Article

Dangerous lull at Enercon

In public, CEO Hans-Dieter Kettwig likes to put the blame for the misery on politics. In fact, in 2017 the federal government slimmed down the lavish remuneration for green electricity and switched the funding to an auction model, which initially had problems with its implementation. In addition, a lack of permits and lawsuits prevent the construction of new wind farms on land. Last year, only 282 new turbines were put into operation in Germany - 91 of them from Enercon, which can be recognized from afar by their egg-shaped nacelles designed by Sir Norman Foster. In the record year 2017, the Aurich company alone had installed 711 new systems. A historic break-in. But the crash of the domestic wind market is only partly the cause of Enercon's imbalance. In truth, the roots of the crisis also lie in a sect-like corporate culture.

The figurehead of the German green electricity industry is in a serious crisis. The management of the Aurich wind turbine manufacturer Enercon says: Politicians are to blame. But if you take a closer look, you quickly notice: The misery is also their own account

In the East Frisian district town of Aurich, the factory premises of the wind turbine manufacturer Enercon and its previous suppliers make up almost a separate district. After many years of boom, the company has been struggling with massive problems for monthsTomas Engel

On the last day before the planned end, the huge factory site in the north of Aurich already looks as if someone has turned the switch. In front of the KTA company, a supplier for the wind turbine manufacturer Enercon, the rotor blades are piled up like gigantic Mikado bars at the end of February. The factory's windows are dark, nobody can be seen. Only if you stand a little too long in front of the fence does a man drive up in a white car: the Enercon security service.

No one outside of the East Frisian company knows what is going to happen in the building in which more than 1000 employees built rotor blades for Enercon's wind turbines in good times. Not even... more [truncated due to possible copyright]  

The figurehead of the German green electricity industry is in a serious crisis. The management of the Aurich wind turbine manufacturer Enercon says: Politicians are to blame. But if you take a closer look, you quickly notice: The misery is also their own account

In the East Frisian district town of Aurich, the factory premises of the wind turbine manufacturer Enercon and its previous suppliers make up almost a separate district. After many years of boom, the company has been struggling with massive problems for monthsTomas Engel

On the last day before the planned end, the huge factory site in the north of Aurich already looks as if someone has turned the switch. In front of the KTA company, a supplier for the wind turbine manufacturer Enercon, the rotor blades are piled up like gigantic Mikado bars at the end of February. The factory's windows are dark, nobody can be seen. Only if you stand a little too long in front of the fence does a man drive up in a white car: the Enercon security service.

No one outside of the East Frisian company knows what is going to happen in the building in which more than 1000 employees built rotor blades for Enercon's wind turbines in good times. Not even the employees of the EEZ energy information center in the city of Aurich right next to the factory site. “Enercon doesn't tell us anything,” they say there. They feel no different from the Enercon employees themselves: "Even they only know what is in the newspaper."

At least the old reflexes still work at Enercon, one of the most closed large companies in the republic. The company is still ticking like its founder Aloys Wobben, a brilliant engineer and tinkerer, but an autocratic head of the company. But otherwise there was not much left for the company, which over the years has pepped up the energy transition into a colossus with 5.6 billion euros in annual sales, as it was in the good times. The fact that wind energy is in a serious crisis in Germany hits no company harder than the country's most important wind turbine manufacturer - and with it an entire region.

Since 2017, the last boom year, Enercon's turnover has plummeted by well over 1 billion euros. For the first time in its history, the icon of the German green electricity industry made losses, in 2019 a "high three-digit million amount" according to its own statements. Last autumn, Enercon even threatened to run out of liquidity. There will also be a loss in 2020. Most recently, the Enercon management announced at the beginning of June that they would tighten their plans for a far-reaching restructuring of the group - including the sale of parts of the company.

