Big Interview

IT’S TIME FOR THE GOVERNMENT TO ACT

The current economic climate is one of the most challenging times of my career, says Carl Arntzen, CEO of Worcester Bosch.

It’s been a year since Business Direction last spoke to Carl. At the time his focus was on innovation and sustainability, as the company looked ahead to a new post-pandemic era of business. Today however, the company – like many others - faces a double whammy of uncertainty caused by the lingering effects of lockdown and the cost-of-living crisis. At the time of writing, the new Prime Minister had yet to be announced. Carl echoes the sentiment of every business in the country when he says it’s time for the new government to provide desperately needed positive leadership in these unprecedented times. “Yes, business is a real challenge at the moment,” Carl concedes. “Like every other company we’ve suffered a huge impact from ongoing supply constraints, shortages of raw materials, and price increases. “Our issues are mainly linked to supply, but the semiconductor electronics shortage is the origin of our problems if we drill down to the root cause. “Bosch is big enough and ugly enough to compete on the global supply chain market; however, the problem doesn’t actually lie with our built-in electronics systems. Our sub-suppliers are struggling to get parts to make sub-components, so we are doing a lot of spot buying on the open market to help them complete the part on our behalf!” Carl adds, “Our sales volumes will be severely affected this year because of these supply issues, and profitability will take a hit from increased running costs. Worcester Bosch will still make a profit, but dramatically reduced from our traditional standpoint. “We are very lucky to be part of the global Bosch Group, which is self-financing overall, but our financial performance needs to recover to continue investing and innovating in the future.”

IS GLOBALISATION WORKING?

Globalisation and Just In Time have been industry buzzwords for many years, but their methodologies aren’t faring well in such exceptional headwinds. Does Carl see a shift in strategy? “Well, I can confirm that as a direct consequence of our supply issues, Bosch is building a new semiconductor factory in Germany. The Group is one of the biggest suppliers of electronic components to the automotive industry, and it simply can’t suffer this type of disruption again. “The new site will take a couple of years to come online so Worcester Bosch won’t start getting supplies until the end of 2023, but it is a long-term investment. “The current climate presents a real challenge to traditional thinking around global supply chains, not only in electronics but in many other areas too. At the moment, Just In Time simply isn’t working and in fact, we are carrying inventory – a dirty word in our business!” he says wryly. Like every other business leader, Carl had hoped the economic turmoil would have settled by now, but extraordinary demand is still rocking the boat. “It looks like these issues will run over into 2023, so we continue to plan ahead. Demand has started to drop off a little bit, which will help our supply chain recover. But that in turn will present other challenges for us as a business.”

MAINTAINING GREEN MOMENTUM

The political vacuum at the centre of UK government also presents a massive headache for businesses, not least Worcester Bosch. Carl explains, “Clarity is needed around the government’s 10-point plan for its green industrial revolution. We’ve very conscious that some of our current technologies look set to be banned by the end of this decade or early in the next one.

Our research teams have been really encouraged by our hybrid field trial results, where a small heat pump is added to a gas or oil boiler system. The heat pump covers basic space heating requirements, and the boiler kicks in if temperatures fall below zero, or for a quick heat or hot water boost. It leads to a dramatic drop in carbon emissions, plus consumers get used to not relying solely upon gas or oil for their heating.

Carl Arntzen, CEO of Worcester Bosch

“So we are lobbying parliament to make key decisions on certain heating technologies. It makes the government’s inward-looking focus over the past months all the more frustrating.” Hydrogen-ready boilers were at the top of Carl’s agenda in our last interview; today, though, Worcester Bosch is still waiting for a top-level decision. “We have taken part in field trials to help the government decide on the future of the gas network and repurposing it over to hydrogen. But we face yet more delays and really can’t afford to waste more time. “The previous government also made some bold forecasts around heat pumps, running a couple of funding programmes and various other schemes, yet people haven’t been persuaded to make the switch.” Carl believes that part of the problem hinges on consumers’ current expectations and the way new technologies operate. “Consumers need some gentle nudges to change behaviour, for instance running appliances at lower temperatures and getting better thermal insulation. UK homes are traditionally very leaky and this, coupled with our dramatic weather changes, mean current heating systems are geared to turn up the thermostat quickly. “New technologies like heat pumps don’t work like that. They are a great technology but can’t react instantly to a sudden change in temperature. We need to make sure the right heating system and technology is applied to the right house!” Carl continues, “Luckily the UK rarely gets sub-zero temperatures, so I still think that heat pumps could still help meet future energy needs. Sadly it’s the same old record, with the decision on converting new houses over to heat pumps also delayed until 2026.” Nevertheless, Worcester Bosch continues to be a passionate advocate of hybrid technologies. “They should be supported as transitionary technologies that helps everyone get used to a little bit of electric heating alongside using their boiler. “Our research teams have been really encouraged by our hybrid field trial results, where a small heat pump is added to a gas or oil boiler system. The heat pump covers basic space heating requirements, and the boiler kicks in if temperatures fall below zero, or for a quick heat or hot water boost. It leads to a dramatic drop in carbon emissions, plus consumers get used to not relying solely upon gas or oil for their heating.” Carl is both pragmatic about current challenges and optimistic for the future. “Our sights are firmly set on decarbonisation, and we remain very excited about investment in new technologies. Bosch is renowned for innovation, it’s in our DNA. We’re just being held back a little by the blunt realities of life at the moment. “Everyone needs the new government to step up to the mark straightaway and support everyone through this short-term energy crisis. Once we get through this winter, I think the economy and inflation will start to settle down over the next couple of years. “If I got the chance to meet the new Prime Minister, I would simply say, ‘We need you to make decisions now. Decarbonisation and climate change isn’t going away. These issues need urgent resolution. Let’s get on with it!”