The story of Bosch: Part two

It’s not all sweetness and light, though. We can’t write about the recent history of Bosch without mentioning Dieselgate. No need here to rehash the whole sordid tale – you probably remember most of it, and if you don’t, make a cup of tea, click on Gavin Green’s excellent story right now and come back later. But the short version is: VW were found guilty of cheating on emissions testing by adding software to the ECUs of some of its Diesel-engined cars that would detect when they were under test conditions, and ‘cheat’ by making them a lot cleaner than they were in use on the public road.

But that software did not sit in space. It was embedded in the engine control ECU – supplied by Bosch. Now, it would be pointed out in the subsequent long, involved lawsuits in various countries that Bosch did not write the software. VW engineers used some code modules supplied by Bosch, yes, but they effectively misused them – using software development tools provided by Bosch. Lawyers for the company also pointed out that they had indeed warned their customer that using this code in a production car could violate regulations. Fair enough – but (and this is a hell of a but) – they continued to supply ECUs with the ‘cheat code’. No fewer than 17 million of them…

Now, VW as a company was found guilty, has issued many corporate mea culpas and has been fined, directly and indirectly to date, somewhere around £25bn – and the lawsuits are not yet over. Two VW employees went to jail – some would claim that the company got off very lightly with just this number.

Bosch, on the other hand, was not found guilty. It accepted a judgement in German courts, not of intentional fraud, but of ‘negligent oversight’, and paid a fine of €90m, or about £78m. In addition, it agreed to settle class actions in the US amounting to somewhere around about £370m. Case closed? Not quite – civil lawsuits rumble on – and probably will for some time.

We mentioned Ryanair earlier. Bosch is not known for being the Ryanair of the industry. It knows its products are good, and it expects customers to pay accordingly: think Emirates airlines, maybe? Now – and I’m treading very carefully here, as I know that Bosch also has an impressive legal department, staffed with battalions of serious folk – Dieselgate probably made them lose a bit of their sense of humour. I’m not sure that the Ti legal or finance ‘departments’ could withstand a libel suit from these boyos. So, steady as we go here. Bosch also has a reputation for a certain – how shall I put this delicately? – confidence in dealing with its customers. Don’t get me wrong – I’m not saying it can be a touch cocky, much less arrogant – I’m just floating the idea that it is: very, well, confident. Walk into a negotiation with Bosch and you will be facing teams that are very sure of their products, their processes – and their prices. That can occasionally rub people up the wrong way. But I guess you have to compare it to meeting an athlete at the top of their game. They often come across as cocky because they know they are good. And there is a certain charm in that, I’ve always found.

Speaking of negotiating with Bosch, I hope you’ll indulge me with a bit of ‘inside baseball’ talk here, as our American friends say. I’ve mentioned in previous articles that relations between OEMs and their suppliers can be a bit tense. Yes, we tend to dress things up in the kind of smooth phrases like ‘partnerships’ and ‘long-term synergies’ and ‘co-development’ that look nice on the slide deck, and sound good when the big dogs shake hands on the corporate deals, but many of the day-to-day customer-suppliers negotiations are a lot grittier than this. In truth, the OEMs want to pay as little, and get the most as possible. The suppliers want to get paid as much as possible for the least amount of effort and hassle. This can lead to pretty, shall we say ‘robust’ exchanges. Suppliers will use a change of specifications by the OEM’s engineers to justify a new bill – a price hike of two cents here, an extra development cost of 200k there. The OEM engineers in turn will try to get the supplier to modify a part ‘for free’, as it’s not quite fully met the test results required by page seven, paragraph two, clause (iv) of the specification documents. That sort of thing.

These exchanges can get pretty nasty. The financial stakes can be high, and things are made even dirtier by the fact that neither side is making much money. As we’ve mentioned before, profit margins in the industry as a whole are paper-thin, and that makes people ready to fight like hell for their side of the deal. If everyone was making fat stacks of cash, we’d probably all be a lot more relaxed.

Readers, I’m not proud to admit this, but back in my corporate-soldiering days, I was pretty good at this low-level corporate knife-fighting. You know the old adage, ‘never wrestle with a pig: you just get dirty, and the pig enjoys it’? I was that pig. I liked the low blows, the eye-gouging and the sneaky kicks to the groin in the UFC cage of supplier-OEM fights. And I usually won, or at least held the opponent to an angry, breathless and red-faced draw…

There was just one supplier that regularly – no, always, beat me. Usually by a KO. Yes, you guessed it – it was Bobby B himself. No matter how well I prepared, no matter what clear deviation from the drawing I had spotted, no matter which bulletproof clause I thought I could prove they had infringed, I cannot remember winning a single bout with the slick fighters out of Stuttgart  in the blue corner.

Why was this? Well, looking back now, I realise that it was because my heart was just not in it. With any other supplier, I was fully committed. I would fight to the last gasp for a cent or for 10k of a 100m contract, prepared to fight to the last gasp for peanuts. Why? Because I was always defending the slimmest of profit margins on already marginal products. I felt it was not just my right, but my corporate duty to pull the blanket of profitability as hard to my side of the bed as I could – and tough cheese if the other party’s feet got a bit chilly as a result. I was not responsible to their employees or shareholders. I felt on solid moral rounds – and that made me a committed corporate streetfighter.

Except against Bosch. Every time it came to the crunch, and I had to land that low blow, that sneaky elbow, that kick to the back of the knee, I found I had not the stomach for it. I would hesitate and look away – and the Bosch guys would see it in my eyes and pounce. They had the moral high ground on me every time.

Because, you see, I’ve kept the most amazing thing about Bosch ‘til the end.

It is a charity.

You read that right. The biggest automotive supplier works, not to generate corporate profits to distribute to shareholders, but for charitable causes.

Now, this is not technically correct. Robert Bosch GmbH is 94 per cent owned by Robert Bosch Stiftung GmbH, a charitable trust. The remaining 6 per cent is owned by the Bosch family or the company itself. But we’re splitting hairs. In general, Bosch works, not to make more money for its owners, but to build hospitals and schools and sponsor various good causes.

And that’s why I was stumped. I was fighting ultimately to make Nissan or Renault shareholders richer – God bless ‘em. That was my job. The Bosch folk in the room were fighting to save sick babies and educate the feckless youth. I was beaten before the bell went.

I’m half-kidding as usual folks, but to sign off on a serious note: Bosch is a company I admire deeply. Its track record of innovation is truly second to none. Its quality record over 14 decades is admirable. And the fact that it operates largely outside the ‘normal’ capitalist model that most of us bought into a long time ago is really remarkable.

So here’s to another 140 years, Bobby. I forgive you for kicking my behind.