In public, CEO Hans-Dieter Kettwig likes to put the blame for the misery on politics. In fact, in 2017 the federal government slimmed down the lavish remuneration for green electricity and switched the funding to an auction model, which initially had problems with its implementation. In addition, a lack of permits and lawsuits prevent the construction of new wind farms on land. Last year, only 282 new turbines were put into operation in Germany - 91 of them from Enercon, which can be recognized from afar by their egg-shaped nacelles designed by Sir Norman Foster. In the record year 2017, the Aurich company alone had installed 711 new systems. A historic break-in.

But the crash of the domestic wind market is only partly the cause of Enercon's imbalance. In truth, the roots of the crisis also lie in a sect-like corporate culture: an authoritarian leadership that wants to decide everything for itself, an impenetrable, difficult-to-manage corporate network, clique economy, a lack of external control and dealing with employees that no employer can actually afford can. In an internal memo, which Capital has, Kettwig admitted last autumn: The crisis was "partly homemade".

The consequences of this management failure, which dates back to the early days under Wobben, are now pulling Enercon down even more in the doldrums: an unhealthy dependence on the home market, false products, far too high costs, a disturbed communication with politics. In addition, there are massive quality defects in some plants. The gearless and therefore low-maintenance turbines developed by Wobben enjoyed the reputation as "Mercedes under the wind turbines" worldwide for many years – which is why many customers were also willing to pay the higher prices. In order to survive as an independent manufacturer in the long term, the Group now needs to change not only its structures, but also its culture.

"The fair has been read"

Early November 2019, State Chancellery Hannover. For several days now, it has been known how the Enercon leadership wants to prevent the worst: up to 3,000 of the approximately 18,000 jobs across the Group are to be cut, and several exclusive suppliers such as the Aurich company KTA are to be completely closed. The production of the rotor blades, which Enercon, like almost all large components, has so far produced practically on its own, is to be relocated abroad, where labour costs are much cheaper and the East Frisians want to open up new markets for their plants. A shock for Lower Saxony.

Now Kettwig has to report to Prime Minister Stephan Weil – one of the appointments that the ceo does not like at all. Enercon has never been talked into, certainly not by politicians. After the crisis talks, Kettwig stands next to Prime Minister Weil with a sinister face and complains about politics: "We have been pulled the plug." Any attempts to exert influence would be too late, and nothing could be changed in the job cuts. Then comes a sentence, cold as ice: "The mass is read."

After all, Kettwig, who has served as a multi-executive director in Wobben's empire since 1991, has appeared at all – not a matter of course at Enercon. As recently as the summer of 2018, when a first round of redundancies was underway at the company's direct suppliers, the company's management refused to hold any talks with top politicians. Even the Federal Minister of Economics, Peter Altmaier, let Kettwig sit at the time – a remarkable strategy in an industry that hangs like hardly any other on the drip of politics and state subsidies. The company will harm itself if it behaves like this, says Lower Saxony's Energy Minister Olaf Lies.

When the outrage eated, Kettwig explained on the intranet that one did not want to give the impression that there was room for negotiation "where in reality there is no one." In addition, the group claimed that the suppliers concerned were independent companies – although many of them worked exclusively for Enercon and belonged to owners who, through complicated company constructions, use tax havens and foundations to lead them into the vicinity of Group Founder Wobben. In the case of the rotor blade manufacturer Aero Ems in Haren, Germany, for example, the Enercon peak was only ready for talks on job cuts when Mayor Markus Honnigfort threatened to make public who signed the contracts for the factory site: Wobben and Kettwig. "That's not how you deal with employees," says Honnigfort.

Even under Wobben, Enercon's political demeanor was "a disaster," says a longtime companion of the founder. Wobben, a cocky engineer from Emsland, had already begun experimenting with wind turbines in the 1970s. In 1984, he founded the company, obsessed with the idea of providing the world with clean electricity. In Aurich, Wobben was often seen on a bicycle or in an old Audi, which he had converted to battery operation at an early age. Even as a multiple billionaire, the Enercon founder lived in a yellow clinker building on the outskirts of the city, on whose letterbox "Fam. Wobben" stands. Wobben always shunned the big politics because he thought she was "evil," says the companion. He preferred to talk about the technical details of his wind turbines or his own climate model and gave lectures that hardly anyone could follow.

