• Yvonne Döbler

"We separate the harmful from the useful."

(Reading time: 9 - 18 minutes)

Family business. Two families, a global corporation with sales of almost four billion euros and the solution to an ecological and social problem: Mann+Hummel develops filters that are used in cars and buildings, in water treatment and in the food industry. "Thomas Fischer, shareholder and Chairman of the Supervisory Board, is optimistic that "our possibilities are limitless."

Thick air. In eight European countries and 20 German cities, the limit values for pollutants in the air are being massively exceeded. According to the EU Commission, more than 400,000 premature deaths occur every year. In other regions, this price for industrialization is likely to be much higher. The world has a big problem.

A possible solution comes from Ludwigsburg and looks like a roof rack. Since the beginning of this year, the family business Mann+Hummel has been testing a new filter technology. "The aim of this project is to actively clean the air. That's why we called these filters 'fine dust eaters'," says Thomas Fischer, Chairman of the Supervisory Board and spokesman for the Mann family.

Mann+Hummel is one of the many "hidden champions" that the state of Baden-Württemberg has to offer. "As the world leader in filtration, we take care to separate the harmful from the useful. You will find our 120000 products in cars, construction machinery, rail vehicles or ships, in industrial plants, in ventilation and air-conditioning technology or in water treatment. This is the passion of the shareholders from both owner families - clean air, clean water", explains Fischer.

In 2017, more than 20000 employees at 80 locations generated sales of 3.9 billion euros with filter technologies. "And that's just a stopover," predicts Fischer, "in nine years we want to turn over eight billion. After all, we are operating in an extremely exciting growth segment."

The success story began in 1941, when two textile entrepreneurs bought the filter division of the piston and filter manufacturer Mahle KG in order to maintain their operations. After all, oil and air filters are considered war-relevant products. None of the founders has a technical education, "neither my grandfather Adolf Mann - he was a mathematics teacher - nor his partner, the lawyer Erich Hummel," says Thomas Fischer. But they are good entrepreneurs: they use the know-how of engineers and metal workers to develop innovations in filter solutions for vehicles. "This has carried the company through the war years."

The fact that Mann and Hummel are involved in the development of the so-called Kraft-durch-Freude-Wagens, which will later be successful as the VW Beetle, naturally also helps. After the end of the war, the two become partners of the fast-growing automotive industry, which urgently needs oil, air and fuel filters. "Cars were the prestige objects in all western countries, and the trade with replacement filters soon became an important mainstay of the business," says Fischer.

For entrepreneurs, "We have to be where our customers are." At the beginning of the 1950s, they consistently began a globalisation strategy: first, representations were established in the Scandinavian countries, later also in Southern Europe, Latin America and the USA. At the beginning of the 1960s, the Volkswagen Group alone produced one million cars a year. More than half of this is exported. Mann+Hummel produces the filters on site.

In the mid-1950s, Adolf Mann's daughter Sibylle meets her future husband: Dr. Hermann Fischer. At the beginning of his career he worked as an engineer in the automotive industry in America and later joined the company at the insistence of his father-in-law. "A woman in the company was still unthinkable at that time," says Thomas Fischer about the life of his parents.

1988 Hermann Fischer resigns from active management. "My father was diagnosed with MS early. He was involved in the management of the company. But of course, at some point there was a lack of strength to drive innovation forward," says Thomas Fischer. When Jörg-Dieter Hummel, son of Erich Hummel, retires from the management board in 1995, both families decide to employ external managing directors in the future. "Management must be successful. If she can't do that, she has to go. This is not enforceable with a shareholder. A family member only lets go when he or she is ready."

Nevertheless, the owner families retain a strong position. "We don't interfere in day-to-day business, but we clearly give management the strategic direction, the guidelines for their actions." Each family - 100 percent of the company is owned equally by the 30 or so members of the Mann and Hummel families - has appointed a spokesman to represent their interests on the Supervisory Board. If the family representatives are unavailable, substitute representatives are available: "They are involved and could take over immediately if the need arises." At present, however, these are not family members. "The next generation is still too young, between 20 and 25. They need to figure out what they want and what they can do."

