Vaillant GmbH

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Vaillant GmbH

Berghauser Strasse 40
D-42859 Remscheid
Germany
Telephone: (49) (2991) 18-0
Fax: (49) (2991) 18-2810
Web site: http://www.vaillant.de

Private Company
Incorporated: 1874 as Meisterbetrieb des Installationshandwerks von Johann Vaillant
Employees: 5,605
Sales: EUR 855 million ($723.7 million) (2000)
NAIC: 333414 Heating Equipment (Except Warm Air Furnaces) Manufacturing; 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing

Vaillant GmbH is one of Europe’s leading manufacturers of heating systems and is based in Remscheid, Germany. The company’s flagship products are its wall-hung gas-powered boilers and heaters. Vaillant also makes floor-standing gas-powered boilers and furnaces, combined electricity- or gas-powered water heaters, electric heaters, solar collectors, and aluminum die castings for the auto industry. Wall-hung boilers account for about 60 percent of Vaillant’s total sales, floor-standing boilers and furnaces contribute about 13 percent, and electric heating appliances roughly 15 percent. The company maintains production facilities in Germany, Italy, Spain, and the United Kingdom, and sales offices throughout Europe. The acquisition of British competitor Hepburn in 2001 added production sites in France, the United Kingdom, Slovakia, and the Netherlands, and the brands Saunier Duval, Glow-worm, AWB, and Protherm to the Vaillant group.

A Patent and a Logo in the 19th Century

Company founder Johann Vaillant was born in 1851, the tenth child of tailor Franz Theodor Vaillant and his wife Maria, a family with French roots which had moved to the German town of Kaiserswerth in the 18th century. Twenty-three years later the young man moved to Remscheid, near Cologne, and announced in the local newspaper that he had set up shop as a coppersmith and pump maker. At that time, taking a bath was not as common as it later became. Rather, it was considered a luxury for many, and a major undertaking for people who could not afford it. To bathe a family, many pounds of coal had to be carried into the house to heat the necessary amount of water on the kitchen stove. Even for the well-to-do bathing was somewhat troublesome. In the gas-powered “open system” water heaters common at the time, the process gas from burning the fuel dissolved into the bathing water and the water temperature was impossible to control. Johann Vaillant, who made it his principle to maintain close contact with his customers to find out what they really needed, saw a huge business opportunity, and over time developed a completely new kind of gas-powered water heater. In Vaillant’s “closed system” water heater, the fuel-burning process was separated from the water tank, in which the water was heated indirectly. This innovation not only made the process more secure and hygienic, it also made it possible to control the water temperature. In 1894, the German Patentamt awarded Vaillant a patent for his invention, and his business took off rapidly. By 1897, due the ever-rising demand, increasingly from abroad, production had to be moved from the small workshop to a bigger facility in Remscheid. Vaillant had grown from a craftsman’s workshop into an industrial enterprise.

Far ahead of many businesses of his time, Johann Vaillant also had the vision to turn his water heaters into brand name products. For a while the company founder had been looking for a symbol he could use as a trademark. Occasionally he had used an angel, which did not seem to be very original and could not be trademarked. However, one morning around Easter, Vaillant was browsing the monthly Catholic magazine Alte und neue Welt, meaning “old and new world,” when an illustration caught his eye: an Easter bunny crawling out of an egg that had just broken open. For some reason, the image seemed to be what Vaillant had been looking for. He acquired the rights to the picture from the artist and secured it as a trademark in 1899. Slightly modified in the Jugendstil design style of the time, the Easter bunny soon became the company’s easily recognizable logo.

Making Bathing a Luxury for the Masses in the Early 20th Century

At the beginning of the 20th century, apartments very rarely had a separate bathroom and were rather small altogether. Vaillant recognized the demand for an appliance that would take up as little space as possible. He came up with the idea to hang a hot water heater on the wall where it wouldn’t take up as much space as the floor-standing models that were common a the time. In 1905, Vaillant introduced the first wall-hung gas water heater to the German market. The new appliance was named “Geyser” to evoke the association with the hot springs pouring out of the earth in Iceland. The name was secured as a brand name and became very popular among customers and plumbers, one of the company’s main target markets.

