The Deutz case – shipwreck with electric engines

With electric drives for boats, the world’s oldest engine manufacturer wanted to set off

into the future. The result: quality problems, the threat of legal action and a divisional

sale. A lesson in mismanagement – including fights between works councils.

Published by Kirsten Bialdiga, Manager Magazine – 10/18/2023, 2:56 p.m. (Translated from german)

Judge Annette Gräfin zu Ortenburg is prepared for anything this morning. The witnesses have

been summoned and have appeared. Laptops are ready to play videos of the evidence. The

judge has scheduled a whole day for this civil hearing in Room 111 of the Munich II Regional

Court.

On the plaintiff’s bench, along with his lawyer, is Rolf Huber (66), once a high-ranking

Siemens manager and ex-board member of the Group Foundation. He represents a start-up

called Asobo, which he runs together with other former managers of Dax corporations. Their

goal: to equip fishing boats in East Africa with electric motors.

The electric drives for them were to come from Torqeedo, a subsidiary of the engine

manufacturer Deutz. But what looked like a textbook liaison of German industry is turning

into a fiasco. For some time now, motors have been breaking down in rows. So serious is the

matter that Huber and his partners are now taking Torqeedo to court this September 27 after a

cascade of escalations. For the company and its venerable parent company Deutz, a lot is at

stake – Torqeedo is offering three lawyers at once to fend off the lawsuit.

ce to fend off the lawsuit.

“Defects of the motors are undisputed”

Annette Gräfin zu Ortenburg, Judge

The judge opens the hearing punctually at 9 a.m. and quickly gets to the essentials: “Defects

in the engine are undisputed,” she says. The reasons for this are still to be discussed.

Anyone following the court proceedings, listening to company insiders, sifting through

volumes of documents and talking to dealers throughout Europe, gets an idea of the

dimensions of the case. One of the many incensed customers writes on a specially created

website: “Wanted a Torqeedo got a Torpeedo – how a German Industrial Company torpedoes

your projects.”

What seems clear by now is: The small start-up Torqeedo, once bought by Deutz as a starting

point for the E-transformation, threatens the green future of the traditional engine

manufacturer. It forms the core of the Green division, in which the Cologne-based company

(1.95 billion euros in sales; 4975 employees) bundles its few green activities. Just as

motorization once began in 1864 with the invention of the Otto engine in the Cologne district

of Deutz, so the electrification of commercial and agricultural machinery was to emanate

from Torqeedo.The figures, on the other hand, are a single casualty: Deutz now forecasts the adjusted

earnings margin of the Green division at minus 30 to minus 40 percent – for the Group as a

whole, it will be plus 5 percent. In the second quarter of 2023, Torqeedo’s e-motor sales

slumped by 43.6 percent compared to the same quarter last year.

Downward trend

The fact that Deutz’s green master plan has failed so far is not only due to partly inadequate

new developments. It also has to do with a negligent corporate culture that has repeatedly

allowed governance and performance failures in recent years. Managers who fail to recognize

problems, an ex-manager who granted a business customer a private standstill loan, and

hostile works councils who come to blows – all this is part of everyday life at Deutz.

The new CEO Sebastian Schulte (44), previously CFO at Deutz and who came from the

Thyssenkrupp marine division in 2021, now wants to get rid of the Torqeedo problem through

a quick sale. Talks, for example with Japan’s Suzuki, are making good progress, according to

insiders.

It would be a decisive setback for the transformation – manager magazin traces how it could

come to this. A report on the failed green transformation of one of Germany’s oldest industrial

companies.

Idea for Lake Starnberg

When Christoph Ballin (55), a manager at Gardena and a Lake Starnberg resident, notices that

boats with combustion engines are increasingly undesirable on inland waterways, he and a

colleague found a start-up for electric boat motors in 2005. This is indeed a gap in the market.

They christen the company Torqeedo, which is supposed to stand for torque (torque) and

speed (speed).

Ballin himself took over the marketing. Even his critics don’t doubt that he has an excellent

grasp of this. He even cleverly makes associations with start-ups in Silicon Valley. To this

day, the Torqeedo homepage is emblazoned with a wooden boat shed and the headline: “It’s

not unusual for a success story to begin in a garage. This is ours.”

Ballin even doesn’t shy away from comparisons with Tesla: “Sometimes parallels to Tesla are

brought up. We can lay claim to being the pioneer and market leader for electric mobility on

water,” he says in a 2017 interview with manager magazin. He estimates the growth potential

of e-motors for boats to be similar to that of cars.

At first, everything goes well. Ballin designs standard motors for kayaks, tenders or sailboats

that pass the practical test. Soon, the founders are drawn to higher boat classes with

increasingly powerful engines.

