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.