Vaillant’s annual production at the new factory in Remscheid’s Berghauser Strasse reached 10,000 water heaters in 1914. However, preparations to celebrate the company’s 40th anniversary were interrupted by the outbreak of World War I. Johann Vaillant’s two sons Franz and Max were called to serve in the German army and the government administered what had to be produced for the war economy. A year after the war had ended, in 1920, company founder Johann Vaillant passed away at the age of 68. Karl and Franz Vaillant who had entered the business in 1907 took over after their father’s death. Four years later Vaillant engineers developed the company’s first gas-powered furnace. The mid-1920s brought about a temporary economic upswing and sales tripled in comparison with 1914. Construction of residential buildings was thriving, taking a bath was becoming a more common pleasure, and Vaillant’s “Volksgeyser”—the people’s geyser—was immensely popular. However, in a sudden economic downturn after the “Black Friday” stock market crash in New York in 1929, the company’s sales dropped by two-thirds in just three years and production was cut in half. It took until the mid-1930s for Vaillant to recover. However, only four years later World War II started. Vaillant was not so much in demand for the war production and it became more and more difficult to organize the necessary raw materials and supplies. Because of these conditions the company moved its operations to the Netherlands. During bombings of Remscheid in 1943, the company’s factory was severely damaged and production was ceased.

In these turbulent times Vaillant’s marketing underwent many changes as well. The company’s first slogan was: “Warm bath water for everybody.” Besides its logo the company’s most often used images were children and the elegant, busy housewife. The title page of a brochure from 1902 showed a nicely dressed maid giving a shower to four children in a bath tub with water provided from a Vaillant hot water heater in an upscale bathroom. A poster from 1905 showed a horse coach pulling a Vaillant water heater and children following behind, taking a shower under warm water while spectators from different continents and countries watched and applauded from the sides. After the World War I, the company started using the slogan “Platz ist in der kleinsten Hütte”—there is room in the smallest house—to promote its “Volksgeyser” model. In the 1920s, German culture became more tolerant and in 1926 for the first time, a naked female holding a towel up to her hips was portrayed in an ad—of course with her back turned to the viewer. In 1929, the company hired an advertising director for the first time, who synchronized corporate and product design, and the Easter Bunny logo became more stylized. After the Nazis took over political power, there was no place for erotic images anymore. The company began using truck-like automobiles for advertising and promotional tours from house to house, demonstrating different models and offering long term financing. In order to raise customer’s sympathy for Vaillant, the company’s logo came to life for the first time in 1935 in a comic brochure. In a story called “Eine königliche Hasengeschichte”—a royal bunny story—the Easter Bunny left his egg and started a trip around the world, convincing everybody he encountered of the advantages of a hot bath.

Post-War Boom Begins in the 1950s

After the end of the Second World War, Vaillant rebuilt its Remscheid factory which had been severely damaged. In May 1947, the factory started up regular operations again. For its first big order after the war, Vaillant manufactured 85,000 “Kanonenofen” furnaces. Hans Vaillant, the founder’s grandson, led the company through the post-war period and the economic boom years that followed. His son-in-law Franz Wilhelm and nephew Karl-Ernst Vaillant took over in fourth generation. Until the end of the 1980s, the company was led by members of the Vaillant family. In the 1990s the about 40 remaining shareholders form the Vaillant family retreated from operating the business.

In the postwar period, Vaillant focused on product innovation and international expansion. In 1960, the company started making “Geyser” water heaters powered by electricity. One year later the company introduced a novelty in the heating market: the wall-hung furnace “Circo-Geyser.” Another innovation followed in 1967 when the company launched the “Combi-Geyser,” the first heating appliance that could be used both for heating a room and heating water. At the end of the 1960s, the era of Vaillant’s comic-bunny began. Dressed in a checked shirt and coveralls, the bunny became synonymous with the friendly and competent handyman who installed Vaillant appliances. In the 1970s the company ventured into sport sponsoring and sponsored German Porsche driver Bob Wollek. “Always a bunny length ahead” became the new company slogan.

