There are many great, old European manufacturing companies and one of them is ZF. Now one-hundred-years-old they’re a company that sports car enthusiasts will know as a manufacturer of automotive transmissions. They are also involved in automotive safety systems, suspension components and parts for heavy trucks, commercial vehicles, cars and industrial applications, like wind turbines.
ZF has been on an acquisitions spree lately. They are currently finalizing a deal to absorb an automotive unit of Bosch, and most recently they've concluded a deal to buy TRW, a great, old, American firm in the automotive OEM supply chain.
I feel a little heartbroken that TRW has disappeared as a brand. TRW will be completely absorbed by ZF; TRW shares have been delisted in the New York stock exchange. TRW as an entity is gone.
In joining ZF however, TRW is becoming part of one of the three top automotive suppliers globally in the entire industry, with 213 locations across 40 countries.
Like TRW did, ZF invests five percent of their sales in research and development. I think that's one key reason why ZF is the powerhouse that it is. If all firms took a stand to allocate a significant percentage, like five percent of sales (not profit) into R&D, they could stay ahead of the emerging competition and become a global player like ZF.
Another thing to consider is ZF is one of many German companies doing very well in industrial manufacturing globally. What I’m wondering is ‘why’?
What is it about Germany? Is it something about their culture? Is it something about their economic policies? Is it something about their balance of state control, with central planning coexisting with free market economics? Something is going on in Germany that makes that country work within an otherwise chaotic Europe.
Remember, Germany is not a low wage economy. They have a strong middle class, high wages, high benefits and despite a significant amount of government involvement in the economy, they still succeed in ways that are admirable to many people on this side of the Atlantic.
The Germans have found something. We need to dig down, find out what it is and transplant some of that here, so we can be as competitive as they are. Can their model work in the US? Maybe. Either way, we've got something to learn from these guys.