German household goods and furniture company Fackelmann moved much of its manufacturing to China in the 1980s. Now it is bringing much of it back again. But almost nothing is the way it used to be.
• In Hersbruck, near Nuremberg, a production line shoots out plastic barbecue tongs, plastic lids for baking tins, plastic sink strainers, cooking spoons and ladles. They are all products that only cost a few euros in the shops – and unlikely to be manufactured in a country like Germany these days.
Just a few months ago many of them were still being made in factories in the Chinese cities of Pingdi and Shenzhen. Until 2012, the Fackelmann company employed 3,500 workers in China. That number is now down to 1,500, and by the end of 2018 there will be just 1,000 left. Yet, despite reducing its workforce in Asia, Fackelmann is not turning out any fewer bathroom accessories, potato peelers, toothpicks, frying pans or cake tins.
A shift is visibly taking place in Franconia, southern Germany, where employees earn on average more than €3,400 (£3,000) gross a month. Machines are bringing jobs back to this country of high wages. The question is: what kind of jobs? And for whom?
To China and back
Fackelmann’s story is typical of the way that industrial labour has evolved in Germany over the past 50 years. In 1960, it installed the first machines to cut wood into spoons, chopping boards and toothpicks. A factory was set up in the small town of Hersbruck, 20 miles outside Nuremberg, because it offered plenty of space and cheap labour. Alexander Fackelmann, who now runs the company, was four years old when the factory started sharpening its first toothpicks.
When he turned 25, the company began to manufacture plastic kitchen utensils and boxes. Like many firms in Germany, the company grew and grew, and the wages rose. In 1960, the average employee in Germany earned 6,000 deutschmarks a year. By 1990 that had shot up to DM41,900. Even adjusted for inflation, the trend is clear: between 1960 and 1990 real wages increased by 250%.
German reunification and the new access to Eastern Europe opened up huge markets and led to a sharp rise in demand for baking tins, spatulas and ready-made furniture. Fackelmann wanted to produce more – and more cheaply.
Alexander Fackelmann’s father had built his first factory in China in 1987. Soon the company had several thousand workers in China, while the size of its workforce in Germany stagnated. Fackelmann was doing what so many German manufacturers did in the 90s: moving the labour-intensive aspects of the production process to countries where wages were low. Eventually, in the 2000s, Fackelmann’s management asked itself: why are we still manufacturing in Germany? Why not simply shut down the local factory?
“My accountants showed me calculations of how much we could save if we stopped all our manufacturing operations in Germany and moved them to China. The bottom line was a seven-digit figure,” says Fackelmann. In board meetings, remarks were made to the effect that “nothing lasts forever” and “if we don’t want to jeopardise the company, we must be prepared to do whatever it takes”.
Fackelmann himself, however, was not prepared to go this far. “I knew at the time that if we left, we would not be coming back,” he says. “You lose all your knowhow and your expertise. There’s no turning back.” Nevertheless, in business terms there was no point making simple plastic kitchen utensils in Germany.
In the end, Fackelmann found a compromise between tradition and economic efficiency: the company kept the site near Nuremberg, but expanded in Asia and Eastern Europe. The production output in Germany became a small part of the increasing global puzzle.
The decision testified to a degree of independence and farsightedness. “I’m very glad that we didn’t blindly follow the figures,” says Fackelmann.
Something astonishing has happened in the past 15 years. In the Hersbruck factory more goods are being produced than ever before; 17 machines run non-stop, robots whirr to and fro, clutching plastic lids and kitchen sink mats, watched over by three men working eight-hour shifts.
Most Germans believe factories here are only viable if they manufacture complex, technically sophisticated goods such as cars, trains, washing machines, power plants or aircraft. Products that require a lot of expertise and a highly trained workforce – and that sell for enough to pay engineers’ salaries of more than €60,000 a year.
Steffen Kinkel, professor for networked business at Karlsruhe University of Applied Sciences, knows that this is not the case. Every few years, he asks some 1,400 German manufacturers whether they have moved jobs abroad or brought jobs back. He has been sending out his surveys ever since 1995. “That was when relocations were at their peak,” he says. In 1997, he found 27% of metalworking and electronics manufacturers were shifting part of their production abroad. In 2003, it was down to 25%. “Since 2003, the figure has been dropping continuously,” says Kinkel. By 2012 just 8% of industrial enterprises were still emigrating.
Kinkel’s surveys also reveal that one in three of the companies is now repatriating parts of its manufacturing operations that had previously been moved abroad. Many have had problems with their local partners or the logistics have proved too complicated. Some, like Fackelmann, have decided that it makes more sense economically to manufacture in Germany. Those making a strategic decision in favour of Germany often do so because automation is opening up new perspectives. Operating factories in Germany is no longer simply a nostalgic gesture; it can be highly profitable, provided you are able to replace enough workers by machines. “Those companies that make intensive use of digitisation technologies – robots and intelligent software – are more likely to come back,” says Kinkel. “About 10 times more likely.”
