14 September 2011

Out of the Maier

Lacklustre investment in plant will soon bring UK manufacturing growth to a standstill. Siemens' UK boss Juergen Maier tells Max Gosney why a dedicated bank for industry is vital to get things moving again

The Bank of UK Manufacturing plc. It's got a nice ring to it, says Juergen Maier, MD of Siemens UK. "If you had a bank with that sole focus then it would be much more supportive of the manufacturing agenda and would definitely lead to more financing."

There certainly wouldn't be any shortage of manufacturers – particularly SMEs – applying for new cheque books. Grassroots operators have blasted the onerous lending criteria of the old banking order, which they claim is blighting growth prospects. The banks' attitude is "crazy" says Maier, who heads Siemens' Industry division, which sells robots, drives and software to those feeling the frustration most. He says: "I can go out and borrow money to buy a house at a cheaper rate than a small engineering company can finance an engineering asset. Our banking system attaches a higher risk to manufacturing assets; we need friendly banks that understand."

Maier, an Austrian national born in Germany, points to Germany's KfW bank as a role model. The state-owned organisation offers cheap finance for business start ups and SMEs. "Ultimately we're going to need a stronger public sector bank, one that's focused on the SME sector to help them invest in R&D and capital equipment." Government plans for a Green Investment Bank show Whitehall has embraced the principle, says Maier. But plans to capitalise the bank with a sum equating to "peanuts" suggests they've yet to perfect the practice, he claims.

It's a similar story with the much hyped Project Merlin, adds the Siemens chief. "What Project Merlin will do is keep us going at the same rate we have been doing for several years," he says of the deal to increase bank lending to small businesses by £10 billion this year. "It won't be that step change to innovation that we need to keep up with the global productivity race."

For now, UK manufacturing remains in touch with productivity pace setters China and the USA, says Maier. However, he warns that unless we drive up frontline factory investment, pretty soon we'll be dropped. "It's the Achilles heel of British industry. In 2010, manufacturing in the UK grew 3.6% and our investment in plant dropped by 8%. You're growing output and sweating your assets... If we carry on like that, we'll fall further down the productivity league table." Once again, Germany provides a sobering reminder of how things should be done, says Maier. "In Germany, manufacturing grew just over 4% in the same period and investment in plant and machinery rose by 8%."

The 'make do and mend' spirit of the 1940s still exists in UK factories, according to the Siemens chief. He explains: "We have customers who are prepared to buy spare parts to keep existing assets running for another 15 years, and it is already outdated technology." Even the remonstrations of the Siemens sales team aren't enough to persuade some manufacturers to reconsider, he adds. "We tell them the part will soon be obsolete; this technology is 25 years old. They just want to buy enough parts to keep it going for the next 15 years." Maier – himself a production engineering graduate – remarks that UK engineers are like Duracell bunnies, determined to keep going, on and on: "The British engineer is proud: 'Look at me, I can keep this going for another 15 years and I put the original in'."

Until now, our thrift has failed to dent national productivity gains. But that's thanks largely to the closure of poorly performing plants, says Maier. "A decade ago, we caught up a lot because much of the less productive manufacturing was lost or shut down... That was reason number one, but secondly we were coming from a long way behind." And there is a final and more positive force that ensures we remain a global force, adds Maier. "The thing that we've done very well in this country is to really drive business excellence – lean manufacturing, Six Sigma, and so on. In the UK we've really embraced those."

In fact, Germany – to whose coat tails we're so often seen hanging – can learn much from us in this regard, says Maier. "I have worked in Germany and here, and I think we're ahead of the game here by quite a long way in terms of lean, Six Sigma and business excellence." Siemens' UK factories outperform the group's overseas manufacturing sites in the productivity stakes – indeed, Siemens Mobility in Poole holds the Factory of the Year crown in the much acclaimed Best Factory Awards programme.

