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Klöckner-Werke AG

Klöckner-Werke AG

Klöcknerstrasse 29
Postfach 10 08 53
D-47057 Duisburg
Germany
Telephone: (49) 203-3-96-32-96
Fax: (49) 203-3-96-34-56
Web site: http://www.kloecknerwerke.de

Public Subsidiary of WCM Beteilingungs- undGrundbesitz AG
Incorporated: 1897 as Lothringer Bergwerks- und Höttenverein Aumetz-Friede AG
Employees: 5,632
Sales: $944.5 million (2002)
Stock Exchanges: Xetra (Germany)
Ticker Symbol: KLK
NAIC: 541330 Engineering Services

Klöckner-Werke AG of Duisburg, once identified as a leader in German steel, machinery, and plastics, is now known as the engineering subsidiary of WCM Beteilingungs- und Grund-besitz AG, a Hamburg-based property and investment firm. WCM acquired an 82 percent stake in Klöckner-Werke in 2001 and has since instituted a radical restructuring program for its subsidiary. At the time of the takeover, Klöckners four main divisions were filling technology, packaging technology, film production, and Other Markets, which was composed of various other industrial activities. After the sale of Klöckner-Pentaplast, the film division, to the British Cinven Group in 2001, the company was left with three main divisions.

Company Origins: 18971923

Klöckner-Werke AGs story begins in 1897. By that time Peter Klöckner, one of the outstanding personalities of German industry and commerce in the first half of the 20th century, had taken preliminary steps toward the fulfillment of his ambition: to build his own self-contained trading organization integrating the three basic industries of coal mining, iron and steel production, and steel processing. After 20 years spent as an employee, learning the commercial aspects of the iron and steel business, Klöckner had set about rescuing ailing industrial companies, in the role of shareholder and board member. One such firm was the Eisen- und Stahlwerk Haspe AG, of which he became a director in 1894 and chairman in 1899. Its history was to be intertwined with that of Klöckner-Werke AG.

The forerunner of Klöckner-Werke AG was another iron and steel company that Klöckner found in need of rehabilitation, the Lothringer Bergwerks- und Hüttenverein Aumetz-Friede AG, founded in 1897. This company owned coal mines and a blast furnace at Kneuttingen, in Alsace-Lorraine, at that time German territory. In 1903 Peter Klöckner joined the board of Lothringer, becoming chairman in 1913. He reorganized and expanded the firm, making it one of the largest and most modern production complexes in Europe at the time. In 1911 he ensured its energy base by adding to it the Victor and Ickern coal mines at Castrop-Rauxel. The years leading up to World War I saw Germany in a phase of rapid industrialization and, with the pig iron, rolled steel, and wire products of the Haspe and Kneuttingen works, the trading house Klöckner & Co. was able to take the opportunities presented by a strong domestic demand.

At the end of World War I the Kneuttingen works in Lorraine were lost to Lothringer Bergwerks, when the region was returned to France. Undaunted by this setback, Peter Klöckner started at once on a reconstruction process that was to lead to the founding of Klöckner-Werke AG in 1923. In 1920 Eisen- und Stahlwerk Haspe AG, Peter Klöckners first protége, signed an operating agreement with Lothringer Bergwerks- und Hüttenverein, and in 1923 it merged with that companys legal successor, Klöckner-Werke AG, of which it became a subsidiary.

With Klöckner-Werke AG Peter Klöckner had achieved the construction of his own new industrial group. It possessed coal mines at Castrop-Rauxel, Kónigsborn, and Werne, and iron and steel works and processing factories at Hagen-Haspe, Georgs-marienhütte, Osnabrück, Troisdorf, Dusseldorf, and Quint, all supplying goods for the trading activities of Klöckner & Co. Later he added to Klöckner-Werke AG a large automobile and engineering organization, Humboldt-Deutz-Motoren AG, which had been produced by the merging of the engine factory of Deutz with the Humboldt engineering works and the Oberursel car factory. Humboldt-Deutz-Motoren AG merged in turn in 1936 with Magirus of Ulm, which made lorries and firefighting equipment, to become in 1938 Klöckner-Humboldt-Deutz AG (KHD), of Cologne, an almost fully owned subsidiary of Klöckner-Werke AG. This subsidiary was split off from Klöckner-Werke AG after World War II as a result of the Allied decartelization policy, going to Klöckner & Co., which in 1953 became its main shareholder.

Weathering Turbulence: 1920s40s

During the 1920s, in the face of limitations imposed on German industry by the aftermath of war and the lasting effects of the Treaty of Versailles, Klöckner-Werke AG continued under its founder to expand its coal and iron and steel activities. It also diversified, embarking on the manufacture of coal byproducts and buying a 50 percent interest in a factory producing synthetic fertilizers.

Political and economic instability at home, as well as a worldwide economic depression, set limits to the growth of German industries in the 1930s. National defense requirements afforded the steel industry some protection from the worst effects of the economic crisis, but at one point Klöckner-Werke AGs Georgsmarienhütte and its steelworks at Haspe were working only a month at a time, each in turn, in order to avoid complete closure.