Under Wobben's leadership, the company rose from the Lower Saxon province to a global company. In 2012, a deep cut followed: the founder withdrew from the leadership due to his progressive dementia. Internally, however, it had been apparent long beforethat that the boss was no longer up to the top, insiders say. Nevertheless, the patriarch's word continued to be considered a law for all.

It is one of the peculiarities of Enercon, how the conditions at the top of the company were already rearranged in the time of Wobben's illness. Two women from Wobben's closest circle took over the control: his secretary Nicole Fritsch-Nehring and a department head who enjoyed his trust as a physicist. "Nobody got past the two of them," says one of Enercon's major customers, who has known the power relations in Aurich for a long time.

In 2012, Fritsch-Nehring moved directly from the anteroom of the head office to the management next to Kettwig. At the same time, she took on another board position: in the Aloys Wobben Foundation, into which the founder brought in a large part of his group at the end of 2012 in order to secure his life's work and prevent it from being destroyed in the event of inheritance. The same people sat on the board of the powerful private foundation as at the top of the group: Kettwig, Fritsch-Nehring, and later Wobben's nephew Simon, who moved to the top of Enercon soon after his studies. So the leadership clique supervised itself for years. Therefore, no one was bothered by the fact that Kettwig and other top managers also had numerous private company holdings – among others at wind farms in the region, which in turn usually bought their plants from Enercon.

As Enercon grew into a global group, the nested group of companies with its dozens of subsidiaries and holdings was still managed as it did in the early days. Similar to Wobben, who constantly feared for the independence of his company, Kettwig also shows an unimaginable delusion of control. For years, he signed virtually every supply contract for wind turbines himself – only reading the contracts he left to his employees. Even events with ridiculous sums wandered over his desk until the very end. Employees from sales and foreign subsidiaries complain that they can hardly decide anything without approval from Aurich. Even when there was a power struggle between Kettwig and Fritsch-Nehring in 2016, the problem was solved in a way typical of Enercon: Fritsch-Nehring went on holiday – and did not return.

Fantastic profits and luxury projects

Despite this corporate culture, Enercon had gigantic success as long as the German market was buzzing. For years, the wind turbine manufacturer made fantastic profits, after taxes it was 400 million euros or even more. In Aurich, it is now clear how large and rich the company has become – not only in the Aurich-Nord business park, which was once created with the help of EU funding and has long since become almost an Enercon district of its own. As recently as 25 years ago, there was little more than flat land in the area.

In the times when Enercon was doing well, Aurich naturally benefited enormously, says Horst Feddermann, the mayor of the district town with 40,000 inhabitants. Taxes, jobs, suppliers. In the best year of 2013 alone, 166 million euros in business tax were collected, says Feddermann – with a total budget volume of around 90 million euros. "That was the hammer, of course." Of course, Feddermann does not say how much of this went to Enercon's account. Tax secrecy. But what is clear is that it was by far the largest part.

Aurich's new mayor Horst Feddermann feels the massive consequences of the Enercon crisis in his budget. Many prestige projects from the fat years are now taking revenge (Photo: Tomas Engel)
To show where the money landed, Feddermann scrolls through a brochure from the Tourist Office. Aurich has "been able to afford some things" in recent years, says the non-partisan mayor, who came into office in autumn 2019: completely free daycare centres for many years, new buildings and equipment for the fire brigade for almost 20 million euros, a "feel-good bath" for almost 20 million euros, the energy information centre EEZ next to the rotor plant for almost 30 million euros, a new family center, a new family center , a new townworks for which the municipality merged with Enercon. "Of course, we indulged in a lot that a city wouldn't allow under normal conditions," Feddermann says. Many neighbors looked to Aurich with envy for a long time.