Interestingly, he believes British success with continuous improvement can be explained by the fact we're naturally very bad at it. "It's actually inverse behaviour. We have to force it and by forcing it and giving it the right level of management attention we actually end up doing a damn good job of it." The British bulldog spirit trumps nations which, on paper, seem more suited to lean philosophy, he explains. "What happens in Germany and Japan is you have a lot of systematic process thinking naturally in the culture, so people don't need lean and business excellence as much."

But, while we can be proud of our CI acumen, says Maier, it's not enough on its own to secure the future of British industry. "Now we hit a point where the next level of productivity is only going to come through real innovation and investment in plant machinery and automation."

Growth will also rely on keeping international manufacturing giants on our shores. A plethora of SMEs feeds off a single OEM such as Siemens, so it's crucial the government makes the UK an attractive operations base, says Maier. More work must be done to develop R&D, available skills and collaborative partnerships with the public sector, he argues. "It tends to be a little bit easier, for example, to say let's extend that plant in Germany because we have links with the Fraunhofer Institute and there are already a lot of skills there."

The UK needs to work out its own star qualities and put everything into developing them, the Siemens chief says. "What is the UK's differentiator? I've asked this of the government," he says."When I go to my board in Germany can I say, look, for manufacturing drive components in electric cars, there's no better place than the UK because we have three universities we can collaborate with and five colleges turning out engineers that totally understand this market? No. Where is that [specialisation]?"

The strategic abyss is apparent in the awards made by the regional growth funds (RGF) says the Siemens chief. "If UK strategy was geared in that direction we would have said the RGF initiative should target a good proportion of its funding at manufacturing. But it hasn't been done lik e that, it's a very scattergun approach. The qualifying criterion is anybody who can create jobs."

Despite the gripes, Siemens retains strong anglophile principles stresses Maier. "The fact that we've got 5,000 people here in manufacturing shows that our board understands and believes we can manufacture well here." Siemens' UK division has had a "rather incredible year", according to Maier. The company has announced a new wind turbine manufacturing facility in the UK and secured key rail contracts for Eurostar and Thameslink. One key objective in the coming year will be to persuade more manufacturers to upgrade sites with Siemens technology, says Maier. "We want to really work with manufacturing companies to generate the business cases so they can invest in this technology and ultimately up the game of British manufacturing."

Business cases that would surely be top of the approvals pile at the Bank of UK Manufacturing plc. Whether the same applies at the UK's traditional high street banks will be a defining moment for the sector.

Brief biography

  • Born in 1964
  • Moved to England in 1974
  • Joined Siemens in 1986 after graduating from Nottingham Trent University with BSc (Hons) in production engineering
  • Held several manufacturing roles within Siemens – including heading up the Congleton factory – before being appointed UK chief in October 2008
  • Also serves on the board of sector skills council Semta.

Maier on…
…Closing down a factory

"It's only ever happened once. We've acquired a number of factories over the years and all bar one we've managed to invest in and turned from starved levels of investment to productive factories. This one – a lighting factory in Birmingham – was just so far behind we had to make the decision to close it. The machinery and technology we discovered there was better off in a museum." ... Telling a good factory from a bad one "I can judge in 10 minutes. By walking around the place you can get a good gut feel whether it's up there in terms of excellence or if it's an also ran."

... Emigrating from Germany in 1974 "Shocking. A part of my memory I'd like to blank out. Coming to Leeds was a nightmare for the whole family. I was a young guy, so I found it amusing. But sitting at home with no lights on, having to bake our own bread... we just wondered what the hell we had done.

... What the government must do to deliver a winning manufacturing sector "Firstly, we need more clarity on what the strategy is. The second is R&D: I think the technology innovation centres are a good first step, but it's a drop in the ocean compared to what we need to do. The amount of money going into these centres is 300 times less than goes into Germany's Fraunhofer Institute. The third point is skills. The rest we will do."

... Investment "If we don't resolve this, we won't achieve the same growth in manufacturing that we've been enjoying for the last 18 months. It will begin to dry up. What's been keeping us buoyant is global demand and our exchange rate. It hasn't been the fact our manufacturing is better than the rest of the world. We have to find the next levers and one of them is investment."

Max Gosney

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