Robert Bosch once came across a stray paperclip while wandering round one of his factories. He asked a nearby worker if he knew what it was. ‘A paperclip,’ the worker nervously suggested. ‘No 3 this is my money!’ the entrepreneur said. 

The oft-told tale, possibly apocryphal, says a lot about Germany’s largest privately owned engineering group. Frugality and financial discipline have underpinned Bosch’s growth as an independent company since it was founded in 1886. Combined with a distinctive company culture and a reputation for innovation, they have since helped it expand to become the world’s largest car supplier. 

Franz Fehrenbach, chief executive and only the fifth company head since Robert Bosch, has this year put the company on a mission to single out every superfluous paperclip. ‘We have to cut costs in all areas,’ he says, sitting in the executive dining room at Bosch’s headquarters in the hilly outskirts of Stuttgart. But he makes one exception: ‘We will reduce spending in the ongoing business, but we will not cut back on research and development for important future projects.’ 

A sharp drop in revenues has prompted Mr Fehrenbach to slash output in recent months, making 17,000 German employees temporarily redundant and cutting jobs permanently at plants around the world. The news elsewhere in the sector is bleak: a succession of medium-sized suppliers has filed for bankruptcy in recent months. 

In spite of appearances to the contrary, though, Bosch is in a markedly better position than many German manufacturers. Mr Fehrenbach has held fast to the company’s long-term strategy amid the crisis: ‘Our triple-pronged strategy comprises further diversification, investment in research and development and a targeted internationalisation.’ 

While other companies are taking drastic action in response to the crisis, Bosch’s culture and solid financing position give it vital breathing space. The company thinks long term and has conservative, sometimes even reclusive, instincts. Employees take pride in its cutting-edge technology and the company’s habit of reinvesting almost all of its profits in the business instead of funnelling them to anonymous investors. 

QUESTIONS

1. Why is Bosch in a relatively good position compared with similar German companies?

2. How did they deal with the economic crisis of 2008/9?

3. Carry out your own research and investigate how Bosch has performed since the crisis.