“Less watering can”

Flossbach von Storch is the largest independent asset manager in Germany and is based in Cologne. The company has over 300 employees and manages assets of over 80 billion euros. In November 2023, the financial services institution hosted a summit meeting. Also in attendance: Axel Vollmann. During a panel discussion with the former President of the Bundesbank, Prof. Dr Axel Weber, and politician Wolfgang Bosbach, the topics discussed included inflation, the shortage of skilled workers and politics in Berlin. He was also interviewed on the topic of “Germany as a business location”.

SMEs are considered the backbone of the German economy. However, the switch to electric cars, a shortage of skilled labour and high energy costs are causing problems for many automotive suppliers. Entrepreneur Axel Vollmann on Germany as a business location.

Mr Vollmann, you’ve been responsible for the Vollmann Group for over 30 years. Would you like to briefly introduce your company?

With pleasure. We’re a third-generation family business. That means I am the third generation – and my wife and I are very pleased that our two daughters have also decided to take on responsibility. My grandfather and his brother founded the company in 1911, manufacturing sockets for Edison light bulbs. The company then survived several crises and two world wars. After the Second World War, my father restarted production with only a few employees and introduced modern production techniques. I joined the company in 1985 and was given sole responsibility by the family a few years later. All in all, I successfully developed the company as a supplier to the lighting and luminaire industry with 350 employees until 2005, only to realise that globalisation, particularly with the power of China, left us no chance of long-term survival. As the sole shareholder (later with our daughters), I then decided to change sectors by means of targeted acquisitions, and so we used our expertise as a large-scale manufacturer of PVC and metal parts to gain a foothold in the automotive industry. Today – not even 20 years later – parts and assemblies from our plants can be found in almost every series-produced vehicle.

Car manufacturers in particular are being hit hard by climate change. Drive technology will have to be completely reorganised in just a few years. How difficult is that for you and for Germany as a business location?

The automotive industry is going through a very difficult phase of transformation. And it is our most important sector as an industrialised nation. It is also an extremely competitive sector. And then there’s this sprawling system of regulations. Many companies with a turnover of 10 or 20 million euros tell us that they can no longer cope with it all. We’re happy to bring such companies together or take them over and network them under a central administration that works very efficiently for us. In this way, we can jointly achieve an increase in productivity and bring it to our customers. After all, I can`t come there with higher prices, I have to operate within the set limits. This development may not be good or healthy. But ultimately, it’s probably the way forward: more and more smaller ones are dropping out and the bigger ones are getting bigger.

Your company has grown very strongly. With approx. 800 employees, you posted a turnover of around 150 million euros in 2019. You are now at 400 million euros with almost 2,000 employees. And that despite the coronavirus crisis. What happened to you? Did the state help?

In a way, you could say that. First of all, the Reconstruction Loan Corporation (Kreditanstalt für Wiederaufbau (KfW)) quickly provided money during the pandemic to get the economy up and running again and we received 22.5 million euros at an interest rate of two per cent. The money was provided by the house bank. I think you can come to very favourable arrangements with the banks, even in difficult times.

And why was the money important for you during this phase?

Many companies in our industry are under a great deal of pressure. And so in 2020 and 2021, within 18 months, we acquired three companies with six locations in three countries. This doubled our turnover to 300 million euros. We also achieved organic growth because we received many new orders in every area, but particularly in e-mobility. Yes, and to be fair, it must of course also be said that our turnover, which now totals 400 million euros, includes around 60 million euros due to inflation. These are increased material cost surcharges – MTZ for short – which we were able to pass on to customers one-to-one, but which will also be reduced if material costs turn out to be lower, as forecast for 2024.

Energy costs were certainly among the increased costs for you as well. After all, electricity prices soared following the invasion of Ukraine by Russian troops. Energy has been in short supply since then. Is that an important issue for you?

When there was this explosive rise in electricity prices, we didn’t purchase our energy requirements via a fixed price from a supplier, but via the electricity exchanges. Alas, that was a major disadvantage. We consume around 20 million kilowatt hours of electricity annually and were paying around 20 cents prior to the “energy shock”, all in all. So we’re talking about around four million euros in energy costs per year In 2022, we were paying around double that. That was difficult and cost us reserves, but we coped with it well.

How does it compare to 2019 – before the pandemic?

At that time, we were paying around three cents per kilowatt hour via these electricity exchanges. Then there was the EEG surcharge of seven cents per kilowatt hour, plus the grid fee and electricity tax on top, so the bottom line was 20 cents. Today, we pay eleven cents for electricity, which is almost four times as much. But there is no longer an EEG surcharge, so the bottom line is that we are back to the price I mentioned earlier. For us, the way it is now is perfectly fine.
 