This makes the start-up Torqeedo interesting for the Deutz Group. In 2017, then Deutz CEO

Frank Hiller (57) is urgently looking for a new growth story for the diesel dinosaur. Hiller

doesn’t think twice; he sees an opportunity to transfer some of the e-know-how for boats to his

Deutz engines as well. He acquires the start-up from Bavaria for just under 74 million euros

and soon establishes the new “Green” segment in the Deutz Group. The combustion engines,

on the other hand, will operate under the name “Classic” in the future.The cooperation begins on a hopeful note. Almost every week, high-ranking Deutz managers

meet with Ballin and his technical director Ralf Plieninger (54). In the beginning, the modern

technology can actually be transferred to Deutz engines for small excavators, which are used

in inner cities, for example.

Nevertheless, the relationship between Ballin and Hiller became increasingly strained. The

Torqeedo founder was always bubbling over with ideas, but put profitability in the

background, says an insider. The company is posting losses, in some cases in the double-digit

millions, on sales of around 50 million euros.

Ballin is leaving the CEO post at Torqeedo to join the advisory board of the subsidiary for a

year and a half. He himself says he decided to leave the company “for personal reasons.”

From then on, Torqeedo’s management goes from strength to strength.

The Deutz board tries to get a grip on the problems with ever new heads. Ballin is succeeded

by Michael Rummel (67), who is sent to represent Deutz. Rummel is followed from March to

October 2022 by interim manager Alf-Joachim Harkort (64), a tough reorganizer who comes

from automotive supplier Leoni and is described as a manager with a robust personality.

Customers are getting nervous.

Fishermen in distress

One major customer in particular is increasingly losing patience: Asobo, the start-up launched

in 2019 and led by experienced Dax managers such as ex-Siemens foundation board member

Huber. The gentlemen have a noble goal: They want to equip fishing boats on Lake Victoria

in Kenya with Torqeedo e-motors in order to protect the environment and climate and

improve the working conditions of fishermen.

A project that, in addition to the German government, counts the Shell Foundation and Total

Energies among its financial supporters. On Africa’s largest inland lake and the third largest in

the world, tens of thousands of fishermen live off their catches, which they haul in at night.

From 2025, thousands of Torqeedo e-motors will be used on the lake thanks to Asobo. That’s

the plan.

Things went quite well at first, reports Wolfgang Gregor (69), one of the project founders and

a former manager at Osram. The first tests with 17 Torqeedo motors from the somewhat older

4 series went perfectly. But by mid-August 2022, that’s already over. 14 Torqeedo motors of

the new “Cruise” series (3.0 and 6.0 kW) fail after a short time, Gregor recalls. Torqeedo’s

lawyers also admit that there was a gearbox fault in the first delivery of these motors.

However, they say that “only” 14 of a total of 21 motors delivered were involved. “It is

shocking that a Deutz subsidiary sells boat engines that – as in the case of our fishermen on

Lake Victoria – fail within a very short time and put people’s lives in danger,” laments

Gregor, who repeatedly gets a picture of the situation on site during that time. The suspicion

arises that Torqeedo has brought new engines onto the market without sufficient product

testing.

According to the report of Torqeedo’s head of development, who was also at the lake, the

older Cruise 4.0-kW series motors proved to be much more reliable than the 3.0- and 6.0-kW

motors delivered most recently. Because Torqeedo drives failed, he reports there were nights

with up to three rescues for fishermen in distress. After several months of back and forth,

Asobo finally files a lawsuit. In part because, according to them, the project has virtually

ground to a halt due to the frequent breakdowns.

Torqeedo’s lawyers rely on a fundamental defense: The motors and systems were free of

defects when the risk was transferred, and only improper use by the fishermen caused the

problems, they say in their reply to the court. Gregor finds it shameful that Torqeedo wants to

blame the fishermen, after all they had no problems with the engines of the first series.

In the trial at the Munich Regional Court, the parties ultimately agree on a settlement. Mainly

for pragmatic reasons: Sending an expert from Germany to Kenya alone would require a

request for legal assistance and would take years, Judge Ortenburg had previously warned.

This would not have helped either party. This way, however, at least the development aid

project can be continued. With a different engine supplier. But Asobo is far from the only

customer with failures.

“We never reached Monaco.” Rolf-Werner Boss, entrepreneur and Torqeedo customer.

Rolf-Werner Boss (55) also relies on a Torqeedo motor, basing his entire business model on it

and, according to his own statements, closing the small Geneva IT company he once founded,

Kin S. A. Boss is having a trimaran with an electric motor named Noos built so that he can

coach managers and market eco expertise on this ship. He plans to be ready to launch at the

end of 2018, with the maiden voyage taking him from La Rochelle to Monaco. The Monaco

Energy Boat Challenge is taking place there, a perfect marketing event for him. Especially

since Prince Albert had announced his coming, he said. “But we never reached Monaco

because the Torqeedo system was on strike on the coasts of Portugal, Spain and Ibiza,” Boss

says looking back. The final stop, he says, was Mallorca.

