WILO – CEO letter on the coronavirus crisis: Moving forward together safely

Dear colleagues,

In the coronavirus crisis, the world is facing a historic test. An unbelievable number of people are losing their lives and are threatened by loss of jobs and prosperity. At this point, the extent of the material and social damage can hardly be quantified, and certainly not on a global scale. It is completely unclear how much unemployment this crisis will cause in the long run, or how many companies will be unable to recover from the crisis and will eventually have to file for bankruptcy.

Solidarity in health and economic matters is the need of the hour

At the political level in many countries of the world, the initial reactions to the coronavirus crisis came as a reflex and were mostly nationalistic. We witnessed unilateral border closures not only within the EU, medical supplies and protective materials were hoarded, and a systematic redistribution of patients between countries was initially unthinkable.In recent weeks, the heads of state and government around the world have met in various multilateral institutions using video conferencing systems. It is slowly becoming clear that the virus knows no borders and that a considerable degree of coordination and mutual supranational solidarity is needed to contain the pandemic.The individual regions and states will still need each other even after the storm has passed in order to fight the recession. It is necessary to put together comprehensive aid packages for those states that are hit particularly hard by the crisis. To overcome the crisis, the burdens of countries such as Italy and Spain, for example, should be shared among all EU members. After all, these countries cannot be blamed for being the first to be hit by the pandemic, or for being hit so hard. In this respect, the issue of Eurobonds to stabilise the economy would be a clear signal that Europe is moving forward in a sovereign manner and even increasing its integration in times of crisis. Further integration would also have a positive effect on the global economic recovery.

In parallel to mastering the health crisis, it is therefore extremely important to minimise the economic damage caused worldwide, to preserve financial stability and to prepare for a subsequent economic recovery phase.As much as isolation in private life and social distancing currently characterise the social environment, the opposite is true at the political level. It is now an essential matter of cooperation and coordination in the individual regions of the world.

In addition to solidarity in health care, solidarity in economic matters is therefore the need of the hour. As the coronavirus crisis shows once again, protectionism and isolation are not effective and increase risks. Global challenges such as climate change and now the coronavirus pandemic can only be mastered together, thinking globally and not – as a reflex – nationally.

Wilo is now organising the “ramp-up”

Whereas towards the end of last year, companies were still dealing meticulously with the budgets and medium-term plannings of their net assets, financial and earnings position for the next five years, what is now required is not only a long-term strategic understanding but also solid short-term tactical skills. We will have to steer through and react to the storm as we go, and, at the same time, plan the right time and adequate measures for the “ramp-up”.

Hundreds of thousands of companies are on the verge of shutting down or losing their independence. If companies want to ensure “going concern”, i.e. the continuation of their business activities, they must now not only plan the reconstruction (or “ramp-up”), but also adapt their organization accordingly and immediately implement measures.

The “ramp-up” requires at least as much tactical skill as the “shutdown” and must be carried out in the same spirit of solidarity.For us as Wilo Group, “ramping-up” is not quite as complex as for companies that have had to shut down their business operations completely.

We are of systemic importance and serve critical infrastructures

We have considered it absolutely necessary to maintain, as far as possible, those activities that benefit the general public and support state public services. With our products, systems, and solutions, we serve applications which are vital for keeping everyday life going. As Wilo Group, we therefore assume social responsibility especially in these times of crisis and are a fundamental part of the critical infrastructure in many countries around the world. For example, we have succeeded in obtaining special permits to continue our production activities in the USA, Russia, France, Italy, and India. Also, we have been classified as “of systemic importance” by a number of individual hospitals in Germany (among others). Furthermore, according to the German Federal Ministry of the Interior, HVAC companies are generally part of the critical infrastructure.

Industrial products are crucial in overcoming the coronavirus crisis

Dear colleagues,Certain journalists are already seeing this – again – as sign of the end of industry and of the “old economy”. Reference is made to the rise of technology giants like Amazon, Apple, the big streaming companies, Microsoft with its cloud services and certainly the gaming giants like Nintendo. Supposedly, all these digital companies benefit from the coronavirus crisis and their business models are boosted as if by magic. On the other side, the shutdowns of traditional industrial companies and a corresponding fall in share prices on the stock markets are illustrated negatively.

It is certainly true that in the midst of the coronavirus crisis, we are discovering the digital world of streaming, e-sports and e-learning, and we are using e-commerce and online shopping much more than before.Here too, the Wilo Group is seizing its opportunities and consistently driving forward the digital transformation along the dimensions of products & solutions, processes, and business models. To give you a concrete example, the Wilo Live-Assistant provides our customers with digital support via smartphone, which is unique in the pump industry. Without having to be on site, our Wilo experts in 45 countries around the world can provide digital support for technical challenges of all kinds and are thus close to the customer despite social distancing.

