Grammer AG (ETR:GMM): A Fractured Path to Value Creation – Governance, Misallocation, and the Need for a Strategic Reset

The Illusion of Resilience

Grammer AG (ETR:GMM) has long been a quiet player in the automotive interior industry, known for its premium seating solutions and technical ingenuity. However, beneath the veneer of modular construction and “center console” innovations lies a company grappling with a perfect storm of governance failures, capital misallocation, and innovation stagnation. While the firm's 2025 half-year report claims a 20% rise in operating EBIT (to EUR 35.6 million), this is largely a mirage fueled by one-time restructuring gains and a narrow focus on short-term cost-cutting. The reality is starker: Q2 2025 operating EBIT plummeted to EUR 11.7 million, a 42% drop from EUR 20.2 million in Q2 2024, amid a 7% revenue contraction. The question is no longer whether Grammer is failing but how deeply entrenched its systemic issues are—and whether a strategic overhaul can reverse the damage.

Corporate Governance: A House Divided

Grammer's corporate governance structure appears robust on paper, with a tripartite board system (Executive Board, Supervisory Board, and committees) and strict adherence to the German Corporate Governance Code. Yet, the recent resignation of the Supervisory Board chairman in February 2025 and other board members signal internal discord. This exodus, coupled with the resignation of key members of the Executive Board, raises questions about leadership cohesion. The remaining executives—CFO Jurate Keblyte, COO Guoqiang Li, and Strategy Head Jens Öhlenschläger—now face the daunting task of steering a ship with a rudderless crew.

The Supervisory Board's equal shareholder-employee representation, while democratic in theory, often leads to gridlock. For example, the decision to sell the TMD Group in September 2024—a move that reduced overhead but eliminated a potentially profitable segment—was likely debated for months. Such delays in decisive action erode investor confidence and allow competitors to capitalize on market shifts.

Capital Allocation: The Cost of Survival

Grammer's “Top 10” restructuring program, launched in 2024, has been a double-edged sword. On the surface, it appears to have stabilized the company: a Shared Service Center in Serbia, a 1,100-employee reduction in EMEA, and the divestiture of TMD Group have trimmed costs. However, these measures prioritize short-term liquidity over long-term growth. The Serbia Shared Service Center, for instance, saves costs but risks operational complexity and dependency on a single location. Meanwhile, the EMEA layoffs have left the company with a lean but fragile production footprint, ill-equipped to scale with the automotive industry's rapid electrification and automation trends.

The TMD Group sale, while reducing overhead by EUR 35.7 million in 2024, has also deprived Grammer of a high-margin, diversified revenue stream. TMD's integration of advanced driver assistance systems (ADAS) and software solutions aligned with the industry's shift toward tech-driven interiors—a space where Grammer's own R&D efforts remain conservative.

Innovation Stagnation: A Race to the Bottom

Grammer's R&D pipeline, while technically impressive, is increasingly out of step with industry needs. The company's 2023-2025 innovations—such as the MSG 297 suspension system for agricultural machinery and the Mercedes-Benz GLC center console—represent incremental improvements rather than disruptive breakthroughs. In an era where Tesla and traditional automakers alike are redefining interiors with AI-driven cockpits and autonomous features, Grammer's reliance on mechanical enhancements feels antiquated.

Moreover, the company's R&D spending, while undisclosed, appears insufficient relative to its peers. A