It’s been just over one year since Accelleron’s CEO, Daniel Bischofberger, took on the position. In this interview, he reflects on his journey to date, and the direction of Accelleron.
This interview first appeared as part of Accelleron’s 2022 Annual Report, published on March 29th, 2023
What was the decisive factor in you taking on the position as CEO of Accelleron?
It was a once-in-a-lifetime opportunity. I knew that turbochargers were going to be a fantastic business and that Accelleron would be a market leader in high-performance turbochargers for internal combustion engines. It is great to start a new chapter and become part of the Accelleron family. Also, I can contribute my experience to Accelleron’s large service business because of my previous work as head of a gas turbine service business with a multi-billion-turnover and my previous position at Sulzer as a member of the Executive Committee and Division President of the service organization.
How have you settled in so far?
The learning curve was steep, but I felt welcomed and supported right away. That quickly got me to the point where I could support both the company and the people on this exciting journey.
You started your new post in March 2022 amid a geopolitical crisis. How did that affect your start period?
Initially, our focus was on ensuring that our organization was prepared as thoroughly and swiftly as possible for becoming an independent company.
The schedule was quite tight, and the business was and still is performing at a high level. Service is performing strongly overall. Regarding new installations, many ships had been ordered, and power plants were running at full speed, too. Yet we also faced special challenges, such as supply chain issues and the Russian war of aggression against Ukraine. We decided to withdraw from the Russian market and wind down our business. So, over time, that affected the business, but Russia only accounted for about 1% to 2% of our business. Our presence was minimal, and we had left the market entirely by the end of 2022.
Your predecessor as Division President is now your Chairman. How do the two of you work together?
Especially in the beginning, he helped me get up to speed. A big focus was on visiting our customers. Accelleron has always devoted an impressive amount of time and effort to being close to its customers. Now that our introductory phase is over, my predecessor is clearly focused on his role as Chairman, and I’m focused on the role of CEO. We have an excellent relationship, with clear roles and responsibilities on both sides.
What insights did you gain from these customer visits?
My first impression was how close we are to our customers. We very openly discussed the challenges they face. There is a great deal of uncertainty about what the transition to a carbon-neutral world will look like. We’re in a good position to help with our products and our industry know-how.
Does that make us a thought leader?
In this field, we definitely are, but we have to remain humble. The challenge is bigger than just the turbocharger. It starts out with the production of future fuels, transportation, storage, combustion, emissions, and so on. So, it’s a broad field, but we definitely have a critical component that will be a huge help.
Accelleron’s digital platform Tekomar XPERT, for example, focuses not only on turbochargers but also on engine performance. Aren’t you taking over your customers’ business?
Not at all. We have a solution that is independent of the engine original equipment manufacturers (OEMs). They have their own proprietary software, which is probably more accurate for their engines. Some customers need a platform that is independent of the OEM – and that is exactly what we offer them. So, there is no competition; it depends on what the customer needs. If they want an OEM-specific solution, they will choose one from the OEM. On the other hand, if they want a single platform for all the different combustion engines, they will opt for our solution instead.
What is the most important outcome for the customer when using Tekomar XPERT?
Tekomar XPERT is a software as a service platform that is evolving. It started with modules with the engine in focus. The customer can use simple information to figure out how to improve efficiency by saving fuel and reducing CO2 emissions. As regulations have become ever more stringent, it is important that the customers understand their CO2 emissions and how they can influence them. Tekomar XPERT provides good guidance and is a helpful planning tool for this purpose. We are now also developing other modules in our platform, including one to determine the ideal moment for hull and propeller cleaning cycles, which enhances efficiency and enables customers to optimize their planning operations. The idea behind Tekomar XPERT is to give the customer a comprehensive tool that they can use to reduce their CO2 emissions, while also turning operational cost savings into a reality. Naturally, our core business is and remains component manufacturing. But it’s about the customer’s entire emissions reduction journey. Reducing emissions is very complex.
Speaking of emissions: what direction do you believe the regulatory environment will develop in?
