The two men who take over Robert Bosch July 1 face a more severe test than might be apparent at the E35-billion German supplier.
As Franz Fehrenbach, 53, and his No. 2, Siegfried Dais, 54, prepare to assume the top management positions, it looks like a textbook-perfect management transition.
Bosch remains Europe's No. 1 auto supplier. Sales are up. Profits are steady. Current CEO Hermann Scholl, 67, and his deputy Tilman Todenhöfer, 59, will move to the Robert Bosch Industrietreuhand, which Scholl will chair.
But Bosch sets high standards for itself, and the group is not meeting its own tough measures of success.
Among the problems Bosch faces:
Fehrenbach and Dias certainly won't inherit a crisis. Bosch is highly respected by its customers and is financially secure. But flat profits and revenue raise the issue of whether Bosch's technology-leadership business model still works.
Fehrenbach's elevation to CEO may appear to be a reward for his successful leadership of diesel systems, Bosch's largest business unit with annual sales of E5.5 billion. In Fehrenbach's unit, Bosch's technology-leader strategy is working. Bosch still dominates the common-rail diesel injector sector after taking an early lead because of its technical edge and is riding the rising popularity of diesel engines in Europe.
By emerging from leadership of a strong division, Fehrenbach's rise parallels the earlier path of Scholl, who came from the brakes business.
Fehrenbach and Dais have strong technological backgrounds and long experience within Bosch.
Fehrenbach has a reputation among colleagues as an unpretentious, practical and accessible executive. He studied business and engineering in Karlsruhe before joining Bosch in 1975.
His career included stints in the central business planning and controlling department in Stuttgart and abroad, becoming head of the North American division.
Fehrenbach inherits some fundamental problems. Scholl has publicly questioned whether automakers are willing to pay enough of a premium for advanced-technology components to adequately reward companies like Bosch for massive research-and-development investments.
Two new developments threaten Bosch's traditional high-risk, high-reward business model of technology leadership.
More competitors have developed strategies to quickly follow behind technology leaders, shortening the period when Bosch innovations command a premium price from automakers. Bosch had an early lead in electronic stability program (ESP) technology but couldn't exploit that because competitors quickly offered similar products, for example.
Second, with increasingly price-sensitive consumers, automakers are slow to adopt expensive technologies. Meanwhile, the cost of innovation is increasing sharply as cars get more complicated and component software must be compatible with other devices on cars.
Bosch has certainly been the prime example of a supplier investing heavily to bring advanced technology products to market first. It has an almost unrivaled reputation for technological competence and innovation, and registers over 2,000 patents a year.
Bosch's braking systems and engine-management businesses are leaders in their segments, and the group has a strong brand presence in the aftermarket.
But both units face a tough time matching recent successes.
The next big leap forward for brake technology, brake-by-wire, appears far off. Automakers aren't adopting the 42-volt systems the technology needs to work efficiently. And car buyers are reluctant to give up proven mechanical systems.
Bosch is disappointed with the take-up of its interim hybrid technology, electro-hydraulic brakes. Mercedes-Benz introduced electro-hydraulic brakes on the CL in 2001 and the E class last year, but Bosch has no other launches before 2005.
In diesel-engine management, competition is getting tougher as the technology matures. Prospects for volume growth outside Europe are limited, despite Bosch's efforts to stimulate demand in North America.
And Bosch's next major technology bet, gasoline direct injection (GDI), may not parallel the rapid growth of direct-injection diesels.
Bosch expects the global market to jump from 800,000 units last year to 2.5 million by 2005, with Europe growing fastest to 1.6 million units. But the influential German magazine Auto Motor und Sport suggests actual GDI fuel-economy benefits are less than the 10 to 15 percent Bosch claims, based on recent comparative tests of Volkswagen FSI engines.
The scale of Bosch's investment challenge is apparent in the driver-assistance systems that it hopes to develop into a business as big as engine management and braking.
These complex systems will integrate video radar and infrared sensors around the car with adaptive cruise control and Bosch's park assist systems. Later, further integration of brakes, drivetrain management and steering systems add still more complexity.
Developing the technology is an extremely ambitious task. And rivals Continental, TRW and Valeo are already working on similar systems.
But with Fehrenbach and Dais still in the first half of their 50s, they have time to work on revitalizing Europe's largest auto supplier.
But the new bosses can take some comfort. The German giant has faced big problems before and has always overcome them.