Company Perspectives:

At the end of the 19th century, Vaillant was the first company to sell wall-hung gas boilers. It is this expertise that we have consistently expanded. Our aim is to become market leader for gas appliances in all major EURopean countries. In doing so, we have an unflagging commitment to innovation which we are promoting with the Vaillant Innovation Process (VIP). We are currently working intensively on the EUR ope-wide market launch of new products like the EUR o Pro and Plus wall-hung appliances. Customer satisfaction is our focus. We offer system solutions and involve our customers in the development and the ongoing improvement of our products.

Before World War II the company exported about ten to 20 percent of its annual output. Hans Vaillant put forward an unprecedented international expansion program starting in the 1970s. Within the next decade, foreign subsidiaries were established in Western Europe including the Netherlands, Austria, Belgium, France, Italy, and the United Kingdom. The economic boom in Germany and the company’s international expansion made new production facilities necessary. A new factory for electric water heaters was set up in 1962, and another production facility for foundry and other metal products. In 1981, a production plant for making directly and indirectly heated gas-powered hot water tanks was set up in Bergheim. Two years later a new facility for manufacturing gas- and oil-powered furnaces was build in Hilden. Finally, a new plant was established in Gelsenkirchen for making gas-powered heating appliances. By the mid-1970s the number of Vaillant employees reached about 3,000 and more than doubled in the following two decades. At the onset of the 1990s the company had six production facilities in Germany and 15 foreign subsidiaries.

Focus on Productivity, Quality, and Innovation in the 1990s

Vaillant enjoyed almost continuous dynamic growth until the 1990s. Since the middle of the 1970s sales had grown more than sevenfold, reaching a high of almost DM two billion in 1992. While the rest of Western Europe suffered from a sluggish economy, West Germany’s businesses got a huge boost from the reunification with East Germany in 1990. However, stagnation set in after 1992 when the East German households that could afford it had been equipped with new heating appliances. On top of that, the market for heating equipment was swamped by a wave of new competitors pushing into the market. The number of companies competing in the German market for wall-hung heating appliances exploded from just six in 1990 to 50 nine years later. Prices fell significantly, by an estimated 20 percent through the 1990s, and so did Vaillant’s profits, since the company had lost most of its technological edge. The strength of the German Deutschmark turned out to be another disadvantage for Vaillant’s export business. The fact that newly-built houses were more energy efficient and hence didn’t need to be heated as much anymore was another factor. The only way to stay in the game was to significantly raise productivity levels and to regain the technological cutting edge the company had lost.

To counteract the downward trend of the 1990s, Vaillant started cutting cost by moving part of its production abroad. The manufacture of gas-powered water heaters was moved from Gelsenkirchen to Spain, Europe’s largest market for the product, where a joint venture was set up with Spanish competitor Fagor. In 1995, the company streamlined its operations into six decentralized business units working on three major processes, including the innovation, production, and marketing process, staffed with interdisciplinary teams. In addition, Vaillant’s top management initiated a comprehensive program of quality management and invested in new product development. Under the “Vaillant Excellence“ program, assembly lines were replaced by Japanese decentralized production methods. Workers almost completely assembled the product they were responsible for. Every employee agreed on certain goals which were directly connected with their paycheck. In addition, every employee underwent a customized education program, while managers had to select and mentor two potential successors for their position. The rigorous focus on high quality finally paid off. Production cost were cut by 25 percent, reclamation rates went down and development time for new products was cut in half. In 1999, the company won the German Quality Award. The environmentally friendly Vaillant “Thermoblock,” a combined furnace and water heater, was introduced in 1991. In 1997, the company started making solar collectors. Vaillant’s next cutting edge development project was the fuel-cell heater. First developed as an energy source for space travel, fuel cell technology seemed a promising alternative to burning coal and oil in the late 1990s. In 1997, Korean female executive Seonhi Ro joined the company as project manager for Vaillant’s “fuel-cell heater” project. Vaillant’s vision for its fuel-cell based appliance was to provide not only heat and hot water, but also electricity to residential households with a high energy efficiency and almost no environmental pollution. The company exhibited a prototype of a Fuel Cell Heating Appliance—jointly developed with Latham, New York-based Plug Power, Inc.—in spring 2001 at the International Sanitary and Heating Fair in Germany and was planning to launch its first fuel-cell based product for one- and multiple-family dwellings at the end of the same year.

