Hoesch AG

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Hoesch AG

Eberhardstrasse 12
D-4600 Dortmund 1
Federal Republic of Germany
(231) 8410
Fax: (231) 2345

Public Company
Incorporated: 1871 as Eisen-und Stahlwerk Hoesch
Employees: 50,000
Sales: DM14.00 billion (US$9.37 billion)
Stock Exchanges: Frankfurt Munich Berlin Dusseldorf Hamburg Stuttgart Hanover Bremen Zurich Basel Geneva

Hoesch is one of the oldest companies in the Ruhr area of Germany. Over its long history, the profile of the company has undergone substantial changes: from an iron works, it evolved into a mass steel manufacturer; from this to a provider of specialty sheet steels; and from a pure steel company, it has become a diversified producer of industrial materials. The modern Hoesch is a group of companies operating globally, with subsidiaries and associates at home and abroad, offering a broad range of products and services.

Hoesch’s activities include the mining of raw materials, the production and refining of materials, the manufacture of components and building sections, the construction of complete installations and systems, trade in metals and the recycling of waste materials, the development of software, components, and system solutions for industrial automation, measurement and navigation technology, and communications technology.

At the beginning of the 19th century, according to the West-fälisches Magazin of 1798, Dortmund was still “a large village with walls, an hour’s walk in circumference, its citizens all farming people.” The town owed its later industrial advancement to mining and to the iron and steel industry. The engines of this advancement were the Hermannshütte company, founded by Hermann Diedrich Piepenstock in 1841; the Dortmunder Union of 1854; and the Eisen-und Stahlwerk Hoesch (Hoesch Iron and Steel Works), established in 1871. These originally independent companies have all belonged to Hoesch since 1966, and form the core of Hoesch Stahl AG, the 100%-owned subsidiary of Hoesch AG. Technical achievements such as the exclusive patent for the Thomas process, which used phosphorus-rich pig iron in the blasting process, acquired in 1879—the process had been developed to operational standard in Horde, now part of Dortmund, in the same year—illustrate the innovatory strength of Dortmund as a steel-producing town. Hoesch has remained exemplary for its innovation. Feinblech-Contiglühe, for example, established in 1985 for the production of new high-quality thin sheet metals, is one of the most modern plants in the world.

The company’s origins can be traced to the 1820s, when Eberhard Hoesch acquired the Lendersdorfer Hütte (Lenders-dorf Rolling Mill) near Duren in the Eifel region. Within a few years, he developed Lendersdorf, following English models, into one of the most modern puddling and rolling works of its time. Its major product was tracks for the expanding railway construction industry. After the ore resources of the Eifel area had been exhausted and the traditional energy supplies of water power and charcoal had been superceded by coal and steam power, the descendents of Eberhard Hoesch decided to move to the Ruhr. They chose Dortmund, with its large coal resources and good communications, as their location.

On September 1, 1871, Leopold, Eberhard, Viktor, Albert, and Wilhelm Hoesch founded the Eisen-und Stahlwerk Hoesch as an ordinary trading partnership with a capital of 2.4 million marks. Initially the company was purely a Bessemer steelworks with added rolling mills. Two-thirds of the pig iron used in the Bessemer process was imported from England. There was as yet no processing of the rolled steel.

In September 1873, six months after the Vienna stock market crash, Hoesch took the bold step of becoming an Aktienge-sellschafl, with capital of 3.6 million marks. This was only possible because of considerable investment by the Hoesch family. Hoesch shares were not listed on the stock exchange until 1895-1896, when the company’s expansion caused its capital to rise initially to 6 million marks and then, in 1914, to 28 million marks.

The economic crisis of the 1870s, which followed the boom of the Gründerjahre, a period of intensive industrial growth in Germany, had a contradictory effect on the new company; although profits collapsed, production rose steadily. After 1878 Hoesch again began to make profits. In 1881 a first dividend of 5% was paid. After this, the company’s profitability rose sharply; dividends did not fall below 10% in the years leading up to World War I, reaching a peak of 24% in 1914.

