DEUTZ CEO on 2024: Achievements, Challenges, and Outlook

What is your assessment looking back at 2024?
Dr. Sebastian C. Schulte: Last year was quite challenging and intensive for DEUTZ, not least because of the difficult market conditions. But we were successful overall. We did sell significantly fewer engines – just over 140,000 – than in the previous year, when we sold 187,000. And although engine sales alone reveal increasingly less about our earnings performance thanks to our strong diversification, this decline still had an impact on all aspects of the value chain – from procurement and the supply chain through to production and assembly. We had to adjust our capacities, which the teams did fantastically. At the same time, we went in new directions, broke into new markets, and made further decisive progress in implementing our Dual+ strategy.

What makes you particularly proud when you think about last year?
Dr. Sebastian C. Schulte: There are lots of things. From individual meetings with customers, partners, investors, and employees to our 160th anniversary. Most importantly, however, we – as an organization – learned how to align all our energies toward growth while marrying that with a much greater focus on our cost base. Of course, we are still learning more here every day, but that in particular was key last year.

You’ll need to explain this marrying together. Let’s start with growth and strategy. In autumn 2024, you updated the Dual+ strategy. Why?
Dr. Sebastian C. Schulte: To become ever better at meeting the needs of our customers and the demand in our main markets. Everything we do is geared toward this. We want to offer products that are sought after now and will continue to be so in the future. That is the key. But at the same time, we want to make ourselves less dependent on the highly cyclical markets that we have long considered our natural home. So the core of our updated strategy is to put DEUTZ on a broader – or more resilient – footing. We will be doing much more to position ourselves as a provider of solutions. And in all areas where our experience and expertise means that we are already ahead of the field or have the potential
to get there.

You’re talking about the newly created Solutions segment.
Dr. Sebastian C. Schulte: That’s right. Called DEUTZ New Technology since the start of this year – but previously known as Green – our alternative drives business is currently part of Solutions. We want to align this offering even more closely to the market and are concentrating on electrified products and hydrogen combustion engines. For this to work, we in German industry need the building blocks to be put in place at national and European level, including a strategy for the supply of hydrogen. We ourselves closed a difficult chapter by selling Torqeedo to Yamaha Motors, who are providing a much better home for the Torqeedo team than we ever could have.
 

The Energy business unit was created through the acquisition of Blue Star Power Systems and also forms part of this segment. Its annual revenue is expected grow to more than €500 million by 2030. What else are you hoping to achieve here?
Dr. Sebastian C. Schulte: This is a good example of what I mean by a broader positioning. We have entered a market – for power generators – that is new to us, but not entirely foreign. The engine is, after all, central to this equipment, and we have been producing engines for use in gensets for a long time now. Acquiring one of a leading manufacturers of power generators in the USA means we are operating in familiar value chains and tapping into a fast-growing and less cyclical market. This is fully in line with our strategic goals.

What are you basing your optimism on?
Dr. Sebastian C. Schulte: Global demand for electricity will double by 2050. But the grids are not expanding at anything like the same pace, especially in many of the more highly developed, industrialized countries. Moreover, the share of renewables in the electricity mix is growing rapidly. The net effect is a discrepancy between demand and grid capacity. This is creating instabilities that hit not only households but also system-critical infrastructure such as server farms and hospitals. Storms, earthquakes and other extreme weather factors only compound the problem. This phenomenon is apparent not just in developing countries but increasingly also in highly developed countries, particularly the USA. The solution lies in a more decentralized energy supply system and in microgrids, which reduce fluctuations and outages by linking consumption, storage, and production smartly and at local level. We are reckoning on power generators playing a key role in both these areas.

At the same time, you are continuing to focus on the traditional combustion engine business. What is your assessment of this segment?
Dr. Sebastian C. Schulte: In the business with traditional combustion engines (Classic), we expect the market consolidation to continue and, above all, to encompass off-highway applications that still rely on combustion technology. We will carry on playing an active role in this business in order to make DEUTZ more cost-effective and break into growth markets. We showed what we mean by an active role last year.