Thomas Fischer himself was 39 when he was appointed to the Supervisory Board. When he was 42, the family appointed him to be his agent. "At the time, I also had the offer to become CFO of a DAX company. It was clear to me that this would have been the first row, while I would be standing here in the second row. Such a decision must be made consciously. You can't do that at a young age."

The owners are currently dealing with two major strategic issues. "Firstly, we want to position ourselves even more broadly and reduce our growing dependence on the automotive sector, which still accounts for more than 85 percent of sales. And secondly, it is necessary to strengthen competitiveness - through a growth strategy and an innovation offensive," the entrepreneur outlines.

Fischer illustrates the fact that the family makes no compromises when it comes to implementing its specifications with an example: "We lost a higher eight-figure amount worldwide with our first investments in water filtration. That was a lot of money, but it didn't change the owners' desire to be active in this field."

The task of the management had been: Getting the subject of water filtration under control. "We can imagine exchanging management rather than saying goodbye. We want to assume social responsibility and we know that the company can do this."

Today, the subsidiary Microdyn-Nadir successfully cleans liquids such as rainwater, cooling water and process water using membrane technology - produkt - in an environmentally friendly and energy-efficient way. In the year 2030, Thomas Fischer plans to achieve a turnover of around 400 million euros in the water sector.

Fischer also sees great potential in building technology. "Asia in particular is a huge market for our smart products." Smart means that the filter will signal when it needs to be replaced or the air quality is deteriorating. The air in the children's room can be checked from the car or a service order can be placed using an app. "Other exciting fields are food - preserving milk is also a filtration process - and wind technology. Or clean pharmacy. Even beer must be filtered. And the air that is also used in gas turbines. If it is dirty, particles can act like bullets and destroy the turbine. Our possibilities are almost limitless."

Thomas Fischer wants to be the driver. Not the one that's driven. "We are already the world market leader in filtration. But our market share is still only just under five percent at the moment - there are a lot of people romping around. That's not efficient. Consolidation in the market is taking place and we are playing a major role in it."

In figures, this means that between 2005 and 2017 sales rose from around EUR 1.4 billion to EUR 3.9 billion. Around one billion of this was organic growth and 1.5 billion was realized through company acquisitions. The most recent major transaction was the purchase in 2015 of the US company Affinia's automotive filter business. Affinia's filter brands Wix and Filtron also specialize globally in the replacement business with oil, fuel, hydraulic and coolant filters. "We were super fast. Faster than any other, including listed companies. Here we have clearly played out the advantage of a family business - discuss, decide, close." Mann+Hummel is investing around 1.1 billion euros, financed by a loan.

So far, the cooperation has been going very well: "They are doing the filter replacement business for us all over America. Of course changes are coming to the company - but that's what the managing directors there want too. We're doing this very gently." Whether a merger works or not is always a question for the people involved. "The CEO there and our CEO are very good with each other. There's a lot of respect, that's at eye level."

Meanwhile the company has a lot of experience with acquisitions. And he knows the mistakes that can be made from his own experience. "In the past, for example, we were offensive as a MANN-FILTER product brand and wanted to run newly acquired brands under our label. That didn't go down well. We were also a little premature with the water filters - just because the filter is written on them, the business doesn't have to function according to our rules. New market, new customers, new technology - only the word filtration fit. In addition, business in Asia was always conducted via corruption. We can't do that."

Fischer suspects that such an acquisition strategy would hardly have been feasible for a listed company. Finally, the high depreciation charges had a negative impact on earnings. "But as a family entrepreneur, it's relatively easy for us to digest. We want this place cleaned up, so let's copy it out. It doesn't cost us any cash. And there's no bench on our backs. We shareholders ourselves do not want to draw high dividends from society. We are aware that entrepreneurship also means taking risks. As long as the return is good and the development is right, we see ourselves above all as trustees for the next generation."

An IPO was therefore never an option. "We've watched what the IPO does to other family businesses. The owner family is usually slowly pushed to the edge because it no longer owns the majority. The identity is lost. At some point she decides to sell it after all. We don't want that."