I think the maritime industry will move in the same direction as the power generation industry. Power generation has set itself a goal of being carbon neutral by 2050. The International Maritime Organization (IMO) is aiming to achieve a 50% reduction by 2050, which definitely isn’t ambitious enough. It is also clear that the maritime industry must become carbon neutral by 2050. At present, the shipping industry’s CO2 emissions account for about 3% of global CO2 emissions. Even though we’re just talking about 3% – power generation accounts for one third of global CO2 emissions, every single percent counts.
How much does Accelleron’s turbocharger contribute to CO2 emissions?
A combustion engine without a turbocharger generates 10% more CO2 emissions. The maritime industry emits about 1 billion metric tons of CO2 in total. Ten percent of this is 100 million metric tons of CO2 emissions. This is equivalent to the emissions generated by approximately 40 million mid-range passenger cars driving an estimated 20,000 km over a full year. And Accelleron’s turbochargers have the highest efficiency compared to the competition.
The global economy as a whole is in bad shape, and Accelleron is growing at a considerable pace. How would you categorize this scenario?
There is currently high demand for LNG tankers. Not only are they needed for operating power plants in Europe; they are also vital to industry. The U.S. has a large supply of shale gas, and pipelines and transportation capacity are being expanded, creating further demand. In addition, many emergency diesel generators are needed because of the risk of a temporary power shutdown. It will take years to build a global LNG infrastructure and to make up for Europe’s previous reliance on and use of Russian pipeline gas.
What has Accelleron learned from the numerous crises that have emerged since 2020?
That we are quite resilient because of our services, which account for around 3 quarter of our business. Services tend to be much more resilient than products. In past recessions, such as the 2008 financial crisis, the service business fluctuated up to 5%. On the other hand, during the extraordinary 2020 COVID-19 pandemic we saw a decline of almost 10%. It was a very unusual crisis because, during a “normal” recession, ships are still being used and power generation is still running. In 2020, most cruise ships were not operational due to the pandemic, and it was sometimes not possible to service other ships and power plants due to the restrictions and quarantine measures in place, and sometimes customers were reluctant to service their equipment.
Do you believe there are further opportunities for expansion of the service network?
Our service network is like a living organism. Normally, we set up a service center when there is a need for one in the region in question. For example, when power plants need on-site service to be operating. However, when power plants are taken out of service, we close them. Overall, the number of locations in our service network has been steadily growing over the last decade to over 100.
Where will Accelleron’s future growth come from?
We are well positioned to generate mid-term growth of 2% to 4%. There is already a clear need for our highly efficient turbochargers today because fossil fuels are becoming more and more expensive. But also because of the deregulation to reduce CO2 emissions of fossil fuels, our turbochargers are a good solution. The internal combustion engine will remain in the long-term because there is no alternative to combustion engines in areas such as maritime and energy. But it is clear that these internal combustion engines are increasingly being powered by synthetic fuel, which is eight times more expensive than fossil fuels today.
While these costs will come down through economies of scale and technological improvements, it is estimated that synthetic fuels will still be at least two to three times more expensive than today’s fossil fuels. So, even in a carbon-free world, turbocharger efficiency plays a major role because it translates into huge cost savings. With our expected higher market share as a result, we will also be able to drive forward our service business. In addition, we also believe there are opportunities to grow in adjacent markets. We can offer customers more solutions to reduce their CO2 emissions – both in the digital segment and for products or components in a ship’s propulsion system.
Why do you think you have the edge over your competitors in this respect?
Because we already have the most efficient turbochargers. In addition, we are investing in developing our technology. In 2022, we invested around USD 50 million in R&D to further develop our technology and products. This ensures we are always one step ahead of our competitors in terms of performance and reliability.
Why do you invest between 6% and 7% of sales into Research & Development?
We see tremendous technological opportunities in dealing with emission-related challenges. Especially because efficiency is becoming increasingly important, it is worth investing in and exploring possibilities in manufacturing, simulation, and new materials.