Hoesch developed into a highly integrated group at an early stage, encompassing all the production stages from ore and coal mining, to pig iron and steel production, through to mechanical engineering. In 1896 the first blast furnaces, of the latest design, were set in operation; in 1899 the Kaiserstuhl mines I and II were purchased; and in 1907 the Limburger Fabrik und Höttenverein, now Hoesch Hohenlimburg AG, became part of the group. Further acquisitions followed; for example, in 1911 the Maschinenfabrik Deutschland, founded in 1872, and in the following year the hammer mill Von der Becke. The group’s coal base was extended in 1920-1921 by a cooperation agreement with the Küln Neuessener Bergwerksverein mining union.

The company’s products spanned the whole range of contemporary iron and steel applications, encompassing rails and finished railway carriages; special sections for machine construction; steel girders; castings, such as ship’s propellers or crankshafts; and bulkheads for canal and harbor construction. The products were supplied throughout the world. A separate section of the business was responsible for bridge construction alone. Dortmund steel was used to build many of the structures that appeared in significant numbers in Europe and the United States from the end of the 19th century onwards, including the Wuppertal suspension railway, the platform hall at Cologne Central Railway Station, and the Limmat Bridge in Zurich. Railway bridges were built in Russia, the Balkans, the Near East, and India, and dock and port installations in Hamburg; Lisbon; and Canton, China, using Dortmund steel. The expansion of the group required capital resources stretching far beyond the limits of the founding capital. The group’s share capital reached almost 150 million reichsmarks by 1931. Although Hoesch had grown beyond being purely a family business, the company’s capital structure revealed the continuing dominance of the family’s share-holding.

Bank shareholdings in Hoesch before World War II amounted to less than 30%, which meant that the banks did not have a significant presence on Hoesch’s supervisory board. Demands for such a presence in the 1920s had been categorically opposed by Hoesch director Friedrich Springorum, who had even threatened to terminate business relations. So Hermann Fischer, a board member since 1921 in his capacity as director of the Abraham Schaaffhausenscher Bankverein, remained the sole representative of the banks until the merger with Köln-Neuessener Bergwerksverein in 1930.

The continuing development of the group was overseen by Albert Hoesch and his successors Friedrich Springorum and the latter’s son Fritz Springorum, the directors of the company until the outbreak of World War II. They steered the company through a time of deep economical, political, and social changes and preserved Hoesch’s commercial independence. In July 1925, Friedrich Springorum declared that Hoesch would not join the Vereinigte Stahlwerke (Union of Steelworks). Thus Hoesch, like Krupp in Essen and the Gutehoffnungshütte Aktienverein in Oberhausen, remained outside the gigantic mining group formed by the merger of 21 German companies. The Vereinigte Stahlwerke had a share capital of 800 million marks and the work force amounted to 200,000 employees. Its pig iron capacity was ten million tons.

World War I and subsequent interventions by French occupation forces, culminating in the Ruhrkampf of the early 1920s when miners and foundry workers staged a passive resistance directed at the French troops occupying the Ruhr, submitted the iron and steel industry of the Ruhr to the mechanisms of state management. Production levels fell to a low point. As a result of the Versailles Treaty, Alsace-Lorraine, the Saarland, and parts of Upper Silesia had to be conceded. Compared with pre-war capacities, this meant a loss of nearly 80% of ore production, 43.5% of pig iron production, and 35.8% of raw steel production. By 1926, however, Germany had already re-attained prewar production levels. The Ruhr, doubling its share of production to around 80%, played a decisive part in this.

At Hoesch, pig iron production after World War I had fallen back to the level of the year 1900. Yet production overtook prewar levels as early as 1925, rising to an all-time high of 800,000 tons in 1929. However, after the collapse of the New York stock market on “Black Friday” in October 1929, the flight of capital and falling prices in Germany led to a slump in production and to mass unemployment. The economic stabilization that had begun to take shape came to an abrupt halt, at Hoesch as elsewhere. The severity with which this economic collapse affected the Ruhr mining industry as a whole was already a clear indication of a structural crisis, the real extent of which would not be fully recognized until after the steel crisis of the 1970s.

