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German heat pump bonanza tests industry’s resilience in face of Russian gas crisis

HOLZMINDEN, Germany, Aug 18 (Reuters) – In a way, Stiebel Eltron has never been better. The heating maker’s main plant has gone to work around the clock to make the energy-efficient heat pumps Germany needs to wean itself off Russian gas.

But the situation has never been more difficult, with supply bottlenecks, labor shortages and soaring energy costs making it virtually impossible to meet demand. almost unlimited.

“I’ve worked here for 25 years and I’ve never experienced such fluctuating and high material prices,” said Kai Schiefelbein, the company’s chief operating officer.

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Thousands of medium-sized family businesses like Stiebel Eltron, with some 4,000 employees and less than a billion euros in turnover, are the engine of the German economy, accounting for half of its production and some 40 million jobs. Their adaptability will be the key test of whether Germany’s prosperity, based on its manufacturing excellence and exports, can survive in the new era ushered in by Moscow’s invasion of Ukraine.

“Germany has built an economic model that relies on cheap Russian gas,” Economy Minister Robert Habeck said earlier this week. “This model has failed and it will not come back.”

Heat pumps, inverted refrigerators that draw heat from the environment to heat homes and water during the winter using only a quarter of the energy of a gas boiler, are in high demand as the Germany is preparing for a winter with less Russian gas.

But Stiebel Eltron, like many other medium-sized family businesses in the “Mittelstand”, has now found itself short of everything that was Germany’s winning formula – smoothly functioning global supply chains, a hand – skilled labor and cheap energy.

Supply chains, already strained by the coronavirus pandemic, have been further frayed by the war in Ukraine, while the cost of raw materials has soared, including that of copper from which cooling pipes are made, or silver with which the sections are soldered together. .

“We bought processors that normally cost 42 cents for 45 euros,” Schiefelbein said, pointing to a tiny component on a half-assembled unit at the company’s main factory in Holzminden, a scenic town on the edge of the Weser river in central Germany.

Rising demand is a boon for the company, founded in 1924. It sold 50,000 heat pumps last year – a third of the 154,000 sold in Germany – and plans to sell 80,000 this year . Revenues are expected to reach one billion euros, compared to 837 million euros last year. But he could have sold 50,000 more had he been able to keep up with the demand.

‘IT’S WORK’

With solid growth in demand, Stiebel Eltron has it easier than many: in the automotive sector, life is tougher, with many suppliers finding their heavy engineering expertise less valuable in the age of electric vehicles.

Earlier this year, auto component supplier Robert Hofmann announced it was cutting up to 70 jobs due to shifting demand for combustion engine vehicles. Chief executive Oliver Hofmann told broadcaster BR that the company, a pioneer in 3D printing, was looking for new markets in aviation and healthcare.

Many businesses are weathering the storm, but the bigger picture is grim: An Ifo Institute survey of mood in the Mittelstand showed it hit a two-year low in July, the surge energy costs being a major concern.

The Nord Stream gas pipeline from Russia is delivering just 20% of its normal volumes, and many fear that Moscow is yet to completely shut off the taps, leading to rationing and more misery in an economy on the brink of recession. Read more

Schiefelbein has little time for those predicting a bleak future for the European manufacturing powerhouse, saying his time running a Stiebel Eltron factory in China has given him a positive “half-Asian” attitude.

“These are just the conditions we face,” he said. “And our job, my job in particular, is to make sure people keep their jobs and the business keeps growing.”

This involves recruiting from abroad where there is a shortage of personnel. Since 2015, the share of people with an immigrant background in the company has tripled, according to Rebecca Knauer, the company’s director of human resources.

Over time, the company will add new production lines, allowing overworked staff to resume only on working days, Schiefelbein said as he greeted staff walking out at the end of the dawn shift.

More recently, they recruited Ukrainian refugees, in part through personal networks, with staff who had chosen to welcome newcomers recommending them to the company, which sought volunteers from among the 2,500 employees of the company in Germany to translate for those whose German is not yet perfect. this.

The number of Ukrainians working in Germany is still relatively low: out of one million Ukrainians, 84,000 were employed in June, according to the German employment agency. However, previous waves of refugees, such as the influx from Syria in 2015, eventually led to strong employment growth, with some 400,000 refugees in work in 2019.

Alyona, whose family remains in the Russian-occupied Zaporizhzhia region of eastern Ukraine and refused to give her full name to protect them, found that her experience as a seamstress had prepared her well for the precision welding in central Germany.

Like many German companies in the Mittelstand, Stiebel Eltron welcomes the recent measures taken by the government to facilitate the arrival of foreigners in Germany to work, but is despaired by the persistent insistence of the authorities on checking whether foreign study certificates correspond Germany’s complex professional qualifications.

The company is spending 1.4 million euros to connect to existing liquid natural gas distribution pipelines to ensure gas will continue to arrive even if Russia turns off the tap completely, but it is also investing in new robots who weld by electric induction rather than by gas.

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Reporting by Thomas Escritt Editing by Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

Thomas Written

Thomson Reuters

Berlin correspondent who investigated anti-vaxxers and COVID treatment practices, reported on refugee camps and covered warlord trials in The Hague. Previously, he covered Eastern Europe for the Financial Times. He speaks Hungarian, German, French and Dutch.

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