However, we’re now hearing repeated complaints from industry that power costs are too high. From 2024, the electricity tax for the manufacturing industry is therefore to be reduced by 1.5 cents to the European minimum level. Do you think this is unnecessary?

Well, it could save us around 300,000 euros a year. Nevertheless, I think it would be better if improved conditions were created for energy-intensive companies instead. Energy costs make up at least 10 to 15 per cent of their turnover and they weren’t paying the EEG surcharge even before the energy crisis. Elsewhere in the world, for example in the USA or China, the price is only seven cents – “all in”. It’s thus important that Germany remains competitive here, for example for the aluminium, plastics and steel industries. Because if these companies move to another country with the raw materials industry, we as a manufacturing industry may be next after a few years’ delay.”

And that would mean deindustrialisation – and cost jobs. Christiane Benner, the new chairwoman of IG Metall, is now pursuing the strategy: “We want to work less so that more people stay in work.” Are your works councils inspired by this? With almost 2,000 employees, you have works councils, don`t you?

Yes, we have works councils here and there in the company. But traditionally we’re not bound by collective agreements, which was vital in the East, as productivity there was far below the IG Metall wage expectations for almost two decades. And so we do things the way we think is right. Our employees’ great loyalty to our company and to our family shows us that this is being well received. There is a great sense of solidarity and hardly any staff turnover. I always communicate our opportunities and problems very openly to our employees.

And can you find enough skilled labour?

We always get great employees who will hopefully like to stay with us for as long as possible – including young people. Some of them are less well trained than they used to be at the beginning, but if we then train them accordingly, we can all manage that well together.

So you don`t expect the state to make any improvements here?

That would be nice. Everyone would probably be grateful for that. But I think sometimes you have to cocoon yourself. It`s a crazy world out there. We prefer to trust in our own strength and exploit our opportunities, which can also present themselves in crises.

Our economic policy doesn’t focus very much at present on opportunities and success factors. Instead, we often hear the term social justice. Is that a mistake?

Well, I think we should look at the concept of social justice in a different way. Social justice doesn’t just apply to those who receive state transfer payments. We also owe this justice to those who work from dawn to dusk to ensure that these benefits are paid. But we only ever look at the recipients of benefits who are financed by the federal budget, i.e. by taxpayers.

Do you think the tax level is too high?

Let´s take the top tax rate. Under Helmut Kohl, i.e. until the 1990s, the tax rate was 53 per cent. Today, the highest rate is only 42 per cent. But back then, only incomes that exceeded the average income by 20 times fell into the highest tax bracket. That would currently be just over 800,000 euros. Today, the highest income tax rate is paid on income that is more than 1.4 times the average income. Many of our employees who receive a special payment and overtime pay are already covered by this regulation. Thus the difference between gross and net is already far too great in this income bracket.

So employees should earn more?

Net, yes. The cost of living is high, particularly for young people. I would like to add something at this juncture. Competition for skilled labour, especially for young people, is fierce. And that brings me back to the subject of trade unions. I don`t like this watering can principle, i.e. the same pay model for everyone. I think it`s much better if I can distribute the amount of money – and by that I mean above all what comes on top – specifically to top performers.” I`m not afraid of disputes in the factories either.

And what does that mean in specific terms?

When we hire new people, some earn more than some employees who have been with us for 10 or 20 years. And then one or two people approach me concerning this issue. Then I tell him that their younger colleague is also securing his future and that we all – he and I – need these young people. He himself, who is usually around 50 years old, usually lives in a flat for which he probably pays no more than six euros per square metre because he has lived there for many years. His young colleague, however, has to pay at least 8.50 euros for a comparable flat. In addition, the older person`s kids are usually out of the house and their expenses are more manageable. The younger person still has to shoulder the costs of daycare, preschool and education. And then those questions subside – usually. After all, we all have to pull together in the company.

All of us together, you often hear that in Berlin too. Before the budget crisis, for example, an increase in the Citizen`s Income was decided that can no longer be reversed. Is the Citizen`s Income a disadvantage for Germany as a business location?

It exacerbates the shortage of skilled labour. Because there are no requirements for the Citizen`s Income other than being 18 years old. You can get it easily; without a degree, training or life experience – quite different from having to apply for an attractive job. You’re rewarded for staying in bed.

In other words: more and more people are lying down in our social hammock?

No, they are being put in there by us. Although I see less of a problem with single households when it comes to the Citizen`s Income. However, when people receive social benefits, they also pay a standard rate for children that is significantly higher than the state child benefit. And this entitlement increases with the age of the children. And so, as the number of children increases, many parents compare their income from all these transfer payments with what they have left net as a household, plus child benefit, if they go out to work.

So to sum up, you would say that the Citizen`s Income is…

… Agenda 2010 – but in reverse.

Thank you very much for the interview.