So, we keep it “smart” even in times of crisis and position ourselves even faster as a digital pioneer in our industry. But it is also true that the crisis demonstrates that people cannot exist without industrial products.Medical equipment such as industrially produced respiratory devices and laboratory equipment is needed for survival. It is industrial products that ensure the maintenance of critical infrastructures in the health, energy & water, transport and traffic sectors. The goods sold online must first be industrially produced and physically available in order to be distributed virtually. Even the commodity ‘toilet paper’, which is rare and sought-after these days, is an industrial (luxury) product.

So, I think it is once again wrong to proclaim the sunset of industrial societies. The crisis has just shown that the Wilo Group, for example, as an industrial and technology group, makes a significant contribution to keeping sectors of systemic importance running, and is thus a fundamental component of critical infrastructures. Therefore, industrial companies are also the ones ensuring survival in times of crisis.

We will master the crisis through solidarity

Dear colleagues,I would like to take this opportunity to express my highest appreciation to you all for what we have achieved so far in these times of crisis.You all are making the Wilo Group meet its obligations to society.The virus has not paralysed us but has made us more creative and more supportive. We support each other and show more compassion and empathy. We help each other and think in teams.

In a sign of solidarity, the Executive Board and managers of the Wilo Group are waiving a substantial part of their remuneration. These sums are donated to a Wilo solidarity fund set up for this purpose and are intended as a bonus to benefit in particular those professional groups in the Wilo workforce who are exposed to particular risks in this crisis.Dr Jochen Opländer, shareholder and honorary chairman of the WILO SE Supervisory Board and founder of the Wilo-Foundation, also welcomes this decision and agrees to make a generous donation to the Wilo solidarity fund together with his family. At the same time, the shareholders of WILO SE, whose majority shareholder is the Wilo-Foundation, have agreed to leave around 80 % of the dividend in the company this year and to distribute the remainder over a longer period of time.

The Wilo Coronavirus Task Force becomes the Wilo Go-Ahead Task Force

Furthermore, it is important to me to mention that our globally active Wilo Coronavirus Task Force is doing an excellent job. Their aim is to minimise the negative health impacts as well as the economic shocks on us as much as possible.In particular, our value-added chain has been kept running efficiently during the partial “shutdown”.

Now is the time to focus the task force on a step-by-step “ramp-up” without neglecting health aspects, not violating the duty of care towards our employees under labour law and not ignoring the legal requirements and restrictive measures of the individual countries.

Therefore, the Wilo Coronavirus Task Force becomes the Wilo Go-Ahead Task Force. Its additional task is now to collect foresightedinformation, develop scenarios, and identify the options and measures needed for a coordinated “ramp-up”.The aim is to act with tactical understanding, pragmatically and quickly. After all, the crisis also offers opportunities in conquering market share and strengthening customer loyalty. While one of the task force’s previous focuses was on supplier management, communication with the customer is now even more crucial.Therefore, with immediate effect, Peter Glauner, SVP Group Service, will be leading the Wilo Go-Ahead Task Force together with Stefanie Hirschmann, SVP Group Procurement & SCM. To leverage synergies, the task force will otherwise remain in its extremely successful current composition.

Redefining our strategies

In addition to tactical measures, it is important to continuously question our strategies.The coronavirus pandemic ruthlessly lays bare to us the weaknesses of the current global economic order with all its interconnected value chains.Specifically, we must intensify our localisation efforts. Individual regions should be able to act as decentrally as possible and as centrally as necessary.Make-or-buy strategies are being put to the test, the depth of value creation. in individual regions and countries is being redefined, insourcing activities for critical components are tending to be stepped up and vertical integration along the value chains is being examined for feasibility.Furthermore, the dependency on individual suppliers is to be reduced by multiple sourcing and safety stocks are to be redefined in the context of stockpiling.

Health comes first

Dear colleagues,We have focused our entire performance capability on overcoming the coronavirus crisis. As Wilo Group, we stood and still stand by the now unfortunately no longer quite so unknown task of focusing our strength and energy on a single problem – namely overcoming this crisis.Now it is additionally important to show the same speed of action during our “ramp-up”. Here, the very different legal framework conditions of the respective countries must be taken into account. We are approaching this new challenge with pragmatism and creativity, with a lot of communication and, above all, with the same helpfulness and cordiality as before.Solidarity is also the need of the hour during our “ramp-up”. I am very much looking forward to soon being able to communicate with as many of you as possible – and not just via this channel, social media, or video message.After all, it is precisely this crisis, with its requirements for teleworking and digital video conferencing as well as social distancing and partial private isolation, that shows that even in the digital age, people will remain the focus of attention and nothing can replace personal contact.Until then, please continue to be patient and do not forget: health comes first. Take care of each other!

Oliver Hermes

President & CEO of the Wilo GroupChairman of the Board of Trustees of the Wilo-Foundation