The German playwright Bertolt Brecht was always very keen to strip away theatrical artifice so that his audiences remained alert to the deeper meaning of his plays. The avowed Marxist was celebrated for breaking down “the fourth wall” between actors and audiences to prevent the latter from being lured into the comforting arms of escapism.
Brecht is among the most famous sons of the German city of Augsburg. And if today’s residents were to follow his lead, they would do well to read between the lines of the latest pronouncements from Kuka, one of the Bavarian city’s biggest employers.
The industrial robotics firm has been owned by the Chinese home appliance maker Midea since 2017. As we wrote in WiC459, the €4.5 billion ($5.06 billion) acquisition was controversial because Kuka represented the very cream of German manufacturing.
Government officials only waived the deal through because of commitments made by the Chinese acquirer to keep to business as usual. This included maintaining existing German staff levels until 2023 and respecting the independence of its executive board.
Midea was reiterating the same commitments late last month after announcing plans to buy out the remaining 5.45% of Kuka shares it didn’t already own and delist the company from the Frankfurt Stock Exchange.
Midea CEO Andy Gu told media that “the A in Kuka will continue to stand for Augsburg”. The company reaffirmed that Kuka’s production site and its R&D centre would stay in the German city, with a minimum 15% increase in the R&D budget by 2025 compared to 2021.
During the first year of Midea’s ownership, Kuka reported revenues of €3.5 billion, then saw sales decline each year to €2.6 billion in 2020. This year things have improved, with the company forecasting €3.1 billion in sales by financial year-end, up 19.2% year-on-year.
Kuka board member Michael Leppek told the newspaper Handelsblatt that Kuka was giving up an ineffectual stock market listing in exchange for a joint development plan. The company’s limited freefloat also meant that it wasn’t included in major indices.
Bloomberg reported that Midea is considering a Shanghai STAR Market listing for Kuka instead. This would certainly open up new funding avenues. But what the optics also underline is a fundamental shift in the company’s centre of gravity. In 2018, the two firms announced the opening of a joint Rmb10 billion ($1.58 billion) smart manufacturing industrial park in Foshan, where Midea is headquartered.
German social media commentators weren’t impressed by Midea’s avowed support for Augsburg. “You can’t trust any of these statements,” said one. “We let them fool us. The strategic danger for Germany isn’t Russia, but China.”
Another added: “We’ve been told the Augsburg production site will be retained, just like we were told there wouldn’t be compulsory Covid-19 vaccines. Does anyone still believe any official statements in Germany?”
Midea’s plans for Kuka dovetail nicely with Beijing’s Made in China 2025 strategy to move from being the world’s biggest buyer of robots to its biggest manufacturer of them.
The most recent data shows a huge increase in ‘robot density’. Back in 2014, the figure stood at 36 per 10,000 employers. In 2019, it was 187, according to the latest data from the International Federation of Robotics. This puts China in 15th place globally, behind leaders such as Singapore in first place on 918, followed by South Korea on 816, Japan 364 and Germany 346.
A unified shareholder structure may hasten the achievement of this national goal. Kuka CEO Peter Mohnen told Handelsblatt that closer collaboration between the two would facilitate the creation of a strong platform and “holistic portfolio”.
Other Chinese companies such as Geely, which owns Volvo Cars, have integrated effectively. The Swedish brand has retained its identity within the wider Geely family while working in close collaboration with other brands.
It remains to be seen whether Midea can maintain Kuka’s German identity within its own Chinese one.
Brecht himself was a keen advocate for change. As he once concluded: “Because things are the way they are, things will not stay the way they are”.
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