of building a wall, which will hardly help anyone’s cause especially if this is accompanied by a US withdrawal from NAFTA. Automakers will find their business plans going completely awry should tariffs be imposed on imports from Mexico to the US.

As for the outlook in 2017, Sommer said Europe would see moderate growth even while risks from Brexit were not materialising yet. To that extent, no impact was expected through the year. “We are worried about protectionism. Instead of free trade talks, we are seeing potential risks (in Europe),” he said.

As for North America, despite Trump’s rhetoric, the US economy has been growing and represents a good investment for ZF. Private consumption is on the rise with more cars and light pickups in demand. “We are in a strong position in the US,” said Sommer.

South America, on the other hand, has been under tremendous economic pressure for a couple of years now. ZF does not see any major recovery happening very soon, which means Brazil and Argentina will continue to face headwinds through 2017.

China showed good, strong growth in 2016 thanks to government incentives. ZF was expecting “moderate developments” but things turned out better than it thought. From the company’s point of view, any momentum in China is good for the Asia-Pacific region.

Going forward, ZF will continue to focus on these critical growth engines even while India’s role will become very significant when the Hyderabad technical centre is up by 2020. The intellectual manpower here will be a critical component of the ZF think-tank in its new digital world. Hyderabad may also be the beginning of more such initiatives in India with other cities like Pune also likely to follow suit.

In a recent interview to the Business Line , Sommer had said that “fruitful ideas” were the need of the hour for ZF that could be brought from India to the rest of the world. “When we have the Hyderabad tech centre fully running and give people the freedom to think about their products, who knows what will come out of it,” he had said.

The tech centre will also grow “very aggressively every year” in software and mechanical engineering competencies to support ZF engineering centres across the world. Hyderabad, to that extent, marks “the switch of the ignition” where aggressive growth plans are envisaged. When this happens, the role of India will increase on the ZF roadmap where it will end up being an important growth engine for Strategy 2025.

In parallel, a lot of action will be happening at the new corporate headquarters in Friedrichshafen. It is also here that creative talent will be unleashed to look for solutions in the new world of mobility. As Sommer had indicated, ZF may not be inclined to making a car yet but there was no reason not to explore other options like two-wheelers or delivery robots.

The writer was in Friedrichshafen, Germany, at the invitation of ZF

COMMENT NOW