Strong in the Crisis – Stihl Benefits from its Capital

The financial crisis is everywhere, but not everyone is being affected equally. Some family-owned businesses like Stihl, the motor saw manufacturers, are now profiting as a result of their conservative financial practices. Financial director Klaus Detlefsen made sure that the company built up 1.5 billion euros in reserves. Its equity-to-assets ratio of 60 percent means that Stihl is not dependent on credit from banks. Even though Stihl expects its earnings to go down in 2009, the company still plans to continue its long-term conservative financial strategy. Although Stihl reduced production in March, the company is confident that it can weather even a protracted financial crisis. Marion Hütter takes us behind the scenes at Stihl. ____________________________________________________ 30 centimeters of wood in four seconds. US companies buy the kind of saws tested here - though not as many now in light of the economic crisis. Stihl's clients need to save money by working longer with the old saws. And a saw blade lasts a long time. Andrea Vergati, industrial mechanic: "You might have to clean them sometimes, but otherwise they'll last for 500 hours." Longevity - it's not just important at the test center. The long-term strategy also counts on the executive floor. Chief financial officer Klaus Detlefsen has done his best to steel the firm against crisis periods. He's saved up 1.5 billion euros in company money. Even in the financial crisis, the company would have no trouble getting a loan, but: Klaus Detlefsen: "We'd rather not. I receive many inquiries from banks and visits from banking boards and always have to tell them, it's great to have met them, but on the credit side, we don't need any money. We've focused more on the other side - on business starting points, in investment, for example." For Stihl's employees, that's good to know. They believe their company will be able to weather the crisis for longer. Katharina Volkmann: "Simply because you get the feeling that things are run in the sensible Swabian way. It's something that makes our jobs more secure." Operating in the sensible Swabian way - right now, that means focusing on sinking sales: Because fewer saws are being bought worldwide, Stihl is curbing production. So far, their German employees have gotten off easy - for now, all they've had to give up is their overtime. But it won't stay that way for long. The chief financial officer wants to cut costs. Cutting costs when the company is in financially good shape - the conservative Swabian way of doing business isn't always easy to follow. Klaus Detlefsen: "Certainly it's not really that easy to convey this to employees because the employees were used to the path of growth we were following. We've been able to achieve a lot, things other companies couldn't, perhaps, but now we've just got to keep our focus." Employees should help the firm save, because they profit from sinking costs, too. Their bonuses depend on the company's profits, as does the interest of their capital contributions. So far, a 10-year term yields 10 percent interest. Foreman Marc Schweigert sees the advantage: "With the company, our money yields better interest than it would at a bank - and then the employees are also motivated for the company to do well." At the very least, business with private clients in Germany gives the company a reason for hope. Stihl sells its product in specialty stores only. The clients there are ready to pay more for reliability. At least every client isn't as frugal as the firm itself.

DW-World | May 5, 2009

Tags:. .centimeters. .longevity. .dependent. .klaus. .motor