"...without us you couldn't produce any cars..."
There's always a certain amount of tension in a CUSTOMER-SUPPLIER RELATIONSHIP, says Arndt Kirchhoff, spokesman for suppliers in the VDA. So he went out and visited the buyers. A bit of a show of strength for the manufacturers?
Automobil Produktion: Mr Kirchhoff, which of your many positions is your favourite?
That varies. It always depends on the particular tasks in hand. Of course, the most important job is the one in the VDA. That's my "home territory", as it were. But my position as President of the IW (Institute for Economic Research) is very exciting too. You learn a lot there, and it's fun, too.
Automobil Produktion: Which responsibilities in the VDA have you inherited from Jürgen Geißinger? And what do you intend to do differently?
Of course, I've inherited some of the challenges from him. But those are not unfamiliar to me, since I am practically the longest-serving member of this "club". My job is to try to establish a performance-focused relationship with our customers. That's what is special about the VDA, the fact that suppliers and manufacturers are in the same organisation. And, of course, there are points of friction as a consequence. There's always a certain amount of tension in a customer-supplier relationship.
But the question is, on what level. Conflicts can be handled on an intelligent level, so that in the end the solution
serves the common cause. That is my main task.
Arndt G. Kirchhoff was born in Essen in 1955 and is married with three daughters. He studied Industrial and Mechanical Engineering at TU Darmstadt. He has been a Managing Partner of the Kirchhoff Group since 1990 and is CEO of Kirchhoff Holding in Iserlohn. Extract from the list of positions he holds:
VDA Vice-President and Chairman of Manufacturer Group III (Suppliers); President of NRW Employers' Organisation for the Metal and Electronics Industry; Vice-President of the Employers' Organisation BDA; Chairman of the BDI/BDA Medium-sized Companies Board; President of the Institute for Economic Research (IW); Member of the joint German-Chinese Business Board.
Of course, we talk about how to deal fairly with each other."
Automobil Produktion: You have been Vice-President of the VDA for a good year now. Have you been able to achieve any successes yet?
It's not just one success. There are lots of successes. For example, that the importance of the German car industry in the world has risen even further. When you look at market share, when you look at the successes in sales – that's always thanks to German car manufacturers working with their suppliers. We build very good products, and now more of them are made abroad than at home. German suppliers have expanded abroad with their customers. Alone, we couldn't have achieved that. Essentially, we are reproducing the wealth creation chain here in the other regions
of the world. And since we know each other from our home country, it works particularly well.
Automobil Produktion: Well, some people say one thing, some say another. I'm sure not all suppliers find things like "Open Books" such a great thing…
"Open Books" is just a buzzword. We don't have "open books" but what we call "cost books", to give an overview of the
pricing situation. It's the job of the buyers to look and see if they are buying at market prices. But they don't get complete estimates, rather just the information they need to confirm the technical details, which, incidentally, we as suppliers are interested in too. We ask our customers to make sure that the competition is not operating unfairly. Otherwise we lose orders, wonder why, go to the customer and say, that can't be true, take care with what you're buying. But in actual fact we haven't got the order in the first place. And our primary aim is to get orders, secure jobs and so generate growth.
Automobil Produktion: Do you have a particular objective as spokesman for suppliers at the VDA?
Of course. We have an objective and we have defined it. About two years ago, Messrs Fehrenbach, Hagenmeyer, Kortüm and Härter – when they resigned from their posts in the VDA – took the opportunity to write an open letter. It was addressed to all manufacturers including the Americans and indicated things that needed improving. If you want to be negative about it, you could see it as an indictment. But in fact it was more of a heads-up. The technical changes in vehicles – with the emphasis on Smart Mobility – mean that manufacturers and suppliers have to work more closely together; otherwise manufacturers won't get the full benefit of a supplier's capability, because ultimately it's that capability which determines innovation and product quality. So it was more of a wake-up call. We took advantage of that and are now having one-to-one talks with our customers, the buying managers – you can only do it bilaterally – brand by brand, including manufacturers of commercial vehicles. We talk about what could be done better and, of course, also about how to deal fairly with one another.
Automobil Produktion: And your aim?
The aim is to come to a better understanding between suppliers and manufacturers. After all, we are an integral part,
responsible for 75% of the added value in a vehicle. That means that we are sufficiently sure of ourselves to say "Without us, you can't even make any cars." And then we sit down and go through everything point by point. What we supply has to be exactly right, so we want to know how much we have to deliver, when. Communication between us has to be perfect and there has to be a strong basis of trust. And that's what we're working on.
Automobil Produktion: How many buying managers have you already talked to?
All of them.
Automobil Produktion: And your conclusion from these talks?
They actually welcome it. They want to do better too. If we can set out properly where we can improve, then in the end things get better and better and overall they are more efficient in both respects – more time-efficient and cost-efficient.
Automobil Produktion: About your own strategy – you are keen on these three things: regional balance, diversification of the customer and product portfolio and further development of core technologies. How are you adapting your production sites in order to survive any imminent crises?
The world today is volatile. A year ago, there was no Russia-Ukraine conflict. Anyone who has too much business in Russia now has got a big problem. Because of the volatility in the world and in the markets, you have to work on the basis of a broad business model. At Kirchhoff, for example, that means that we invest in China – because China is a managed state – only to the extent that the rest of the group will survive whatever happens. That is our risk limitation strategy.
Automobil Produktion: So you don't have one-third of your business in Europe, one-third in the USA and one-third in China?
No. Deliberately not. We're not chasing the Chinese market like most people are – we're keeping a limit on it. China only gets enough capital that the rest of the group is not put at risk. We only make about 5-6% of Kirchhoff Automotive's total sales in China.
Automobil Produktion: So how do you keep up in China?
There are other reasons too. We only do things in China that the Chinese can't do themselves. Who can guarantee that, in the next five-year plan, China won't say "Now we're going to do everything differently"? They are fast enough to say whether I can license a car in the city or not. It happens overnight there.
Automobil Produktion: So what does that mean for your plans…?
We invest in free markets – we are relatively strong in Europe and America – with 45% of our turnover in each – and the other 10% is distributed around the world.
Interview by Bettina Mayer ■