The German “Duden” dictionary defines the term “key technology” as follows: a technology that holds a pivotal position in a specific sector—one that is vitally important to that field. At first glance, that doesn’t seem particularly helpful. The question is: what are the implications? The German government uses this term, yet what it specifically entails in practice remains unclear.
This is not intended to be a lesson in linguistics, however, but rather a way to draw attention to a project of significance for industrial policy: the Volkswagen Group is divesting—for economic reasons—its 51% stake in Everllence (the engine manufacturer formerly known as MAN Energy Solutions), a key supplier to the maritime industry. The US financial investor Bain Capital won the bidding process. There is recurring interest in other local maritime specialists as well—from both nearby and distant countries. The same question often arises: does such an ownership structure fit the current picture, even if VW retains a 49% stake and thus a certain say in Everllence’s future?
Will VW’s stated intention to keep this share hold firm during the group’s next strategic realignment? Will Bain Capital prove to be a “good” owner? That remains to be seen. What is already apparent, however, is that industrial policy—specifically regarding “key technologies”—remains a relatively vulnerable area for the German federal government.
A few years ago, the state classified naval shipbuilding as a key technology requiring political protection. At the time, the industry itself noted that this designation likely encompassed many suppliers active in both naval and civil commercial shipbuilding. It is worth recalling that there was no significant pushback from policymakers regarding this interpretation.
Today, the situation looks very different. For months, we have been hearing that civil commercial shipping is also of immense importance to the country’s resilience and—in an emergency—its defense capabilities. Key industries in the hands of private equity? Granted, investment might be facilitated by better access to capital. But still…
The return expectations and exit-oriented strategies of financial investors do not seem like a particularly suitable option for Everllence’s future. The consequences of a potential future resale—to whomever that might be—would be hard to predict; after all, that is what financial investors do—it is part of their economic DNA.
One can only hope that the concerns voiced by our colleague Hans-Uwe Mergener prove unfounded; writing on www.hansa-online.de regarding the developments at Everllence, he suggested that a “familiar pattern” might repeat itself and that the classification of naval shipbuilding and maritime propulsion technology as a “key technology” could ultimately prove to be of as little consequence as a “sack of rice toppling over in China.”
Private equity is not the enemy per se. However, Berlin ought to give some thought to how it intends to give real substance to the term “key technology.” Government circles are surely doing just that. The federal government may well have had a say behind closed doors regarding the Everllence issue. But perhaps the time has come to step out into the open and send a clear signal regarding what—in concrete terms—the government’s industrial policy playbook actually defines as a “key technology.”
