„Vitesco is still kind of a large start-up“
Mrs Nitzsche, you joined Vitesco Technologies at the beginning of October last year, and only a few days later, Schaeffler announced its intention to take over the company. I'm sure you had imagined things differently.
That's right. Of course, I hadn't expected something like that, a change of ownership. I was stunned at first. 4 October was my first official day in the office, and then five days later, this unexpected turn of events happened. I hadn't even started as CFO yet. I didn't officially take over from Werner Volz until 1 November.
Do you already know what the planned takeover means for your career path? The contract of Schaeffler's CFO, Claus Bauer, runs until the end of August 2025.
We are in talks about this. For the time being, I am concentrating entirely on providing good support for the merger and contributing to our corporate culture in the best possible way.
What do you think are the key advantages of this merger?
The joint company will be comparable in size to groups such as Bosch or ZF. We will then have a more significant financial base, even greater financial stability and market dominance. We will be able to supply more from a single source. And thanks to the diversification of the combined company, it will be easier to balance out market fluctuations.
BZ: And together the companies have greater purchasing power.
Definitely! That is one of the synergies that Schaeffler estimates at around 600 million euros.
However, every merger also has risks. What are they from your point of view?
Even if the opportunities clearly outweigh the risks, we must ensure that the integration into the Schaeffler Group does not overshadow everything. Our business continues to have priority: Ramping up the production of around 75 new products in the coming months and keeping our promise to customers to deliver large quantities. 2024 is, therefore, also a very important year – not only for Vitesco itself but also for electromobility as a business area in the new joint venture with Schaeffler.
You mentioned Vitesco's corporate culture, which you want to preserve. The differences are obvious: Schaeffler is a very tradition-conscious family business, while Vitesco has only been independent since 2019, following the spin-off from Continental. What do you want to pay particular attention to?
Vitesco is still kind of a large start-up, which appeals to me. After the spin-off from Continental, the company was able to break free. Vitesco is not very hierarchically organized, which I know from my time in the semiconductor industry. For me, this is a key prerequisite for making decisions quickly. The Executive Board naturally pulls the strings, but it also trusts the entire management and hands over some of the responsibility.
What do you expect from the merged company?
The philosophy of the two companies is somewhat different. Vitesco has a two-dimensional structure: The functional levels and the divisions, i.e., the business level. Schaeffler has a three-dimensional structure: In addition to the functions and divisions, the regions are the third dimension. This makes things more complex at first, but I am very confident that we can find a suitable solution and will be stronger than ever together.
What experience have you had with these structures so far?
In the USA, where I worked for many years, the two-dimensional structure is a matter of course. I have also had very good experiences with this so far because it clearly prioritizes business.
In Schaeffler's case, there is another perspective, if you like: The family plays an important role and also provides the Chairman of the Supervisory Board.
After all, Schaeffler is also a family business. We are currently discussing the future structures of a merged company in our joint integration committee.
Regarding Vitesco's business: According to the preliminary figures, last year's turnover of 9.23 billion euros was at the lower end of the target range. Does this reflect a slowdown in the global automotive market?
No. The forecasts for global vehicle production this year indicate a stable development. There are even signs of further growth for battery electric vehicles (BEVs).
And the decline in incoming orders by 2 billion to 12 billion euros: Is that an indication of lower demand?
As already mentioned, we will see around 75 production ramp-ups in 2024 alone. That's unprecedented and gives us every reason to be confident.
Is the price pressure from your customers increasing because demand is weakening?
We want to stick to the prices we have negotiated. Even if the pressure increases.
Vitesco's orders in the electrification segment fell from 10.4 billion to 8.3 billion euros last year. Why is that?
In view of the numerous new products that we are currently launching, we have deliberately held back somewhat on new acquisitions recently. Now we need to show our customers that we can deliver as well. Then the second and third orders will come. We also want to win more orders in China.
From Chinese car manufacturers?
Yes, especially from the manufacturers of battery electric vehicles. China is a clear focus for us. We want to become even more present there.
How do you intend to achieve this goal?
We already have a large team in China and several development centres. Now we want to hand over more tasks to our Chinese colleagues there. Simply because of the language, but also to be able to act faster in the market there. The new players among the producers are not just from the automotive industry, but many from the high-tech industry.
What does this mean for Vitesco?
High-tech companies have shorter product cycles and are faster to try out new ideas. That happens quickly. New models are springing up like mushrooms. In contrast, the traditional automotive business is all about perfection with the highest quality and safety. And the cycles are much longer.
Can Vitesco keep up with the faster pace of the new players?
We have to. We have to offer solutions that ensure this. We have the great advantage that we have changed our development in the direction of platforms. We no longer have to develop everything from scratch for every customer. The platforms allow for more speed – while maintaining the same high quality standards – and make our business scalable.
BZ: How much turnover does Vitesco generate with Chinese customers?
We generate around a third of our turnover in Asia. We do not provide figures for individual countries.
According to preliminary figures, the adjusted consolidated operating result for 2023 exceeded expectations at 314 million euros, as did the adjusted EBIT margin at 3.7%. This was despite sales being at the lower end of the target range. How did Vitesco manage this?
Quite clearly: the increases in costs and prices matched.
Your aim was to pass on around 80% of the higher costs to customers. Did that work out?
Yes, we succeeded. But there is another important reason for the good result.
Which one?
We have significantly reduced the non-core business areas. We are also continuing to work on reducing our costs. With the growing production volume, we are also becoming increasingly successful at this. Scalability is a very important lever for us.
In the electrification business, you are aiming to break even this year – in terms of adjusted EBIT: is this achievable despite the weaker market growth?
We are clearly sticking to this goal. That is one of our three focus areas for this year.
What are the other two?
Increasing profitability and, of course, successful integration into the Schaeffler Group. I think it is very important to set few but clear goals. I am not a fan of many individual targets.
The largest German automotive suppliers Bosch, ZF and Continental have announced thousands of job cuts. Will Vitesco also be cutting jobs?
No. Vitesco already announced in 2019 which non-core locations would be downsized or closed. Almost all of these steps have now been implemented. We have also created new jobs in our core business.
BZ: How will the number of your employees develop this year?
It will remain largely stable.
