Challenges Of Eastern Europe Breed Innovation
Take the case of Bonnie Kern-Koskela, the recently appointed chairman of Southfield, MI-based Mertik Maxitrol. After joining the company in 1993, she and her husband, Larry C. Koskela (Maxitrol’s executive VP) were charged with overseeing the purchase and reorganization of the German corporation, Mertik Regelungstechnik GmbH, in Quedlinburg, Germany. The name was changed to Mertik Maxitrol GmbH & Co. KG. In September 1993, the Koskelas (including sons George and Max) moved to Quedlinburg in the former East Germany.
Germany’s reunification had taken place officially in late 1989, but changes took time throughout the country. The Soviet Union started collapsing in 1991; Kern-Koskela saw the departure of Soviet tanks when she first arrived in Germany. She also stood in line for groceries. Distribution changes took time.
She recalls shopping for one day’s worth of groceries, which was all that could fit in a small countertop cooler — her family’s refrigerator in their first apartment. Unable to read a butcher’s signs, and feeling embarrassed, she pointed to a cut of meat. The butcher lifted out a huge pork shank — much too large for her family’s needs, but she just wanted to leave, so she paid and left.
BACK OUT OF THE U.S.S.R.
Not all transactions were so simple. The Koskelas had to renegotiate the company’s privatization contract with the German government. Kern-Koskela discovered that much of the inventory was overvalued.They also had to reduce the number of employees. “In the beginning, Mertik had 3,000 employees,” she said. When the Berlin Wall fell, consultants came in. “When we took it over, there were roughly 350 employees.” The company split into machinery, plastics, electronics, valves/controls, and real estate companies. “Some products became obsolete,” she said.
Compounding matters further, the Koskelas were unable to find a German bank that would extend credit to the company. They eventually found an American bank with a branch in Frankfurt.
Their greatest challenges resulted from the collapse of communism in Eastern Europe. “Our traditional customer base in 1993 was East German companies who built products for export to Russia,” stated Kern-Koskela. “This business virtually disappeared, due to the German government’s unwillingness to provide bank loan guarantees for Russian exports as they had in the past. On the positive side, this forced us to develop new technology quickly, for sale into new markets.”
The company’s employees had a history of “improvising.” Due to frequent materials shortages under the East German government, “The employees had to learn how to improvise. In our own country, we are spoiled,” Kern-Koskela said. “If we need something, we buy it.” The East German employees developed creativity and problem-solving skills. Kern-Koskela describes their technical skills as extremely high. Product development teams were formed and existing lines were upgraded. “Today, more than 95% of Mertik’s sales come from products developed since 1993,” she said.
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In 1998, the company moved to a 60,000-square-foot facility in Thale, Germany.
HOME IN SOUTHFIELD
In 1999 the Koskela’s sons were eight and 11; both spoke excellent German, sounding like the other children in the Harz Mountain region. The Koskelas decided it was time for them to attend school in the U.S. They moved back to Michigan at the end of December.These days, the company is working with the demand for precise heating. The company’s gas pressure regulators are a staple in buildings in the United States, but its European roots led to the development of products for more widespread home gas use. The “Sentry GM” gas safety manifold, for example, functions as a circuit breaker in residential gas installations. The “Plug1” safety socket creates plug-in capability for gas appliances such as ranges, clothes dryers, and outdoor grilles.
Travel is nice, but there’s no place like home.
Checket-Hanks is the service/maintenance and troubleshooting editor. She can be reached at 313-368-5856; 313-368-5857 (fax); barbarachecket-hanks@achrnews.com (e-mail).
Publication date: 09/23/2002