OREANDA-NEWS. January 23, 2013. The cooling global economy has slowed the pace of growth of the Bosch Group. According to preliminary figures, the sales of the global supplier of technology and services grew 1.6 percent in 2012, to 52.3 billion euros. Subdued sales developments, as well as a likely one billion euros of impairments and losses in the difficult photovoltaics business, had a significant effect on the earnings situation. Earnings before interest and taxes (EBIT) stand at roughly 2 percent of sales, according to preliminary figures. “Despite slightly increased sales and positive free cash flow, we cannot be satisfied with developments in the business year 2012,” said Dr. Volkmar Denner, the chairman of the Bosch board of management. In 2013, therefore, priority is to be given to improving earnings strength, but without neglecting investments in future areas of business.

Business activity clouds over in nearly all divisions
The global economic slowdown affected all business sectors of the Bosch Group. In the Automotive Technology business sector, most divisions developed positively. Business with gasoline direct injection systems was especially successful, increasing by 50 percent. In contrast, the Diesel Systems division posted a significant decline in sales. It was especially badly affected by the weak European market and weak commercial-vehicles business in China. The Industrial Technology business sector felt the negative effects of the downturn in mechanical engineering and of a further 40 percent drop in prices in photovoltaics. By contrast, developments were more encouraging in the packaging machinery business for the pharmaceuticals and food industries, which is less cyclical. In the Consumer Goods and Building Technology business sector, the difficult economic situation in southern Europe placed an especially heavy burden on the Thermotechnology and Household Appliances divisions.

Different developments in the world’s regions
When viewed by region, the preliminary figures highlight the difficult developments in Europe. Sales there fell 2 percent short of their previous-year level. The business in North America developed encouragingly, growing by 17 percent. In South America, by contrast, sales were down 16 percent year on year. Asia Pacific disclosed modest growth of 5 percent.

Headcount increase pegged to sales developments
In 2012, the further growth of headcount was curbed, and pegged to sales developments. As of January 1, 2013, Bosch Group headcount worldwide rose by just over 1 percent to 306,000 associates. The workforce employed in Germany remained practically unchanged at some 119,000.

Modest growth expectations for 2013
According to its current estimates, Bosch expects global GDP to grow 2.8 percent in 2013. However, it also sees considerable risks, in particular the European sovereign debt crisis, which are not factored into this forecast. On the basis of these expectations, the Bosch Group anticipates that its year-on-year sales growth will be slightly better, but not strong, in 2013.

Extensive measures to improve earnings strength
As a short-term measure for improving earnings strength, Bosch has taken extensive measures to reduce fixed costs and to allow it to adapt more nimbly to fluctuations in the business climate. Firm maximum limits have been introduced on things such as capital expenditure, acquisitions, and investments. And as weak economic growth at best is expected in the company’s European core market in the years ahead, its structures in Europe will be reviewed. Moreover, Bosch wants to be able to react as flexibly as possible if demand falls just temporarily. For this reason, an agreement on overcoming cyclical crises was reached with the combined works council in December 2012. It forms the basis for flexibly and gradually absorbing drops in sales of up to 20 percent without having to resort to statutory schemes for shorter working hours. On the subject of a strategic realignment of the photovoltaics business, all conceivable solutions are currently being weighed in order to arrive at a reasonable solution.

Strategic approach reaffirmed
With respect to the global megatrends, Bosch believes its position is fundamentally sound, covering issues such as energy efficiency, environmental protection, resource conservation, and safety and comfort. Last year, many new products, services, and business models were launched, such as the Drivelog portal for drivers, condition monitoring for machinery, and web-based security solutions. And in 2012, Bosch was successful with a variety of products: from the voice-controlled navigation system to the e-bike, the first cordless screwdriver with an integrated bit cylinder, and gasoline direct injection. With research and development expenditure exceeding 8 percent of sales, Bosch has been among the world’s top R&D companies for some years now. Technology and products that protect the environment and conserve resources account for more than 45 percent of research and development expenditure and more than 40 percent of sales. “There is no doubt that Bosch is right to be active in the efficient conversion of fossil fuels in the mobility, buildings, and industrial segments. This is especially true with respect to the global problems with CO2 and the forecasts for global warming,” Denner said. At the same time, Bosch is further expanding its presence in Asia. Last year, for example, the company entered the Chinese e-scooter market, setting up a joint venture with a local supplier. Bosch particularly focuses on products that are tailored to their respective markets. To this end, the company will carry out more of its engineering work in China, India and Vietnam.

Networking and connectivity for more innovative strength and fascinating solutions
In an increasingly dynamic business environment, Bosch will in the future pay even closer attention to market trends in order to recognize new developments early and to be able to react quickly. “Only if we know our customers’ requirements even better will we be able to come up with innovative and fascinating solutions,” Denner said. Bosch is also changing its organizational structure to meet this need. At the beginning of January 2013, it created its fourth business sector, Energy and Building Technology. This sector includes the activities of the Security Systems, Thermotechnology, and Solar Energy divisions, as well as the subsidiary Bosch Energy and Building Solutions, which was set up in 2011. Closer cross-domain collaboration and networking will give rise to additional business potential. This is also the objective of User Experience, a newly established corporate department. Made up of a team of engineers, computer scientists, psychologists, user interface designers, prototype specialists, and industrial designers, it helps the divisions make their product design more user-centered.

Leadership and collaboration for more agility
To enhance agility and resolve, the practice of leadership and collaboration is to be revised. To this end, Bosch wants to involve its associates more, ask for their opinions, and get them to participate in change initiatives. It is Bosch’s aim to offer its associates attractive working conditions and career development opportunities, so that they can contribute their abilities and aptitudes to improving the company’s innovative strength and competitiveness. The leadership, specialist, and project career paths offer many possibilities for moving into new positions and for personal development. In the future, it is planned that more virtual project teams will deal with tasks, acting with a high level of initiative and creative freedom. With this in mind, Bosch is extending its internal social media activities using the existing intranet, under the heading Enterprise 2.0. Some 5,000 associates already use social media tools to participate in 26 pilot change-initiative projects.