In 1937 Peter Klöckners son-in-law, Gunter Henle, joined the board of directors of Klöckner-Werke AG and took up a post first at the Osnabrück works and then at the Duisburg headquarters. He inherited the leadership of the Klöckner groups when his father-in-law died in 1940, but about a year later he was removed from his offices and duties, apart from those of Klöckner & Co. in Duisburg, by the Nazi authorities. He did not return to Klöckner until January 1947, having been imprisoned for nine months by the British, who took over the running of the groups business when they occupied Duisburg, in succession to the U.S. forces after the end of the war.

In the meantime, although the steelworks at Haspe had remained more or less intact, much of the rest of Klöckner-Werke AGs property, including the mines at Castrop-Rauxel and Troisdorf, had been badly damaged by Allied air raids. KHDs Oberursel automobile factory had been dismantled and its premises used as a repair shop for Allied vehicles. Large numbers of Klöckner-Werke AGs staff housing units had been destroyed or damaged.

Restarting the shattered production systems was a huge task, and conditions were inauspicious. Much of the plant was damaged beyond repair and raw materials were in short supply. In addition, the company, like the rest of the German coal-and-steel firms during the Allied occupation, had to cope with the organizational problems posed by Allied Control Commission restrictions. These were based on an overall policy of deconcen-tration or Entflechtung, aimed at reversing the trend that had produced such large self-contained organizations as the Klöckner combination.

The management of mines was taken from their owners, separated from that of factories, and in Klöckner-Werke AGs operating area put under the control of the British-run North German Coal Control. In the iron and steel divisions of firms, owners rights also were suspended and assigned to the North German Iron and Steel Control, which in a trust management system introduced in 1947 obliged iron and steel firms to break up into single companies with a capital of no more than 100,000 reichsmarks. Klöckner-Werke AGs management board in Duisburg was removed from office and not allowed contact with the works. The Haspe, Osnabrück, and Georgsmarienhütte steel works were broken up into small companies as prescribed. The new parent holding company for these new independent worksthe mines, three steelworks, and four finishing factorieshad to drop the respected name of Klöckner-Werke AG for the simpler Klöckner.

Klöckner-Werke AG and KHD were required to sever their connections with each other. Therefore, in 1953, Klöckner-Werke AG ceased to be a holding company for KHD and handed over this role to Klöckner & Co. Klöckner & Co., for its part, had to divest itself of its shareholding in Klöckner-Werke AG, which it had previously controlled jointly with Peter Klöckners Dutch holding company Handelsmaatschappij Montan N.V. of the Hague. The Dutch firm then became the main shareholder of Klöckner-Werke AGs fragmented successor, Klöckner.

Postwar Recovery: 1950s60s

In the course of the 1950s the Klöckner companies fortunes revived. Postwar economic reconstruction and the rapid growth of the market for consumer durables created a strong demand for steel. The regulations that had been imposed by the Allied Control Commission were gradually being relaxed. The various independent companies into which the Entflechtung policy had split Klöckner-Werke AG were gathered back into one unit, with their assets returning to the parent company, which in 1954 had resumed its old name, Klöckner-Werke AG. From being temporarily a mere holding company it reverted to being a self-contained production company.

Company Perspectives

Total customer satisfaction. Thats the goal of each Klöckner company. To always look for ways to do our best, so you do your best. It all starts with our employees. Motivated, experienced, highly-trained, committed to perfection. And it extends to manufacturing, where quality is engineered into every process and where continuous improvement is an everyday goal.

In 1957 Günter Henle resumed his chairmanship of Klöckner-Werke AG. In the same year the new Klöckner-Werke AG steel works in Bremen, planned since 1952 and costing DM 1 billion, was ready to come onstream with an annual capacity of seven million tons of raw steel. It was the first steelworks in the country to be built on a coastal site, and it had three Siemens-Martin furnaces and a rolling mill. In 1958 a hot strip mill was added, followed in 1959 by the first blast furnace and three more Siemens-Martin furnaces. When in 1966 a larger furnace was ignited for the first time, the works became one of the most modern steel installations in Europe.

Even during the boom of the late 1950s and the first half of the 1960s there were already signs of overcapacity in the European steel market, indicating a need for steelmakers to develop other activities. Klöckner-Werke AG, conscious of the fact that in 1953 it had lost, with KHD, the largest and most important of the finishing works it owned, was making efforts to further broaden its original range of coal, steel, and steel processing products. In the 1950s Klöckner-Werke AG built an electric power station at Rauxel, which used coal from the companys mines to supply power to those mines and to the United Westphalia Electricity Company network. In 1955 it created Klöckner-Ferromatik GmbH at Castrop-Rauxel, which was to win a world reputation with its mine construction equipment, and at Osnabruck and in other factories it was producing fiberglass and other plastics. At the end of 1967 Klöckner-Werke AG was deriving 10 percent of its income from products other than coal and steel.

In 1965 Klöckner-Werke AGs coal mines were united into a mining subsidiary. There had been by then a ten-year period of growth, following the easing of postwar restrictions. While in the last full year of peace, 193839, Klöckner-Werke AGs sales had totaled 245 million reichsmarks, by the business year 196465 they had nearly quadrupled to a value of DM 2 billion.

