Lanxess CEO departs as auto markets enter the New Normal
on February 5, 2014

AutoGer Feb14The blog, like most people, doesn’t like change.  Change creates uncertainty, and makes us all nervous.  Therefore in recent years, it has secretly hoped that its forecasts about the inevitability of the subprime crisis, and the arrival of the New Normal, would prove wrong.  Life would be so much easier if everything could simply continue as it was.

Thus it is distressed to see developments at Lanxess, one of its favourite chemical companies.  Lanxess has achieved a great deal over the past decade since it became independent from Bayer, even gaining a place in Germany’s blue-chip Dax stock market index in 2012.

But now Lanxess is struggling, and its CEO, Axel Heitmann, is departing “by mutual agreement” with the Board.  As the Financial Times reported:

About 40% of the company’s sales remain linked to the automotive and tyre industries which have suffered in the depressed state of the European car market.”

Lanxess’ problems are thus a case study on the need for companies to carefully consider how the dramatic demographic changes now underway across the world will impact their future business and profits:

  • Germany is, of course, a classic case, as the blog discussed in detail in December
  • Its median age is 45.7 years, and German women are having an average of just 1.2 babies

And as the above chart based on a study from Germany’s IMFO institute shows, older people drive much less.  70 year-olds, for example, drive only half the distance of 30 year-olds (blue line).  Thus we are seeing the end of a long period where Germans were driving more each year:

  • Even driving amongst 30-39 year-olds is no longer increasing
  • They were driving 34km/day (21 miles/day in 1976 (green), and this distance rose around 9% by 1997 (red)
  • But it has now stabilised at this level

Equally important is a separate finding from IFMO, discussed in the blog a year ago, that car ownership has decreased in the core 30-39 age group in Germany and most Western countries.

A later report takes this study a stage further, showing that fewer young men in Germany and elsewhere now bother to take a driving test.  By definition, of course, someone without a driving licence will not own a car.

IFMO is the research establishment of BMW, and so its work is really ‘a must-read’ for any company selling to the auto industry.  It suggests, for example, there is :

“A strong indication of profound changes in the travel behaviour of young adults in industrialised countries with signs of decreasing car orientation and reduced overall travel” .

In fact, they go so far as to speculate that we could now be seeing a “peak car” phenomenon develop.  This is being caused by older people driving less than when they were younger, whilst younger people use other modes of transport, or substitute social media instead.

The blog fears that profound change is thus inevitable in many key industries as we move into the New Normal.  In turn, this conclusion suggests that Lanxess’ current problems are a powerful example of how this will impact even companies which have been highly successful in the past.

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