The problems with the e-drive continue, and the delays quickly bring Boss to his financial

limits.

He contacts the then Torqeedo boss Ballin, who, to Boss’ surprise, grants him two bridging

loans totaling 70,000 euros. As a private citizen, mind you. In return, Boss must contractually

agree to waive claims for damages in the future, even though the engine was not yet working

at the time of the contract. A copy of the contract and the bank transfer documents are

available to manager magazin. Ballin does not want to say anything about this because he is

obliged to the other side of a corresponding contract not to comment on the contract and its

background. Deutz says that after the contract was signed, the personal loan was reported to

the Deutz compliance department. The department then ordered Ballin to immediately cease

further personal support for the customer.

Customers without support

In the meantime, Boss has set up a website on the Internet where aggrieved Torqeedo

customers can register to prepare a class action lawsuit. His boat, however, is still not

running.There are many of these stories.Anyone who phones Torqeedo dealers in variouscountries hears a lot of resentment.The smaller electric motors run well, but the motors of the

new 3.0 kW and 6.0 kW series are too delicate, they say.Even the lightest grounding would

cause them to break down. Deutz does not want to comment on this. A high-ranking group

manager speaks of “temporarily too much demand from customers”.

“Customer service is a disaster,” says a dealer who does not want to be named because he

fears that Torqeedo Service will otherwise leave him hanging even longer in the future when

it comes to complaints. Many dealers have now discontinued Torqeedo motors, but: “That’s

like a car dealer discarding VW.” In addition, the problems do not affect all engine types by a

long shot. A company event for dealers and contractual partners, the Electric Days, which was

to take place in mid-October, was cancelled by Torqeedo at short notice. Deutz does not want

to comment on the reasons.

Torqeedo’s lawyers put the customer complaint rate at 3.2 percent, which insiders believe is

grossly understated. Nevertheless, who would board an airplane with a 3.2 percent probability

of problems, up to and including in-flight turbine failure?

Toilet brushes with company logo

At Torqeedo in Weßling near Munich, the management changes once again in October 2022.

After neither the Deutz technical director Markus Müller (43), who was also responsible for

Torqeedo, nor the cost-cutting Harkort were able to get to grips with the problems, Deutz boss

Schulte is now relying on Fabian Bez (43), son of former Aston Martin boss Ulrich Bez (79),

as the new Torqeedo boss.

Fabian Bez, who, according to insiders, spells out corporate design at Torqeedo down to

orange toilet brushes with the company logo, was formerly in the service of convertible

supplier Webasto . Although he is not from the industry, he has caught up with a few of his

old Webasto colleagues who are also not from the industry. Apparently, this is not going

down well. Company insiders report high fluctuation in the workforce, with some teams

quitting almost completely. To this day, Torqeedo does not have a works council; the

employees were not aware of this.

Fight at the wedding

The Torqeedo workforce can hardly expect any support from the works council of the parent

company. They are struggling with their own problems. A few years after the departure of

long-time Deutz works council head Werner Scherer in the summer of 2018, a power struggle

between rival groups in the employee representation has openly erupted in Cologne. So

openly, in fact, that the dispute has now even turned violent.

On May 6, 2023, the dispute escalated to such an extent that a high-ranking works council

member allegedly beat a colleague to hospital at a wedding. This is the result of a works

council report, which was published on Deutz’s bulletin board and is available to manager

magazin.

The author, Hans-Jörg Schaller (63), the current head of the works council and a member of

the Deutz supervisory board, describes how he took the victim of the beating to the

emergency room that same night. The report also mentions a broken finger, a bruised skull,

back and hip, and a stitched wound. The Deutz board reacted with an appeal to all involvednot to leave the factual level and reminded that the company’s interest must always be in the

foreground.

Problems with a green product of the future, the threat of legal proceedings, overburdened

managers and hostile workforces. So there is a lot for Deutz boss Schulte to do. As proof of

his stamina, he likes to cite the fact that he once won the world championship in the rowing

eight. Within the company, this earned him his nickname: “WM 806,” based on his license

plate number: K – WM 806, i.e. Cologne – World Championship – Rowing 8s – in 06.

Schulte obviously understands symbolism. He is now creating the post of Green CEO, albeit

below the Deutz Board of Management. For the next three years, he has announced a round

sum of 100 million euros for investments in green technologies and proclaimed that he will be

“open to technology. The start-up-suitable “you” has also long since been introduced

internally; wall posters with pictures of green grasses hang in a former Cologne factory hall

(“Innovation Center”) on the company premises.

Schulte will have a harder time with the figures, since the starting position is unmistakable: 97

percent of Deutz’s sales to date come from diesel engines, and the meager “Green” division

posted a loss of almost one euro for every euro of sales in the first half of 2023.