The year 1965 saw a downturn, however, in West German industry and in Klöckner-Werke AGs sales. Competition was growing at home and abroad. Investment costs were rising. The then widespread implementation of new technologies such as basic oxygen steelmaking, continuous casting, and computerized control systems, had increased efficiency and quality and reduced unit production costs. The general drive was toward maximizing output, just when demand was about to fall. The year 1966 saw the collapse of the German capital markets and the failure of official economic policy. By 1973, the year of the first oil price shock, the postwar boom in steel had given way to recession, and much of the high capacity of new installations was superfluous.

The West German state tried to help combat the problems posed for the economy and the labor market by this overcapacity, offering financial inducements for mergers or cooperation deals between various big steelmakers. Klöckner-Werke AG was involved in two of these proposals, one in 1983 for a Ruhr group incorporating Hoesch, Klöckner, and Salzgitter, and another in 1984 for a merger between Klöckner and Krupp, but like the rest these proved impracticable.

Transformation in the 1970s80s

The year 1974 had ushered in a decade and a half during which the Klöckner-Werke AGs shareholders would receive no dividends. Also in that year Herbert Gienow, a director since 1962, became chairman of the board of directors. During the worst years of the steel crisis of 197484 and until his retirement in April 1991, Gienow oversaw the transformation of an unprofitable conglomerate still based, in large part, on steel production and processing into an efficient and profitable manufacturing and processing triad with a reorganized steel section and a new emphasis on machinery and plastics. In the business year 198990, with an operating profit of DM 290 million, the company at last found itself able to pay its shareholders a dividend of DM 5 per DM 50 share, and with good prospects of keeping up the performance.

The background to this achievement had been unfavorable. Between 1974 and 1983 West Germanys annual raw steel production had dropped from 53 million tons to 36 million. The steel crisis was felt most strongly in the Ruhr after 1980. In 1980 Klöckner-Werke AGs finances were still in balance. Early in that year the company had raised its capital, and Klöckner & Co. acquired a 10 percent holding. By 1981 the company was experiencing its worst results for 30 years, and by the autumn of 1982 the Bremen factory was working at 48 percent capacity. Thanks to an energetic policy of cost-cutting, shift of emphasis, and development abroad, Klöckner-Werke AG, led by Gienow, was able to make a recovery.

During the 15 years of Gienows stewardship the company, in addition to diversifying its product lines, went international. About the time he took over, it employed 35,000 people, all in Germany, and almost all producing steel in one form or another for four types of domestic customer: the automotive, engineering, mining, and construction industries. By 1991 the same number of people was deployed at 90 production points, more than half of which are outside Germany. Nearly a third of the workforce was located abroad. Steels share of sales for 1989 and 1990 was 37.5 percent, with engineering at 37.5 percent, and plastics at 25 percent. Of the years total turnover of DM 8.035 billion, 60 percent came from West Germany, 30 percent from other European countries, and 10 percent from overseas.

Key Dates

1897:
Lothringer Bergwerks- und Hüttenverein Aumetz-Friede AG is founded.
1903:
Peter Klöckner joins the board of the Lothringer.
1923:
Klöckner-Werke AG is founded.
1938:
Having merged in 1936, Humboldt-Deutz-Motoren AG and Magirus of Ulm become Klöckner-Humboldt-Deutz AG (KHD), of Cologne, an almost fully owned subsidiary of Klöckner-Werke AG.
1947:
The Allied Control Commission institutes Entflech-tung, a decartelization policy whereby Klöckner-Werke AG is split into a number of smaller companies under the new parent company, whose name is abbreviated to Klöckner.
1954:
Klöckner returns to its original name, Klöckner-Werke AG.
1974:
Herbert Gienow becomes chairman of the board.
1992:
Klöckner-Werke files for court protection from its creditors and embarks on a drastic debt-restructuring program.
2001:
Hamburg-based WCM Beteilingungs- und Grund-besitz AG acquires an 82 percent stake in Klöckner-Werke.

In the first year of the 1990s, the move toward greater reliance on engineering and plastics continued. Steel still played a major role. In the steel sector, in 198788, Klöckner-Werke AG acquired 11 percent of NMH Stahlwerke GmbH, and in 198889 it embarked on a joint venture with the Belgian firm of SIDMAR NV to build a steelworks, SIKEL NV, in Limburg, The Netherlands; though in August 1990 it sold its Mannstaedt division at Troisdorf, making hot rolled special sections and hollow and cold formed sections, to British Steel for DM 300 million. In 198889, in the engineering and plastics processing sector, Klöckner-Werke AG acquired 59 percent of Kautex Werke Reinold Hagen AG, 60 percent of Kautex-Bayern GmbH, 100 percent of Kautex-Ostfriedland GmbH, and 98 percent of the Eurotec group, the largest supplier in Europe of plastic components for the automobile industry. Also in 198889, Klöckner-Werke AG increased its holding in SEN AG of West Germany, one of the worlds largest manufacturers of beverage vending machines.

Klöckner-Werke AG was targeting products from all its divisions at the newly liberalized East German market, with projects such as a planned takeover of the Muldenstein tube factory, which, if the deal went through, would buy its raw materials from the Bremen works instead of from the Soviet Union as hitherto.

In 198990 Klöckner-Werke AG increased its share capital again, by a rights issue, from DM 250 million to DM 458 million, and its own holding from 10 percent to 20 percent; another 25 percent was in the friendly hands of the Dutch firm Internationale Industríele Beleggung Maatschappij Amsterdam BV, belonging to descendants of Peter Klöckner and Günter Henle. The latters son, Jórg A. Henle, was the present chairman of Klöckner-Werke AGs supervisory board.

