Swiss champion Switzerland: How SMEs overcome the currency crisis

"The strong Swiss franc is a burden for business": A lament voiced by many SMEs (small and medium-sized enterprises) these days. However, there are also companies that handle the crisis pretty well. Stadler Rail is a best practice example.

In the last annual balance sheet of Swiss train manufacturer Stadler Rail, the company’s owner and CEO Peter Spuhler had to inform about a profit decline in the amount of approx. 100 million Swiss francs due to the Swiss franc shocks. But Spuhler is not one to lament. Instead, he looked for solutions and found them.

In one of their studies, London-based auditing and consulting company PricewaterhouseCoopers (PWC) called Stadler Rail a Swiss Champion. There are Swiss SMEs like this train manufacturer, which are technology leaders with their products, set standards with their services and are globally more successful than their competitors. And they have a solid financial foundation for making important investments for the future. “Because these medium-sized companies have become global leaders in their niche, they can prevail in the fierce international competition despite higher production costs in Switzerland”, says Norbert Kühnis, Leader Family Business and Middle Market at PWC. The Swiss Champions in the PWC study are not just simply suppliers for their customers, but also solution providers. “Through many years of building expertise and continuity in processes and products, they continuously generate innovations”, explains Kühnis, “and this enables them to maintain and often even increase their leading position in their niche.”

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New market segments

Apart from specialization, it is the consistent and systematic search for profitable market segments that makes a company crisis-proof. The first Euro crisis in 2011 hit the rail vehicle manufacturer hard, causing a significant decline in order volumes. Stadler Rail opted to respond with a proactive strategy, with new products like metros and high-speed trains. Now they reap the benefits of this decision, with the sale of metro trains to Berliner Verkehrsbetriebe, the driverless metros in Glasgow, and also the contract with the Swiss Federal Railways (SBB) for the construction of 29 Giruno high-speed trains for the new Gotthard route. Particularly these high-speed trains (going as fast as 250km/h), have a huge market potential, says Thomas Legler,

Employee commitment

Then another currency crisis hit Switzerland in January of 2015. Spuhler consequently sought talks with unions and employees and a temporary extension of working hours was agreed on. “Swiss Champions are characterized by their often manageable size and personal atmosphere, and a high level of identification of employees with the company”, says Kühnis. To achieve this, organisational structures must be flat and communication channels short. Employees are deliberately granted a higher degree of freedom and thus identify more with the company. Employees are particularly attached to their company if management also pitches in. Then SMEs can count on sympathy and commitment from their staff in times of crisis. Of course appreciation must already be a part of the corporate culture before the crisis. “Despite two monetary shocks, we managed to retain the jobs in Switzerland, and even to increase our staff”, says Spuhler.

Flexible organization

Decentralised locations and clear responsibilities further ensure that companies can weather crises. “Every site manager must have the necessary capabilities and resources to independently build whole trains at the site”, Spuhler explains. The only resource Stadler procures in a “pool” are system services. Apart from that, local managers decide which nuts and bolts they want to buy (and from whom) and use at their site. Additionally, sites are strategically selected. “Through
differentiation in the product and manufacturing strategy, by increasingly relocating production of simple diesel railcars to Poland and manufacturing high-tech trains in Switzerland, we were able to improve our competitiveness”, the owner of Stadler Rail adds.

Geographic diversification

Of course every CEO knows that strategies don't always work out as planned. The question is how management reacts to unplanned developments. The currency crisis in Switzerland but also the rouble crisis in the CIS countries forced Stadler to realign their strategy last year. Sales activities shifted from Russia to new markets like the US, the UK, and Australia.

Probably the most significant event was the acquisition of Vossloh's locomotive business Rail vehicles in Valencia. The Spanish locomotive manufacturer has approximately 850 employees - with this acquisition, the total number of employees of the Swiss SME has risen to almost 7,000. This means that now more people work for the company abroad than in Switzerland. With the acquisition of the plant in Spain, Stadler Rail secured the new market segment of diesel-electric locomotives and opened up new markets on the Iberian Peninsula, in Central and South America, and in North Africa.

All this helps to cushion the negative impact of the strong franc.

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