But the crisis at Enercon has long since reached the city's budget. As early as 2017, revenues were lubricated to 43 million, and in 2018 they were even slightly negative. Some of the luxury projects now turn out to be a burden, such as the EEZ and the bathroom. Not only the management of Enercon, but also the city seems to have relied on the fact that the company is always only going up. "You should have been a little more abstinent," Feddermann says. "But you weren't." The new mayor was in office for just four days when Enercon CEO Kettwig called him, with the news that he wanted to sack more than 1,000 people in Aurich.

But open criticism of the company's top management is hardly heard in Aurich. The rough dealings with employees and trade unions, for which founder Wobben was already notorious, as well as dubious corporate constructions over tax havens were also accepted – as long as Enercon only created many jobs in the structurally weak region. "Many people saw Enercon primarily as a source of money," says Thomas Gelder, who is responsible for Enercon at IG Metall Leer-Papenburg. "Politics has closed both eyes, regardless of party." As a result, works councils are tolerated at Enercon primarily if they represent the interests of the Group management. IG Metall, on the other hand, is still regarded as a mortal enemy – not only at the top, but also in large parts of the workforce.

Even among the workers who have lost their jobs in recent months, not a single one has yet contacted the union. Johann Saathoff, a member of the SPD Bundestag, whose constituency includes Aurich, even came forward to complain: about Saathoff wanting to involve IG Metall in the negotiations on the social plans – because this would supposedly worsen the conditions. In the end, the local works councils negotiated the social plans without the union – in a hurry.

In such a climate of fear, the group management could rule without counterweight. This, too, is a cause of the management errors and strategic mistakes made in the boom years, the effects of which are now exacerbating the misery. One of them: the clear expansion into important international markets.

April 2015, Hannover-Messe, Hall 27. The industrial fair is one of the very few dates at which Enercon reveals at least a bit of itself. Traditionally, Group CEO Kettwig holds an update on the company and its new products. It is said that the local newspaper from Aurich always sends an intern to Hanover, so that he can photograph every slide from Kettwig's presentation.

It was possible to read, says Kettwig right at the beginning, that Enercon was closed and "could not do so well with its employees". Of course, he doesn't want to let that stand. So he thanks the "great colleagues", the "lovely banks", the "lovely investors" in the jovial East Frisian tone. Kettwig also has a message for the "appreciated customers": "Don't be angry with us, Enercon is a bit more expensive."

Then we go through the lecture: installed megawatts, employees, technology, equity, foreign markets. "We choose markets where we like to go," says Kettwig. "Where we don't like to go, we leave them a little bit out." Kettwig's next slide: Enercon installations in 2000. "India, our favourite country, was there at the time," he says. A slide further, "Installations today", India is crossed out. Now they want to resume dialogue with an Indian partner, he says, so that Enercon "feels comfortable" there again.

Not only from India, but also from another boom market today, the East Frisians fled early because Wobben burned their fingers there: the USA. In India, there was a rift with the joint venture partner, which continues to this day. In the US, the company was dragged to court by a rival who allegedly spied on Enercon with the help of the NSA. Wobben wanted nothing more to do with the US.

But even after the patriarch's resignation from the corporate leadership, his managers avoided important foreign markets. Today, Enercon is active outside the EU in countries such as Turkey, Brazil and Canada – but not in the US and Asia, where wind energy is particularly booming. As recently as 2016, Kettwig halted contracts ready for re-entry into the United States. The company also left the business with wind farm turbines at sea, which Wobben was not afraid of due to the higher technical risks – although many experts see the future of wind energy not only in Germany offshore, because the turbines far out of the coast trigger fewer conflicts than on land.