Approximately DM 300 million was invested in 198990 in quality control assurance and in further rationalization. The group continued to aim at reducing its energy consumption and improving pollution control.

In nearly a century of existence Klöckner-Werke AG had shown an enduring ability to adapt to changing circumstances. From the coal, iron, and steel profile of its earliest days it had moved on to another triple pattern; in the 1990s the name Klöckner-Werke AG stood for SteelMachineryPlastics. Under Herbert Gienows successor as chairman of the board of directors, Hans Christoph von Rohr, who began his career in different Klöckner enterprises at Klöckner-Werke AGs Bremen works, the company was well prepared to find its way in the rapidly changing world landscape of industry.

Returning from the Brink of Collapse in the 1990s

In the early 1990s, Klöckner-Werke continued its drive to diversify its engineering and plastics activities, while moving away from its reliance on steel. This trend was evident in the companys first quarter results for 1991, which reflected a 25.3 percent drop in steel sales, and at once a 120 percent increase in sales by the plastics division. Also during this time, Klöckner-Werke AG responded to pressure in the consolidating German steel industry by forging new partnerships with non-German, especially Japanese, companies. In 1992, for example, the company teamed up with C. Itoh, a Japanese trading house, and Rautarauukki, a Finnish steel company, to build a new, highly efficient plant for the production of zinc-coated steel, then the preferred material of Japanese carmakers.

Even with these proactive strategies, however, the company suffered from the continued floundering of the European steel industry. Finally, after a prolonged struggle under the weight of its mammoth debt, Klöckner-Werke filed for court protection from its creditors at the end of 1992, seeking to write off roughly 60 percent of its DM 2.4 billion debt. Although the move to composition proceedingsthe German financial laws last stand before bankruptcywas seen by many as an act of desperation, Chief Executive Rohr maintained an air of confidence, characterizing it optimistically as a new departure, a revival, for our steel business. Under the ambitious plan to avert total collapse, Klöckner-Werke placed all of its nonsteel and foreign interests in a company called Klöckner-Mecator-Maschinbau (KMM). The effect of this restructuring was to insulate earnings from plastics and engineeringwhich then accounted for about two-thirds of Klöckner-Werkes DM 7.2 billion turnoverfrom the debts of the steel companies, thereby guaranteeing repayment of the remaining 40 percent of Klöckner-Werkes debt. Further restructuring measures included the closure of one blast furnace at its Bremen steel plant and significant capacity cuts in the production of pig iron, crude steel, and rolled steel. Klöckner-Werke AG also agreed to reduce its workforce by a third, from 6,200 to 4,100, by the end of 1994.

The debt restructuring proved effective. By 1994, Klöckner-Werke AG had unloaded most of its steel interests and returned to solvency, reporting year-end profits of DM 3 million on turnover of DM 4.1 billion. In September 1995, however, the company was reporting a deficit of DM 210 million as the result of losses incurred by its subsidiary, KHS. Shortly thereafter, Hans-Christoph von Rohr resigned as CEO and was replaced by Heinz-Ludwig Schmitz. By 1997, the company had regained its footing and stock prices surged in July, following the announcement that pretax profits would quadruple to DM 200 million that year.

In the late 1990s Klöckner-Werke continued to adjust its priorities. In December 1998 the company announced a plan to focus on its films and packaging divisions, and the sale of its car parts business seemed likely. By November 2000, however, this plan was altered, as the company decided to sell off its machine-engineering business and make foil activities its exclusive focus. Having achieved annual growth of 30 percent over the previous five years, the foil division had gained enough size to warrant this new focus, and CEO Schmidt declared his intention to make Klöckner-Werke AG a world leader in this arena. With 25 of Klöckner-Werke AGs companies up for sale, speculation arose that the restructuring was a defensive effort to prevent a takeover from WCM, a realty and investment group that already owned a 25 percent stake in the company. Although officials at Klöckner-Werke AG dismissed these suggestions, WCM soon launched a hostile takeover bid, which was eventually approved in January 2001.

New Ownership for the New Century

For the purchase price of $1.1 billion, the Hamburg-based WCM Beteilingungs- und Grundbesitz AG increased its stake in Klöckner-Werke AG to 82 percent. Klöckner-Werke AG retained a separate stock listing and identity, but the companys management soon found its business strategies incompatible with WCMs program for its new acquisition. In an abrupt strategy change, WCM announced plans to sell off Klöckner-Werkes lucrative foil business in May 2001, prompting the resignations of CEO Heinz-Ludwig Schmitz and CFO Siegfried Barschkett. WCM proceeded to sell off other facets of the Klöckner Group, with the apparent aim of maintaining Klöckner-Werke as a holding company to utilize its DM 2.3 billion loss carryover. Indeed, one of Klöckner-Werkes biggest businesses, Klöckner-Pentaplast, was sold later that year to Cinven, a British private equity firm. Although the EUR 925 million sale of the plastic films unit resulted in soaring profits for Klöckner-Werke in 2002, this was not the end of WCMs drastic restructuring program. In the early months of 2003 the future of Klöckner-Werke remained uncertain.