Nevertheless, Fischer has not completely closed the stock market chapter. Finally, this year will also see further progress being made in realigning the company. "We will separate the individual divisions and then manage them as separate units under a holding umbrella. Because the processes and procedures are different, we can unfold so much more dynamism."

Acquisitions would then also be easier. "Some former owners wish to retain a capital interest in their company when they sell to us. A stock market listing would be advantageous for one of the units. So we're not categorically ruling that out."

Growth through acquisitions is only one part of the strategy. The second is organic growth. "Traditionally, we were at 50-50. That hasn't been the case in recent years, but that's where we want to go again," says Fischer.

How's that gonna work? "We're making the company more agile and innovative." At the Ludwigsburg headquarters, Fischer wants more of what he has already established worldwide in his companies: Dynamics. "Especially in the automotive sector, there must be a jolt through the company. But after 77 years of working in automotive structures, change is of course much harder to make than it is at a new plant in China, for example."

Fischer compares the situation of the automotive industry in Europe with that of mobile communications in Scandinavia 25 years ago: "Companies such as Siemens and ITT/SEL have mastered the old 'fixed network' technology and underestimated mobile communications. Today, these companies play no role. This is the dilemma of the automotive industry in Europe. We need to get out of our protected area."

New forms of organisation and work should bring more dynamism. "We're trying to become a liquid organization so we can deploy people in different projects." However, this is not at all so simple. "The fact that we then also need less hierarchy makes many managers afraid. Because some of them block permanently, we may have to part with them. We just want people to get braver. Error culture is the wrong expression, I don't want to use it. Risk culture is better off. We need more employees who want to make a difference. We want to enable them to do what they can and want."

Thomas Fischer uses an example to illustrate exactly how this is done with the risk culture: Mann+Hummel invited its employees to submit a short video in which they presented a new product idea in the field of filtration. 70 videos were received, five ideas convinced the management. She sent the five innovators to Silicon Valley for six months to test the feasibility of their idea.

"After this phase, we decide if we want the product. And the employee can decide whether he wants to return to his employment or whether he wants to bring the product to market maturity in a start-up environment. He may earn less in the short term, but can expect a big bonus if he succeeds."

The fact that this innovation offensive is working in the right direction can be seen at the beginning of the year at one of the largest and most important trade fairs in the field of digital technology and consumer electronics - the Consumer Electronics Show in Las Vegas. This is where Mann+Hummel presents its innovations for the first time. Cabin air filter systems for cars and buildings that continuously provide clean air and optimize energy consumption. A personalized filter service interval algorithm that recommends maintenance intervals based on actual individual mileage.

And Senzit, the world's first intelligent air filter monitor. "He was even awarded the CES Innovation Prize. With this system, no physical inspection is required to determine the current filter status. This prevents unnecessary maintenance."

These examples also underline that while many automotive suppliers fear the rapid end of the combustion engine, Thomas Fischer continues to believe in this technology. "If 15 percent of the soon-to-be 90 million vehicles worldwide are powered purely by electricity, there will still be 75 million cars with combustion engines left. In addition, there are agricultural machinery, mining vehicles and construction machinery. They're all still running for 10 to 20 years. Since our filter business is primarily a replacement business, I don't really see any problem for us."

Of course, the automotive business will change, but mobility itself will not be a phase-out model. Thomas Fischer has three possible scenarios in mind.

Scenario one: Individual traffic is being cut back and there are more car sharing platforms. "That's not a problem. Today a car drives maybe an hour or 30 minutes a day. In the future, he'll drive maybe 23 hours a day. Then oil filters and cabin air filters will be replaced more frequently, which is good for our business."   Scenario two: Car sales in Europe will decline significantly. "No problem either. They will increase worldwide. In Africa, Russia and many other countries, the car is still the dream of many people. Even if not everyone can buy their own private car there, more and more sharing models will establish themselves." Scenario three: There will only be electric cars in the future. "Even in the age of e-mobility we are needed. The E axis is lubricated with oil and must be cleaned with our filters. The battery or fuel cell also needs purified air. And even in cars that are not operated conventionally, fine dust is produced by road, tyre and brake abrasion. Our particulate matter guzzler as a small package in the rear axle area enables 100 percent emission-free driving for the first time. This will create additional sales potential in the future."