Key Dates:

1874:: Johann Vaillant sets up his own plumbing business.
1894:: The company founder receives a patent for his “closed-system” water heater.
1899:: The Easter Bunny becomes the company’s logo.
1905:: The wall-hung gas water heater “Geyser” is launched.
1960:: The first electric “Geyser” model is produced.
1967:: A combined appliance for heating air and water is launched.
1970s:: Vaillant intensifies international expansion.
1991:: The environmentally friendly Vaillant “Thermoblock” is introduced.
1997:: Vaillant starts making solar collectors.
1999:: The company wins the German Quality Award.
2000:: The boiler business of Italian manufacturer Bongioanni Pensotti Kalore is acquired.
2001:: Vaillant takes over British Hepworth plc.

By the end of the 1990s, the Vaillant group maintained six production facilities and employed about 5,600 people, about one-fifth of whom worked outside Germany. There was no sign that the saturated western European market would pick up speed soon. The only way to grow and stay competitive in an increasingly consolidating market was through acquisitions. Following the company’s strategic goal to become the market leader in the major European countries, Vaillant acquired the water heater business of Italian manufacturer Bongioanni Pensotti Kalore in 2000. One year later, the company acquired the majority of leading British competitor Hepworth plc in a friendly takeover. Although faced with a big financial challenge—the deal exceeded Vaillant’s own capital by roughly DM 1 billion—the company’s top management was confident that in the mid-term this major strategic step would prove to be a success. The two companies of about equal size complemented each other well in their market positions. Vaillant had a strong grasp on the German, Austrian, and Danish markets while Hepburn had strong market positions in France, Spain, and Slovakia. Both of the partners were also well positioned in the Netherlands, Belgium, the Czech Republic and Turkey. With eleven production sites and two joint ventures, including locations in France, the United Kingdom, Italy, Slovakia, the Netherlands, and Spain, and Vaillant’s five factories in Germany, the new Vaillant group employed about 11,000 people and generated an estimated EUR 1.8 billion in sales. Hepburn also added new brands to the group’s product portfolio, including Saunier Duval, Glowworm, AWB, and Protherm, in addition to the newly acquired Italian brands Bongioanni and Pensotti. Vaillant expected to complete the major steps to integrate Hepburn into the group by the end of 2002 and to cash in on cost synergies in purchasing, procurement, logistics, and research and development as well as through better economies of scale. Vaillant’s top management was hoping to be among the winners of the ongoing consolidation process in the European heating technology market which was expected to reduce the number of producers of wall-hung gas-powered heaters from 116 to a mere handful. Whether the company’s financial strength would be sufficient to further pursue its acquisition strategy without going public was undisputed by the company’s 42 shareholders, all of them relatives of the company founder. However, that remained to be seen.

Principal Subsidiaries

Hepworth plc (U.K.); Bongioanni Pensotti Kalore (Italy); Vaillant Werkzeugbau GmbH (Germany); VAICON Vaillant Consulting GmbH (Germany); Vaillant Ges.m.b.H. (Austria); Vaillant N.V. (Belgium); Joh. Vaillant GmbH u. Co. (Croatia); Vaillant spol. S.r.o. (Czech Republic); Vaillant A/S (Denmark); Vaillant S.A.R.L. (France); Vaillant Hungária Kft. (Hungary); Vaillant S.p.A. (Italy); Vaillant B.V. (Netherlands); Vaillant Sp. z.o.o. (Poland); Vaillant S.L. (Spain); Vaillant GmbH (Switzerland); Vaillant Ltd. (U.K.).