Principal Subsidiaries

Klöckner Mercator Maschinbeau GmbH; KHS Maschinen- und Anlagenbau AG; KHS Till GmbH; KHS s.r.o., Budweis (Czech Republic); KHS Anker-Maschinbeau GmbH; Anker Labelers USA Inc. (United States); KHS Industria de Mäquinas Ltda. (Brazil); IRKAS Beteiligungs GmbH & Co. Vermietungs-KG (99%); Raton Verwaltung GmbH & Co. Vermietungs-KG (99%); KHS America, Inc. (United States); KHS Asia Pte. Ltd. (Singapore); KHS Benelux B.V. (Netherlands); KHS Far East Corporation (Japan; 75%); KHS Austria Getränketechnik Gesellschaft m.b.H.; KHS Klöckner Holstein Seitz GmbH (Switzerland); KHS Klöckner Holstein Seitz Ltd. (U.K.); KHS Klöckner Holstein Seitz S.A.R.L. (France); KHS Machinery Pvt. Ltd. (India; 60%); KHS Manufacturing (South Africa) (Pty.) Limited; KHS Pacific Pty. Ltd. (Australia); KHS Skandinavien ApS (Denmark); KHS Klöckner Holstein Seitz S.A. (Spain); Holstein und Kappert GmbH; KHS Argentina S.A. (Argentina); RECOMA Getränkemaschinen GmbH (Austria); Klöckner KHS, Inc. (United States); KHS Machines, LLC (United States); KHS Mexico S.A. de C.V.; Klöckner Hansel GmbH; Klöckner Medipak GmbH (SchloB Holte-Stukenbrock); Klöckner Hansel Processing GmbH; Klöckner Tevopharm B.V. (Netherlands); Klöckner Hansel Far East Pte. Ltd. (Singapore); Klöckner Medipak France S.A.R.L.; Klöckner Hansel do Brazil Ltda. (99.98%); Klöckner Bartlet, Inc. (United States); Klöckner Medipak, Inc. (United States); Kisters Maschinbau GmbH (76%); Kisters do Brazil Ltda.; Kisters France S.A.R.L. (France); Kisters Kayat, Inc. (United States); Kisters Ltd. (United Kingdom); Kisters Slovakia s.r.o. (94%); MPI International, Inc. (United States); International Fineblanking Corporation (United States); Michigan Fineblank-ing Corporation (United States); Klöckner Desma Elasto-mertechnik GmbH; KDE Sales and Service, Inc. (United States); Klöckner Desma Machinery Pvt. Ltd. (India; 60%); Klöckner Desma Schuhmaschinen GmbH; JV DESKOR (Russia; 40%); REMAK Maschinenbau GmbH; Klöckner Durilit GmbH; GVG Grundbesitz-und Vermogensverwaltungs-gesell-schaft mbH & Co. Objekt Achim KG; Domus Verwaltungs-gesellschaft mbH; RSE Grundbesitz und Beteiligungs-AG (17.4%).

Principal Competitors

Rexam plc; Sidel SA; Spartech Corporation.

Further Reading

Braude, Jonathan, Klöckner-Werke Accepts Sweetened Bid, Daily Deal, January 5, 2001.

Henle, Günter, Weggenosse des Jahrhunderts, Stuttgart: Deutsche Ver-lags-Anstalt, 1968.

75 Jahre Klöckner & Co 19061981, Duisburg: Klöckner & Co, 1981, reprinted 1991.

Hudson, Ray, and David Sadler, The International Steel Industry, London: Routledge, 1989.

Klöckner Werke Aims for World Leadership in Foils Engineering, Handelsblatt (English version), March 19, 2001.

Mény, Yves, and Vincent Wright, et A1., La Crise de la Sidérurgie Européenne 19741984, Paris: Presses Universitaires de France, 1985.

Munchau, Wolfgang, Klöckners Fall Points Up Steel Crisis in Europe, Times, December 12, 1992.

Peel, Quentin, Cinderella of Steel Causes a SceneKlöckners Return to Form Could Be Embarrassing, Financial Times (London), February 11, 1994.

, Klöckner Puts a Brave Face on Tarnished ImageThe German Steelmakers Ambitious Scheme to Avoid Collapse, Financial Times (London), December 12, 1992.

WCM Rings in Strategy Change at Klöckner-Werke Machine Engineering, Handelsblatt (English version), May 22, 2001.

Olive Classe

update: Erin Brown

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Klöckner-Werke AG

Klöckner-Werke AG

Klöcknerstrasse 29
Postfach 10 08 53
D-4100 Duisburg
Federal Republic of Germany
(203) 39 61
Fax: (203) 396 35 35

Public Company
Incorporated:
1897 as Lothringer Hütten- und Bergwerksverein
Employees: 34,793
Sales: DM8.04 billion (US$5.38 billion) Stock Exchanges: Berlin Bremen Dusseldorf Frankfurt Hamburg Hanover Munich Stuttgart

Klöckner-Werke AG of Duisburg is a leader in three industrial fields: steel, machinery, and plastics. In 1989 the company was the ninth-largest iron and steel concern in West Germany and ranked 23rd-largest in the European Economic Community. Besides the production and processing of iron and steel, Klöckner-Werke AG also specializes in the construction of machinery for mining and for the food and drink industries, electric power production, and the manufacture of plastics for packaging and automobile parts.

