“The Growth Will Be In Eastern Europe And Turkey”

BSH is the third largest manufacturer of large household appliances in the world. Europe accounts for a large proportion of its activities but it has also begun to establish itself in the North American market. BSH Chair and CEO Kurt-Ludwig Gutberlet comments that all growing markets are attractive. Gutberlet notes that growth rates in saturated markets such as Western Europe or North America are not large. He comments: “But the markets which have significant rates of growth are the countries of Eastern Europe, Turkey, which is a center of growth, and also China.”

Gutberlet comments that Turkey is an important production base for the company, and stresses that its competitiveness, high quality and high productivity enable it to able to produce for Europe. He says that Turkey is part of BSH’s European production and sales network and that he think that its share will increase in the years ahead. BSH Chair and CEO Kurt-Ludwig Gutberlet told Capital about BSH’s structure, the impact of China, competition in the household appliances industry and the Turkish market.

Could You Talk A Little About The Structure Of BSH And Its Place In The Global White Goods Industry?

Today we rank third worldwide. Our direct competitors are not just the major players but everybody who is competing with us in the small household appliances market. Many companies produce large and small household appliances in different companies but with us both are in a single company. Even though our roots are in Europe, particularly in Germany, we can say that today BSH is active on a global scale. We have production units in Spain, Turkey, Poland and several other countries. In addition we have expanded our operations to North and South America and to China. In addition we also have some activities in Thailand which cover the South Asian market.

Who Are Your Biggest Rivals Worldwide?

The companies which occupy the first two places are Whirlpool and Electrolux. Both companies have very large operations in the North American market. Traditionally we have been a small player. We only started to try to enter the USA market in a more aggressive manner a few years ago. We have established factories there. We have two new companies which began operations at the beginning of this year.

In the USA we manufacture products which have European technology but are suitable for USA dimensions. Because, compared with the Europeans, the Americans like larger products. We are currently expecting a good development on the USA market. But, of course, at the moment we are still very small compared with the two large players that I mentioned there.

We rank first in Europe. Electrolux is second but it is very close behind us. I am talking about all of Europe, including Greece, Turkey and Eastern Europe. General Electrics, which is one of our other rivals, is only active in the USA. Our rivals also include LG of Korea, Maytag of the USA and Haier of China.

Which Countries Or Regions Do You Think Are Interesting Or Will Become So In The Future?

Generally I find all growing markets attractive. If you look at the whole world then you can see that the rates of growth in saturated markets such as Western Europe or North America are not very large. Here one can much smaller, single figure rates of growth.   But the markets which have significant rates of growth are the countries of Eastern Europe, Turkey, which is a center of growth, and also China.

How Would You Evaluate Competition In Turkey? Can Turkish Companies Such As Arçelik And Vestel Become Important Players In Europe?

We certainly take both companies seriously. Arçelik is a very strong company in Turkey and ranks first in the white goods market. I think it has a market share of about 3 percent in Europe, whereas our market share is 20 percent.

But we view the development of both companies as extremely dynamic. But on this point I can say that they are serving rather developing markets outside Turkey. For example, you can see these products more in Germany or Britain. But they are found in regions where prices are attractive.

What Is The Structure Of The White Goods Industry In Europe And The World Today? Are The Expected Mergers And Acquisitions Taking Place?

We see that the greatest concentration is in the USA and the North American market. There are four main rivals. These four companies control more than 90 percent of the market. This is really the highest rate you can find in our industry. If you ask whether such a situation can occur in Europe, a few years ago I would probably have said that it could have done. But if we look at developments in recent years I would say that it probably cannot happen. Because new rivals are entering the market. Five years ago the names of Arçelik and Vestel would not have been included amongst the largest companies in Europe. But they can be seen there now. In addition to them, there are also LG and Samsung which come from Korea and have entered different markets. As you have mentioned, there are also Chinese companies. As a result, there are some mergers and acquisitions but these are few compared with the situation 10-15 years ago. For this reason I don’t think there will be the same consolidation in Europe or the world as a whole as there has been in the US.

As The Highest Ranking Person In BSH How Do You Evaluate The Turkish Market And BSH’s Operations Here?

Turkey is the country where one of our largest affiliates is located. First of all, the market here is very big. There is a large, young population which wants to own good household appliances. This is also very positive for us. In addition, our local brand Profilo and Bosch and Siemens are very well established on the market. And Turkey is an important production base for us. Its competitiveness, high quality and high productivity enable it to be able to produce for Europe. As a result, it is part of our European production and sales network. I think that our share will increase in the future.

Even after the crisis on the markets it went onto the offensive very quickly. We were really surprised by how quickly the Turkish market was able to recover, particularly this year.

“The Rise In Raw Material Prices Is Affecting Us All”

In Turkey Competition With Local Players Is Reducing Prices. How Does This Affect Your Financial Management In Turkey? Do You Have Any Special Financial Strategies?

In fact, this is purely a question of mathematics. If you reduce a price by X amount then you have to increase output volume by Z amount.

But I want to talk about a subject that it is going to manifest itseld next year; and that is the price of raw materials. The household appliances sector is one which uses a high proportion of raw materials such as steel and plastic.

There are problems in steel in particular all over the world and in recent months the prices have risen considerably. It will continue like this next year. We have not see much like this in previous years and this will affect all of us in the industry. There will be such a steep increase in costs that it will be impossible to compensate for it through internal productivity. For this reason we are expecting price increases in product categories which use a lot of raw materials.

On the international markets people tend to talk about this in relation to the automotive industry but we shall be at least as affected by it as the automotive industry. The prices of steel and plastic have risen by approximately 20 percent. It is not just our rivals, we are also affected by this. Whether we like it or not, we shall have to raise prices. This is a problem for the entire world and it will affect everybody, including the Chinese. As a result, we shall be faced with a slightly different picture next year.