Enercon now hurriedly wants to make up for the missed internationalization. Eight to ten countries have been identified by the Group's management – including the US, India and South America. But all these markets are not just home to larger, high-capital competitors such as Vestas, GE and Siemens. Enercon's plants have also recently failed to meet the needs of many customers – especially on the world market, where the melting down of state-sponsored regimes has led to extremely tough price competition: too expensive, too heavy, and not far ahead in technology. The company's top management admitted in a letter of fire to employees at the end of 2019 that they had reacted too slowly to new market trends. Therefore, 'Enercon cannot supply its customers in relevant markets with competitive products at the required cost'. Even in their bastion of Germany, the East Frisians lost their place as market leader in Vestas last year – for the first time since statistics were compiled.

Another problem is the quality defects that scratch Enercon's image as a technology leader. For example, dozens of E-141 systems that have already been delivered have cracks on the concrete towers that had to be repaired at Enercon's cost. In the meantime, this model, which was also significantly more expensive than comparable plants from other manufacturers, is no longer produced. A "misguided development" requires "cost-intensive refurbishment of built facilities," according to internal documents available to Capital. In Aurich, there is talk of costs in the tens of millions. Enercon declined to comment when asked.

New structure, old problems

The Group now wants to find its way out of the crisis with a tough austerity course. The new plants will be "uncompromisingly" geared to the lowest electricity production costs. In order to do this, its own costs have to be reduced by 20 to 30 percent – among other things, by the manufacturer no longer manufacturing almost all components itself, but buying more cheaply abroad. In order to get the savings program through, Enercon brought consultants into the company for the first time last year. In addition, two experienced managers from competitors Siemens Gamesa and Nordex expanded their management and are now responsible for the Finance and Technology Development departments – also in order to reassure the nervous banks. Permanent boss Kettwig, who has already been rumoured to be a coup in the autumn, has been seen by many in the industry as disempowered ever since.

In addition, the new management team is working on a radical corporate restructuring aimed at making Enercon more internationally competitive. For example, the company, which has also been one of the largest wind farm operators in Germany for many years, plans to introduce its own wind farms into a new joint venture with the Oldenburg utility EWE. The proceeds from the deal will be used to finance, among other things, the capital-intensive expansion abroad. The goal of the conversion: Enercon will concentrate completely on turbine construction in the future.

For the turnaround, the Group management has given itself time until 2022. Only then, she estimates, will the market in Germany recover. At the beginning of June, Enercon reported a defusing of the financial situation, which was already very tight before Corona: a new financing of EUR 1.1 billion had been secured by a banking consortium – half of it as an extension of existing loans.

In addition, the Group relies on the financial strength of an actor that is even more closed than itself: the Aloys Wobben Foundation. Since its foundation in 2012, the owner of the company, which is the foundation's purpose of securing, among other things, securing founder Wobben and his family, has collected almost 800 million euros in distributions, according to Enercon's annual reports. Otherwise, she largely stayed out of the company. But in the most serious crisis in the company's history, the foundation has intervened. There is talk in the industry of a capital increase. Enercon did not respond to a request for comment.

Aloys Wobben's wife Thekla, who has chaired the advisory board of the multi-billion-dollar foundation largely unnoticed by the public since 2017, has also become active. At Enercon, she has so far pulled the strings in the background on important personnel issues – for example, last summer, when her nephew Simon unexpectedly left the company. After the outrage over the planned job cuts soared in the autumn, Thekla Wobben travelled to Hanover for a discreet conversation with the Lower Saxony Prime Minister Weil. Their message: Enercon wants to change – also in relation to trade unions and politics.

It's been a few months now. But not much has really happened since then. A joint task force with the state government on the future of jobs in the wind industry ran into the sand. Even the promise to reach a "fair deal" with the trade unions has not changed much in the companies, says Lower Saxony's Energy Minister Lies. Political signals such as the visit of Wobben's wife to the State Chancellery are at best "individual events", but not a new line of the company. So far, the pledges have not been filled with life, Lies says. "If there is nothing to announce, they will continue to muddle forward."


Source: https://www.capital.de/wirt...

JUN 9 2020
https://www.windaction.org/posts/52247-dangerous-lull-at-enercon
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