So, robots and computers are bringing back jobs that had been given up for lost in Germany.
Less effort, more responsibility
Werner Gilner has been working on the factory floor for 29 years now, manufacturing the kind of plastic utensils that can be found in kitchen drawers in virtually every home. The factory itself has not changed, only the machines.
Gilner is 61. For 26 years, until three years ago, he worked shifts – in the middle of the night or in the early morning, whenever he was needed. “There comes a point when you get tired, you know? And my wife also complains when I am always away at night.”
In the old days, the work used to be tougher, he says. In 1987, there were three of them at each machine. The plastic parts had to be removed from the mould by hand for packaging. The door to the machine had to be opened every 45 seconds. Nowadays a robot does this automatically and puts the parts on a conveyor belt, where they are also labelled automatically. The blades of the vegetable graters, too, are now pressed into their plastic handles by robot rather than by hand, as before.
“The most exhausting aspect nowadays is that we have to run around so much, checking things. Three of us have to keep an eye on 17 machines. But I enjoy that – I want to have everything under control, and I’m not satisfied until I know what all the machines are doing,” says Gilner. It is not only the job that has changed, though. Almost half the workforce was unskilled when Gilner started at Fackelmann. That is no longer an option.
His boss is Gerd Deinzer, 32, a plastics engineer. “With so few workers per shift, we cannot afford to employ anyone who doesn’t know how to get the machines up and running again if something should break down,” he says. “The work has become technically more demanding. We need to build extraction devices and write the computer programs for the robots; we do all that ourselves.”
In fact, the robots used by Fackelmann are still relatively simple units in metal safety cages. The latest generation of industrial robots are fitted with sensors so they can work alongside human beings. The hi-tech factories operated by major companies are already a step ahead.
However, even these simple robots and fully automatic machines have fundamentally changed the nature of the work at Fackelmann. Baking tin lids, sink strainers and fly swatters – until recently, it took three workers standing beside every machine in China to make them, now there are robot arms.
According to Alexander Fackelmann, the equation changed about four years ago, when Chinese labour became more expensive and the machines got cheaper.
The wages of Chinese workers have increased by up to 20% a year. Workers who used to be paid $100 a month were now earning $600 to $800. It is a fraction of what skilled workers and engineers cost in Germany, but it shifted the balance.
Instead of spending money on Chinese workers, it was decided to invest in robots and machines, which may cost several hundred thousand euros, but they run non-stop, never tire and only require electricity.
“The machines we invest in,” says Fackelmann, “all pay off within three years. We are simply more efficient here, despite the higher wages. And if I can afford to, then of course I would prefer to manufacture the goods here in Hersbruck, where I grew up and where my roots are.”
Two new plastic-processing machines were bought and a handful of skilled workers and engineers were hired. Essentially, the team is now doing the same work that several hundred Chinese workers used to do.
What’s left to do?
The Swedish economist Carl Benedikt Frey, of Oxford University, is quick and precise as he describes the changes that automation is bringing to the working world: he reckons 42% of jobs in Germany could be replaced due to automation, software and robots.
According to Frey, this process has already begun in all the countries in the Organisation for Economic Co-operation and Development. Jobs that are monotonous and repetitive – such as book-keeping, secretarial services and factory work – have already been replaced. In the UK, for example, the number of jobs requiring medium-level skills has dropped by 11 percentage points since 1993, in France by nine and in Germany by seven points. Although the number of highly skilled jobs has increased over the same period, the rise has been smaller. In Germany and France by four percentage points, and in the UK by seven.
“Automation has already wiped out a large number of jobs,” says Frey. And it does not usually create new ones suitable for the people whose jobs have been taken over. No one is going to turn 50-year-old accountants and secretaries into engineers and IT specialists.
However, there are some tasks that robots cannot do. “Robots find cleaning incredibly difficult. It requires a wide range of different objects to be recognised, grasped and analysed. At the moment, robots cannot even tell whether or not a bed has been made – something a human can see at a glance. And, of course, there are also a number of very demanding tasks for which humans will be needed in the future, too – jobs that require empathy, and involve communication and creativity.”
“I have never been afraid of losing my job,” says Gilner. Not in the 1980s, when the company was still a regional player “on the verge of stagnation”, in the words of Alexander Fackelmann. Nor in the 1990s, when it moved production to Asia and turnover multiplied to more than €300m. “Because we have always been successful,” he explains.
One of the side-effects of automation at Fackelmann was that the employees had to learn how to handle computers and robots. They needed to understand how to write computer programs for these machines, and how to get them going again when a program crashed or a robot got stuck. Their jobs became more demanding, more exciting and less monotonous. So automation can upgrade the work that is already there.
Gilner stands at the top of a flight of stairs with the factory floor spread out below. Machines are rattling away and robot arms are swinging to and fro, while men bark brief exchanges at each other above the noise. “You know,” he says, with healthy self-confidence, “without the people who work here, all this would be useless.”