Its history has been closely linked with that of the international trading and industrial services company of Klöckner & Co. established in 1906 and since 1988 known as Klöckner & Co. AG, also based in Duisburg and with its head offices in the Klöcknerhaus there. Klöckner & Co., created with the intention of providing a link between producers and users of coal, iron, and steel, has acted almost throughout as a holding company for Klöckner-Werke AG. The founder of both companies was Peter Klöckner, members of whose family have played major parts in the development of the two organizations.

Klöckner-Werke AGs story begins in 1897. By that time Peter Klöckner, one of the outstanding personalities of German industry and commerce in the first half of the 20th century, had already taken preliminary steps towards the fulfillment of his ambition: to build his own self-contained trading organization integrating the three basic industries of coal mining, iron and steel production, and steel-processing. After 20 years spent as an employee, learning the commercial aspects of the iron and steel business, Klöckner had set about rescuing ailing industrial companies, in the role of shareholder and board member. One such firm was the Eisen-und Stahlwerk Haspe AG, of which he became a director in 1894 and chairman in 1899. Its history was to be intertwined with that of Klöckner-Werke AG.

The forerunner of Klöckner-Werke AG was another iron and steel company that Klöckner found in need of rehabilitation, the Lothringer Bergwerks- und Hüttenverein Aumetz-Friede AG, founded in 1897. This company owned coal mines and a blast furnace at Kneuttingen, in Alsace-Lorraine, at that time German territory. In 1903 Peter Klöckner joined the board of the Lothringer Bergwerks- und Hüttenverein Aumetz-Friede AG, becoming chairman in 1913. He reorganized and expanded the firm, making it one of the largest and most modern production complexes in Europe at the time. In 1911 he ensured its energy base by adding to it the Victor and Ickern coal mines at Castrop-Rauxel. The years leading up to World War I saw Germany in a phase of rapid industrialization and, with the pig-iron, rolled steel, and wire products of the Haspe and Kneuttingen works, the trading house Klöckner & Co. was able to take the opportunities presented by a strong domestic demand.

At the end of World War I the Kneuttingen works in Lorraine were lost to the Lothringer Bergwerks- und Hüttenverein Aumetz-Friede company, when the region was returned to France. Undaunted by this setback, Peter Klöckner started at once on a reconstruction process that was to lead to the founding of Klöckner-Werke AG in 1923. In 1920 Eisen-und Stahlwerk Haspe AG, Peter Klöckners first protege, signed an operating agreement with the Lothringer Bergwerks- und Hüttenverein, and in 1923 it merged with that companys legal successor, Klöckner-Werke AG, of which it became a subsidiary.

With Klöckner-Werke AG Peter Klöckner had now achieved the construction of his own new industrial group. It possessed coal mines at Castrop-Rauxel, Königsborn, and Werne, and iron and steel works and processing factories at Hagen-Haspe, Georgsmarienhütte, Osnabrück, Troisdorf, Dusseldorf, and Quint, all supplying goods for the trading activities of Klöckner & Co. Later he added to Klöckner-Werke AG a large automobile and engineering organization, Humboldt-Deutz-Motoren AG, that had been produced by the merging of the engine factory of Deutz with the Humboldt engineering works and the Oberursel car factory. Humboldt-Deutz-Motoren AG merged in turn in 1936 with Magirus of Ulm, which made lorries and firefighting equipment, to become in 1938 Klöckner-Humboldt-Deutz AG (KHD), of Cologne, an almost fully-owned subsidiary of Klöckner-Werke AG. This subsidiary was to be split off from Klöckner-Werke AG after World War II as a result of the Allied decartelization policy, going to Klöckner & Co., which in 1953 became its main shareholder. KHD has been independent of Klöckner & Co. AG for several years.

During the 1920s, in the face of limitations imposed on German industry by the aftermath of war and the lasting effects of the Treaty of Versailles, Klöckner-Werke AG continued under its founder to expand its coal and iron and steel activities. It also diversified, embarking on the manufacture of coal byproducts and buying a 50% interest in a factory producing synthetic fertilizers.

Political and economic instability at home, as well as the world Depression, set limits to the growth of German industries in the 1930s. National defense requirements afforded the steel industry some protection from the worst effects of the economic crisis, but at one point Klöckner-Werke AGs Georgsmarienhutte and its steelworks at Haspe were working only a month at a time, each in turn, in order to avoid complete closure.

In 1937 Peter Klöckners son-in-law, Günter Henle, joined the board of directors of Klöckner-Werke AG and took up a post first at the Osnabrück works and then at the Duisburg headquarters. He inherited the leadership of the Klöckner groups when his father-in-law died in 1940, but about a year later he was removed from his offices and duties, apart from those of Klöckner & Co. in Duisburg, by the Nazi authorities. He did not return to the Klöcknerhaus until January 1947, having been imprisoned for nine months by the British, who took over the running of the groups business when they occupied Duisburg, in succession to the U.S. forces after the end of the war.

In the meantime, although the steelworks at Haspe had remained more or less intact, much of the rest of Klöckner-Werke AGs property, including the mines at Castrop-Rauxel and Troisdorf, had been badly damaged by Allied air raids. KHDs Oberursel automobile factory had been dismantled and its premises used as a repair-shop for Allied vehicles. Large numbers of Klöckner-Werke AGs staff housing units had been destroyed or damaged.

