Is This the End of German Automotive Leadership?

Sasan Hashemi (Host): Welcome to Beyond Cost, episode number one. Today’s guest is Andreas Hartmann, former board member of ZF Friedrichshafen AG. We’ll talk about M&A, culture, cars, regional expansion, and much more. I hope you will enjoy it. Hello and welcome to the first episode of our podcast, Beyond Cost, where we talk about manufacturing costs and everything in between. Today’s guest for our first episode is Mr. Hartmann. Mr. Hartmann, thank you for coming. We’re very happy to have you. Let’s get started. Maybe for our audience, could you briefly introduce yourself and tell us where you come from?

Andreas Hartmann (Guest): Thank you for inviting me as your first guest. I’m originally from Cologne, if you’re asking about location. But I think I’m more widely known for my time in Friedrichshafen, where I worked at ZF Friedrichshafen AG, one of the world’s largest automotive suppliers. Before that, I worked in German Maschinenbau – and even the German word is well known internationally. At that time, I was responsible for strategy and M&A at a publicly traded company in Cologne. When I left, I was Head of Group Financing. I joined ZF Friedrichshafen in 1995. At that time, the company had approximately €5 billion in turnover. When I retired, it was almost €40 billion.

Sasan Hashemi: Wow. That’s quite a journey.

Andreas Hartmann: Yes, it was a good time. Of course, there were ups and downs as well.

Sasan Hashemi: We’ll definitely come to that. Today we’ll mainly talk about the German and Western automotive industry and its evolution over the years. But first, you are a lawyer by education. Is that correct?

Andreas Hartmann: Yes, that’s correct.

Sasan Hashemi: And when did you study?

Andreas Hartmann: Some time ago. It was last century. I started university in 1970. As you know, in Germany, studying law takes time. I completed my education in 1978 and started working in a law firm. Already during that time, I was consulting large companies.

Sasan Hashemi: Was it always your goal to move into industry?

Andreas Hartmann: Yes, the goal was always to work in industry. My father worked in industry, so I was familiar with it. What interested me was not just looking at what had already happened, as lawyers often do, but shaping and creating something new. In a company, you can influence the future. That was much more attractive to me.

Sasan Hashemi: You started in machinery manufacturing, right?

Andreas Hartmann: Yes, but it was broader than that. It included tractors, engines, and industrial equipment. A wide range of products worldwide. That was the interesting part.

Sasan Hashemi: That was in the early 1980s?

Andreas Hartmann: Yes, the early 1980s.

Sasan Hashemi: How was the atmosphere back then for a young lawyer entering industry?

Andreas Hartmann: I can’t fully recall my first day, but I had a good start. It was interesting. I moved quickly from the legal department into strategy and M&A, and later became head of finance. It was less about writing legal opinions and more about creating contracts, strategies, joint ventures, and acquisitions. That was much more dynamic.

Sasan Hashemi: Today, many young graduates are drawn to software, AI, or consulting. Was manufacturing considered “cool” back then?

Andreas Hartmann: If you look at Germany today, companies like Porsche, BMW, and Mercedes are still highly attractive employers. What is surprising for my generation is that defense companies are now also attractive to young people. That’s a major shift. Industries change. In the late 1990s, multimedia and IT were the trend. But digitalization is now essential across all industries.

Sasan Hashemi: When you started in the 1980s, how digitalized was manufacturing?

Andreas Hartmann: When I started, we still used typewriters. Later we had early computers, but they were large and expensive. Not everyone had access to one. Communication slowly shifted toward internal email systems. Digitalization was expensive at first, and changing systems meant changing mindsets. That was often the biggest challenge.

Sasan Hashemi: Would you say manufacturing was conservative regarding technology adoption?

Andreas Hartmann: New technology is neither good nor bad by definition. A company must remain profitable. You shouldn’t innovate just for the Deutsches Museum in Munich. Innovation must lead to products customers are willing to pay for. That balance is crucial.

Sasan Hashemi: You joined ZF in 1995 in corporate development and M&A. What were the main strategic goals in the 1990s?

Andreas Hartmann: Profitable growth. That was the key. ZF is not publicly listed, so we had to generate sufficient cash flow to invest in research and acquisitions. One major opportunity was China. When I first went to Shanghai in the mid-1990s, the automotive industry there was close to zero. Volkswagen had already established joint ventures, and that opened doors for suppliers like us. China quickly became a profitable and highly dynamic market.

Sasan Hashemi: Did you mainly enter China via joint ventures?

Andreas Hartmann: Yes, mostly. That was necessary both legally and culturally. China was interested in advanced technology, particularly for passenger cars. The collaboration was largely a win-win situation.

Sasan Hashemi: In the 1990s, did anyone seriously discuss electric vehicles?

Andreas Hartmann: Not in the way we do today. We discussed electrification in steering systems and components. Electric power steering replaced hydraulic systems over time. The true strategic confrontation with electric drives came around 2010. That was when electrification and autonomous driving became major topics.

Sasan Hashemi: How did established mechanical organizations respond?

Andreas Hartmann: It was challenging. Existing products were profitable. New technologies were uncertain. Volumes fluctuated significantly. One quarter you expected 500,000 units; the next quarter it dropped to zero. That created uncertainty. The transition is long and disruptive. It does not happen overnight like the shift from typewriters to computers.

Sasan Hashemi: Do you think this fundamentally changed the OEM-supplier relationship?

Andreas Hartmann: Not fundamentally. We are still in the same boat. But the pressure on profitability has increased. OEMs push Tier 1 suppliers, Tier 1 pushes Tier 2, and so on. Today, profitability across the industry is under significant pressure.

Sasan Hashemi: Let’s talk about one major milestone: the acquisition of TRW.

Andreas Hartmann: Yes, that was one of the largest supplier transactions at the time.

Sasan Hashemi: You once said that in M&A, one plus one must equal at least three. How do you achieve that?

Andreas Hartmann: Post-merger integration is the hardest part. You can impose your structure, leave things unchanged, or take a hybrid approach. There is no universal formula. The key is ensuring people are not against the integration. Resistance destroys value. You must identify people who want to move forward. In a global organization with tens of thousands of employees, that’s complex.

Sasan Hashemi: Another shift is software. Many argue that over 50% of a car’s value is now software-driven. How do you see that?

Andreas Hartmann: There has always been software in cars. Transmissions, chassis systems, steering systems – all rely on software. What’s new is the perception. Younger generations may view cars more as digital devices. The real transformation will come with autonomous driving and data ownership. Cars generate enormous amounts of data. The question is: who owns that data?

Sasan Hashemi: Looking ahead, what is your outlook for the industry?

Andreas Hartmann: It is clearly a disruption. Multiple transformations are happening simultaneously: electrification, autonomous driving, regional shifts, and geopolitical changes. China, for example, started with new technology from scratch. That is easier than replacing legacy systems. There will be consolidation. Not all Chinese EV manufacturers will survive. Perhaps three or four globally. The same applies in Europe and the U.S. Some companies will disappear. Others will adapt. But transformation has always been part of industrial history.

Sasan Hashemi: Mr. Hartmann, thank you for your differentiated perspective and for providing valuable context on the major drivers shaping the automotive industry. This concludes today’s episode. If you enjoyed this conversation, please share it, like it, comment, and support us. Thank you again, Mr. Hartmann.

Andreas Hartmann: Thank you. It was good meeting you again.