Krupp Rises Again
Like Germany itself, the Krupp industrial machine, which has eagerly supplied the arms for military adventures since the days of Bismarck, rose stronger than ever from the ashes of both World Wars. Then, three years ago, a policy of borrowing short and lending long brought the mighty family empire to the brink of insolvency. In return for government guarantees of bank credit, Alfried Krupp, heir to the Krupp power and fortune, grudgingly agreed to relinquish his one-man rule. A public foundation headed by leading government and business officials was established to administer the family stock. Alfried, the last of his line, died soon after.
Now the concern has again rebounded from disaster. Company officers have just reported that after five losing years Krupp showed a profit of $12 million in 1969. The firm's vast range of products--among many other things, it makes tanks and false teeth, grows orchids and owns supermarkets--yielded sales last year of $1.6 billion, compared with $1.4 billion in 1968. The financial woes have been substantially eased. Short-term debt has been reduced by roughly $100 million, to a manageable $30 million.
American Lessons. One sign of the bankers' new faith in Krupp is that last month Hermann Abs, West Germany's most powerful private banker, stepped down as chairman of the supervisory board, which was established to keep an eye on management during the switch away from family control. Abs' successor is Berthold Beitz, 56. a gregarious supersalesman who had been Krupp's general manager for 14 years. Since Beitz was the prime mover behind Krupp's disastrous financial policy, the promotion represented something of a comeback.
Yet Beitz is unlikely to regain direct management control from the man who is largely responsible for Krupp's resurgence: Chief Executive Gunter Vogelsang, 50. Vogelsang (his name means "bird song" in German), who comes from a family of Rhineland managers, is an icily efficient financial specialist with the sturdy build and wavy hair of an idealized halfback. He learned much of his management technique in two lengthy tours of the U.S., during which he visited IBM, National Cash Register, Bethlehem Steel, Republic Steel and other firms. A publicity-shy man with few outside interests, he regularly puts in a 70-hour, six-day work week. For this he earns close to $200,000 a year.
Out of the Hole. At Krupp, Vogelsang has shown what can be accomplished when an outsider slips into a family firm and snips the ties that bind it to traditions. Taking charge in 1968, he quickly changed the paternalistic policy of never laying off a "Kruppianer" and never closing down a branch. He reduced the number of divisions from 23 to 14, pared the work force from 90,400 to 79,500, and sold off holdings in low-yield properties, including a hotel and department store in Essen, the Krupps' soot-filled home city. The Krupp truck plant, which lost $7,500,000 in its last year of operation, was closed. Coal production, long a loser, was reduced--and the last wholly-owned Krupp mine was sold off last year.
Iron and steel still provide a third of Krupp's business, but Vogelsang intends to cut back on mass production of heavy steel and concentrate on the more profitable market for specialty metals. He also plans to move Krupp into electronics, aircraft and reactor technology. As for armaments, company officials contend that they are willing to make only "defensive weapons," which by their definition includes tanks. A $42.5 million modernization program is nearing completion at Krupp's money-losing shipbuilding subsidiary, A.G. Weser. It will concentrate on container ships and tankers of up to 350,000 tons, and Vogelsang is confident that Weser's difficulties are over. "In 1970," he says, "we expect a profit in all sectors." Coming from Vogelsang, the prediction has the finality of a readout from a well-programmed computer.
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