Restarting the shattered production systems was a huge task, and conditions were inauspicious. Much plant was damaged beyond repair and raw materials were in short supply. In addition the company, like the rest of the German coal-and-steel firms during the Allied occupation, had to cope with the organizational problems posed by Allied Control Commission restrictions. These were based on an overall policy of deconcentration or Entflechtung, aimed at reversing the trend that had produced such large self-contained organizations as the Klöckner combination.

The management of mines was taken from their owners, separated from that of factories, and in Klöckner-Werke AGs operating area put under the control of the British-run North German Coal Control. In the iron and steel divisions of firms, owners rights were also suspended and assigned to the North German Iron and Steel Control, which in a trust management system introduced in 1947 obliged iron and steel firms to break up into single companies with a capital of no more than 100,000 reichsmarks. Klöckner-Werke AGs management board in Duisburg was removed from office and not allowed contact with the works. The Haspe, Osnabrück, and Georgsmarienhutte steel works were broken up into small companies as prescribed. The new parent holding company for these new independent individual worksthe mines, three steelworks, and four finishing factorieshad to drop the respected name of Klöckner-Werke AG for the simple Klöckner.

Klöckner-Werke AG and KHD were required to sever their connections with each other. Therefore in 1953, Klöckner-Werke AG ceased to be a holding company for KHD and handed over this role to Klöckner & Co. Klöckner & Co., for its part, had to divest itself of its shareholding in Klöckner-Werke AG, which it had previously controlled jointly with Peter Klöckners Dutch holding company Handlesmaatschappij Montan N.V. of the Hague. The Dutch firm then became the main shareholder of Klöckner-Werke AGs fragmented successor, Klöckner.

In the course of the 1950s the Klöckner companies fortunes revived. Postwar economic reconstruction and the rapid growth of the market for consumer durables created a strong demand for steel. The regulations that had been imposed by the Allied Control Commission were gradually being relaxed. The various independent companies into which the Entflechtung policy had split Klöckner-Werke AG were gathered back into one unit, with their assets returning to the parent company, which in 1954 had resumed its old name Klöckner-Werke AG. From being temporarily a mere holding company it reverted to being a self-contained production company.

In 1957 Günter Henle resumed his chairmanship of Klöckner-Werke AG. In the same year the new Klöckner-Werke AG steel works in Bremen, planned since 1952 and costing DM1 billion, was ready to come onstream with an annual capacity of seven million tons of raw steel. It was the first steelworks in the country to be built on a coastal site, and it had three Siemens-Martin furnaces and a rolling mill. In 1958 a hot strip mill was added, followed in 1959 by the first blast furnace and three more Siemens-Martin furnaces. When in 1966 a larger furnace was blown in, or set in action for the first time, the works became one of the most modern steel installations in Europe.

Even during the boom of the late 1950s and the first half of the 1960s there were already signs of overcapacity in the European steel market, indicating a need for steelmakers to develop other activities. Klöckner-Werke AG, conscious of the fact that in 1953 it had lost, with KHD, the largest and most important of the finishing works it owned, was making efforts to broaden further its original range of coal, steel, and steel processing products. In the 1950s Klöckner-Werke AG built an electric power station at Rauxel, which used coal from the companys mines to supply power to those mines and to the United Westphalia Electricity Company network. In 1955 it created Klöckner-Ferromatik GmbH at Castrop-Rauxel, which was to win a world reputation with its mine construction equipment, and at Osnabrück and in other factories it was producing fiberglass and other plastics. At the end of 1967 Klöckner-Werke AG was deriving 10% of its income from products other than coal and steel.

In 1965 Klöckner-Werke AGs coalmines were united into a mining subsidiary. There had been by then a ten-year period of growth, following the easing of postwar restrictions. While in the last full year of peace, 1938-1939, Klöckner-Werke AGs sales had totaled 245 million reichsmarks, by the business year 1964-1965 they had nearly quadrupled to a value of DM2 billion.

However, 1965 saw a downturn in West German industry and in Klöckner-Werke AGs sales. Competition was growing at home and abroad. Investment costs were rising. The then widespread implementation of new technologies such as basic oxygen steelmaking, continuous casting, and computerized control systems, had increased efficiency and quality and reduced unit production costs. The general drive was towards maximizing output, just when demand was about to fall. The year 1966 saw the collapse of the German capital markets and the failure of official economic policy. By 1973 the year of the first oil price shock, the postwar boom in steel had given way to recession, and much of the high capacity of new installations was superfluous.

The West German state tried to help combat the problems posed for the economy and the labor market by this overcapacity, offering financial inducements for mergers or cooperation deals between various big steelmakers. Klöckner-Werke AG was involved in two of these proposals, one in 1983 for a Ruhr group incorporating Hoesch, Klöckner, and Salzgitter, and another in 1984 for a merger between Klöckner and Krupp, but like the rest these proved impracticable.

The year 1974 had ushered in a decade and a half during which the Klöckner-Werke AGs shareholders would receive no dividends. Also in that year Herbert Gienow, a director since 1962, became chairman of the board of directors. During the worst years of the steel crisis of 1974-1984 and until his retirement in April 1991, Gienow oversaw the transformation of an unprofitable conglomerate still largely based on steel production and processing into an efficient and profitable manufacturing and processing triad with a reorganized steel section and a new emphasis on machinery and plastics. In the business year 1989-1990, with an operating profit of DM290 million, the company at last found itself able to pay its shareholders a dividend of DM5 per DM50 share, and with good prospects of keeping up the performance.