You’re referring to DEUTZ taking over Daimler Truck Engines from Rolls-Royce Power Systems?
Dr. Sebastian C. Schulte: For one. This was another major step forward in our consolidation strategy. We gained access to important customers that we had not served before and are now more strongly positioned in higher power ranges. We also acquired 50% of the shares in HJS Emission Technology,
a global market leader in exhaust aftertreatment. In doing so, we protected our supply chain for critical combustion engine components and are ensuring that important industrial expertise is retained in Germany. This technology is still a long way from being consigned to the museum. We also began to make our production even more flexible so that we can respond to market changes with maximum
agility. The collaboration that we entered into last year with India’s TAFE Group represented a huge step in this direction.

The service business also remains a core element of the updated Dual+ strategy. What is the objective here?
Dr. Sebastian C. Schulte: We will continue to expand the already fast-growing service business and increase its annual revenue to €1 billion by 2030. We are doing this through targeted acquisitions in regions where we have not yet made sufficient inroads and by making better use of the existing service portfolio. This includes extending the network of locations and expanding into new business models, such as smart, digital services.

So Solutions encompasses DEUTZ New Technology, Classic, and the service business. What is DEUTZ’s target here when everything is tallied up?
Dr. Sebastian C. Schulte: Overall, we are aiming to grow annual revenue to around €4 billion by 2030. That is double what the Company currently generates. Of course, this will demand a great deal from all of us. The courage to venture into new areas of business without sacrificing our strengths. To have clear structures and make rapid decisions so that things get done. Another thing we’re working on: In 2024, we held more than 25 workshops at 60 locations, reaching over 2,500 employees in person to talk about our Dual+ strategy – what it means for our employees and how they, in their own roles, can help to achieve our objectives.

At the start, you talked about doing things at the same time. On the one hand you want significant growth, but on the other hand DEUTZ is cutting costs. Is that not a contradiction?
Dr. Sebastian C. Schulte: It may seem a little counterintuitive at first. But both are the right approach, and we need to learn to do both. Not least, because of the difficult economic situation. In 2024, we mounted a response in the form of various short-term measures, including short-time working. And at the end of last year, we set out to make lasting savings of €50 million per year – without curbing our ability to innovate, but allowing us to respond to structural shifts.

What does that mean in practice?
Dr. Sebastian C. Schulte: We need to be honest with ourselves here. Especially when it comes to the traditional combustion engine. There is currently not nearly as much major development work in the pipeline as in the past, because the new emission standards are still years away. We will therefore have to part with around 200 employees in this area. Together with the works council and the German Metalworkers’ Union, we have found good, fair solutions for them that are currently being put in place.

One final question. In addition to the cost-cutting program and the growth strategy, DEUTZ turned 160 last year. How did you mark this?
Dr. Sebastian C. Schulte: In September, together with 3,500 DEUTZ employees, we hosted an inhouse festival at our former premises. During a difficult period in which we at DEUTZ have faced challenges too, we created an experience for us all that brought employees together from around the world. For the very first time. The value of this day for us as a company simply cannot be understated, even though the effects cannot be measured directly, and definitely not in euros or dollars. The feedback that we received very much backed this up. And in May, we invited politicians and customers to our ceremony alongside the Mayor of Cologne, Henriette Reker, and the Minister President of North Rhine-Westphalia,
Hendrik Wüst. The latter said something that will stay with us all: “Germany needs more DEUTZ.” A compliment for us, showing that we are on the right track. But also an incentive and motivation to focus on our strengths.

December 13, 1978
born in Wiesbaden

2008 – 2013
ThyssenKrupp AG, Düsseldorf/Essen:
2008 – 2011: Project Manager M&A
2011 – 2013: Department Director Corporate Programs
2013 – 2014: Head of Investment Controlling
2014 – 2017 ThyssenKrupp Companhia Siderúrgica do Atlântico /Ternium Brasil  Rio de Janeiro (Brazil)
CFO
2018 – 2020:
ThyssenKrupp Marine Systems, Hamburg / Kiel
Managing Director and CFO
January 2021 – February 2022:
DEUTZ AG, Cologne
Member of the Board of Management CFO
Since February 2022
DEUTZ AG, Cologne
Chairman of the Board of Management