The box was introduced in November 2017. It is currently being tested in practice on several electric cars of the logistics company DHL. "If this particulate matter guzzler can also function permanently in snow, mud and rain, we have a really good solution for urban traffic," Fischer is convinced. There are already talks with local transport companies and cities that want to equip their suburban trains and city buses with the filter box. In this way, they could not only reduce their own emissions, but also pay off those of other drivers. "There's a lot of interest."

The new development is also a milestone for the workforce at the Ludwigsburg headquarters. "They have solved a problem that politics and society are discussing - that makes them proud. We are suppliers, so we are actually reserved with our external communication. Now we suddenly became visible - the workforce wants more of it, they are more open to innovation. Everyone feels the spirit of optimism."


Family business.

100 percent of the shares in Mann+Hummel are equally owned by the Mann and Hummel families. The family business has a total of 30 shareholders. Holding them together is a challenge. // 01. Preserving the "we". The "we", Thomas Fischer makes clear again and again, keeps the three generations of the families together. The task of Thomas Fischer and Manfred Wolf, the representative of the Hummel family, is to protect this cohesion. "It's not always easy, there's even been an idea for a foundation," Fischer says. "We have doctors, architects, anthropologists, teachers among us. And at some point, some people were forced to take responsibility for the company. 20000 employees who make a living from being employed at Mann+Hummel can be frightening." Many discussions had been held about this problem, which ultimately led to an agreement on the preservation of the company in its current structure. "We have found that we all live a similar set of values. Clean air, clean water inspire us. This is so valuable to us that we consciously want to pass it on to the next generation." Discussion groups are also regularly organised, moderated or not, in which the transition to the next generation, questions of inheritance tax or wealth tax are discussed. But also: What is my responsibility towards the company? What do I have to do to do justice to the company? And the question: What can I expect from the company? "We'll discuss all this intensively. Everyone receives answers to the questions that are important to them. We want to mediate: We'll take care of you." // 02. Sale of shares. "Everyone is only allowed to sell within his family strand, the spouses are out of the question as buyers," explains Thomas Fischer: "But nobody wanted to sell so far. // 03. Agreement between the tribes. Should Manfred Wolff and Thomas Fischer actually not be able to come to an agreement, they would decide by coin toss. "This has been the agreement since we had a mediator in the company in the 1990s, who suddenly let his own opinion influence the process. Anyone who calls in a mediator goes into the hands of a stranger. We no longer need that," Fischer explains. Only if a point is really very important to you, do you insist on it. "Should this actually happen to both of us, we would flip a coin - and then carefully go in one direction to see if it is right. Fortunately, it hasn't been necessary so far." // 04. How and when the children are involved. "In the past, we only invited the children of the owner family members into the company from the age of 16. Meanwhile, we believe that it would be important if the younger ones also came." The question of how to prevent the children from feeling special when they see the family name on the building was discussed intensively. "We all don't. The children should develop independently. But my children grow up automatically with the company, I always talk about it at the dinner table. I believe it is up to us parents and guardians to ensure that they neither take off nor perceive their origins as a burden."


External managing director wanted.

When Alfred Weber, Managing Director at Mann+Hummel since 2010, retires due to age, the families will have to look for a new Managing Director. What criteria do they apply? "At the beginning of the process, we defined the profile together. We want someone who not only knows the automotive industry, but also accompanies the transformation into a new company. It's not that simple. Of course we feel very comfortable in a conversation when we sit together with a candidate from our car world - he knows everyone we know. But there is a danger that we will choose a managing director who stands more for preservation than for change. That's why, in addition to a headhunter, we hired a woman who specializes in board consulting. She has to be careful that we don't decide according to the comfort factor. We family representatives are close to this selection process - the other shareholders only if they want to. The new CEO should also be able to work with them. We need a managing director who has the same values, who could actually be part of the owning family."



Author: Yvonne Döbler

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