The background to this achievement had been unfavorable. Between 1974 and 1983 West Germanys annual raw steel production had dropped from 53 million tons to 36 million. The steel crisis was felt most strongly in the Ruhr after 1980. In 1980 Klöckner-Werke AGs finances were still in balance. Early in that year the company had raised its capital, and Klöckner & Co. acquired a 10% holding. By 1981 the company was experiencing its worst results for 30 years, and by the autumn of 1982 the Bremen factory was working at 48% capacity. Thanks to an energetic policy of cost-cutting, shift of emphasis, and development abroad, Klöckner-Werke AG, led by Gienow, was able to make a recovery.

During the 15 years of Gienows stewardship the company, in addition to diversifying its product lines, went international. About the time he took over, it employed 35,000 people, all in Germany, and almost all producing steel in one form or another for four types of domestic customer: the automotive, engineering, mining, and construction industrÍes. By 1991 the same number of people was deployed at 90 production points, more than half of which are outside Germany. Nearly a third of the work force is located abroad. Steels share of sales for 1989 and 1990 was 37.5%, with engineering at 37.5%, and plastics at 25%. Of the years total turnover of DM8.035 billion, 60% came from West Germany, 30% from other European countries, and 10% from overseas.

In the first year of the 1990s, the move towards greater reliance on engineering and plastics continued. Steel still played a major role. In the steel sector, in 1987-1988, Klöckner-Werke AG acquired 11% of NMH Stahlwerke GmbH, and in 1988-1989 it embarked on a joint venture with the Belgian firm of SIDMAR NV to build a steelworks, SIKEL NV, in Limburg, in the Netherlands; though in August 1990 it sold its Mann-staedt division at Troisdorf, making hot rolled special sections and hollow and cold formed sections, to British Steel for DM300 million. In 1988-1989, in the engineering and plastics processing sector, Klöckner-Werke AG acquired 59% of Kautex Werke Reinold Hagen AG, 60% of Kautex-Bayern GmbH, 100% of Kautex-Ostfriedland GmbH, and 98% of the Eurotec group, the largest supplier in Europe of plastic components for the automobile industry. Also in 1988-1989, Klöckner-Werke AG increased its holding in SEN AG of West Germany, one of the worlds largest manufacturers of drink vending machines.

Klöckner-Werke AG is targeting products from all its divisions at the newly liberalized East German market, with projects such as a planned takeover of the Muldenstein tube factory which, if the deal went through, would buy its raw materials from the Bremen works instead of from the Soviet Union as hitherto.

In 1989-1990 Klöckner-Werke AG increased its share capital again, by a rights issue, from DM250 million to DM458 million, and its own holding from 10% to 20%; another 25% is in the friendly hands of the Dutch firm Internationale Industríele Beleggung Maatschappij Amsterdam BV, belonging to descendants of Peter Klöckner and Günter Henle. The latters son, Jörg A. Henle, is the present chairman of Klöckner-Werke AGs supervisory board.

DM300 million was invested in 1989-1990 in quality control assurance and in further rationalization. The group continues to aim at reducing its energy consumption and improving pollution control.

In nearly a century of existence Klöckner-Werke AG has shown an enduring ability to adapt to changing circumstances. From the coal, iron, and steel profile of its earliest days it has moved on to another triple pattern; in the 1990s the name Klöckner-Werke AG stands for SteelMachineryPlastics. Under Herbert Gienows successor as chairman of the board of directors, Hans Christoph von Rohr, who began a career spent in different Klöckner enterprises at Klöckner-Werke AGs Bremen works, the company is well prepared to find its way in the rapidly changing world landscape of industry.

Principal Subsidiaries

Klöckner-Werke Stahl OHG; Klöckner Stahl GmbH; Holstein und Kappert AG; Klöckner Ferromatic Desma GmbH; Klöckner Durilit GmbH; Klöckner Ionon GmbH; Weserport Umschlaggesellschaft mbH (99%); Klöckner Datentechnik GmbH; Klöckner-Wilhelmsburger GmbH; Klöckner Planungs-und Neubau GmbH; Klöckner Mercator Maschinenbau GmbH; SEITZ ENZIGER NOLL Maschinenbau AG (92%); H&K S.A.R.L. (France); H&K (Far East) Corporation (Japan, 75%); ALZ NV (Belgium, 15.5%): Sikel NV (Belgium, 33.3%); Kautex of Canada Inc. (Canada); Klöckner Technologic und Entwicklung GmbH; Klöckner Capital Corporation (U.S.A.)

Further Reading

Henle, Günter, Weggenosse des Jahrhunderts, Stuttgart, Deutsche Verlags-Anstalt, 1968; 75 Jahre Klöckner & Co 1906-1981, Klöckner & Co, Duisburg, 1981, reprinted 1991; Hudson, Ray, and David Sadler, The International Steel Industry, London, Routledge, 1989; Meny, Yves and Vincent Wright, et al., La Crise de la Sidérurgie Européenne 1974-1984, Paris, Presses Universitaires de France, 1985.

Olive Classe

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