Up to 1928, successful efforts at rationalization—which resulted in a 20% rise in employee productivity—were still able to offset the risks inherent in creating overcapacity. In 1928-1929 Hoesch had just established a new Thomas-process steelworks, with the largest converter in the world at that time. As production fell back to the levels of the postwar period, Hoesch began to take losses, a trend that was not reversed until 1933-1934. The rationalization measures that had been adopted only brought positive results in a favorable economic climate; the high fixed costs meant a lack of flexibility in times of crisis. Reductions in the work force became necessary for Hoesch as for other companies. Between 1929 and 1932 the total number of employees—workers and administrative staff-in the Hoesch group fell from 31,405 to 18,960. The crisis moved towards its climax, not only in the Ruhr, in 1932, the year of hunger marches and street riots. The merger with the Küln-Neuessener Bergwerksverein and the reserves maintained by managing director Fritz Winkhaus enabled Hoesch to survive these years of heavy losses and to keep its debt to a manageable level.

After Hitler came to power, Germany’s economic development was characterized by a program of job creation and armament. The National Socialists’s policy of autarchy and the pressing scarcity of foreign currency forced the iron and steel industry to smelt increasing quantities of inferior native ore. By the time Hitler ordered the German economy to prepare itself for war, the associations of iron and steel producers had long been brought into line. The dictatorial steel policy no longer allowed any scope for entrepreneurial planning of production and investment. After 1934 foreign trade in raw materials and semi-finished products was strictly controlled; from 1937, raw materials and production were subject to quotas.

The effects of World War II and the economic controls on Hoesch were disastrous; the work force had shrunk to less than 7,000, and production had fallen to a low point of less than 2,000 tons of raw steel. After November 11, 1944, production stopped completely. After a total of 22 bomb attacks, Hoesch was one of the worst-hit of the businesses on the coalfield. According to the investigation undertaken by the Allied Control Commission (Combined Steel Group), the costs of the war damage amounted to considerably more than 200 million marks. A total of 3,000 employees were numbered among the victims of World War II. On New Year’s Day in 1945, operation of blast furnaces I and II was resumed. In 1946, its 75th year of existence, Hoesch’s production was nearly one-fifth of prewar levels.

In the Potsdam Treaty of 1945, it was decided to decentralize Germany’s economy. The 10 conglomerates in the Ruhr area with their 385 subsidiaries were broken up into 24 independent companies with a restricted share capital of 100,000 Reichsmarks each. In 1950, Hoesch AG also went into liquidation. The traditional alliance of ore, coal, and steel had been torn apart. With the establishment of Hoesch Werke AG in July 1952, the managing director Friedrich Wilhelm Engel was able to rejoin some of the old coal mining and processing businesses to the steel production business.

In 1955 Hoesch emerged as one of the first groups in the coalfield to have regained ownership of all its former companies. Between 1952 and 1960, a total of DM1.4 billion was invested in reconstruction. The construction of new steel production plants, the blast furnace VI in 1953, the new continuous semi-finished production train, the new Siemens-Martin-Works III, the fully continuous fine-iron train with 234 trusses, and the semi-continuous wide strip train, ensured the highest technological standards. In 1951 raw iron production reached the levels attained before the global economic crisis and by 1960 had doubled to over 1.6 million tons. During the same period, raw steel production also increased, to over 2.3 million tons. In the financial year 1959-1960, the turnover of the Hoesch group was DM2.5 billion.

These developments were overshadowed by the coal crisis, which had broken out in 1957-1958. The crisis was a result of increased competition from U.S. coal in the German market-its share of the market almost doubled—and from a new source of energy, oil. Political and institutional conditions were also responsible in part for the crisis. The Investitionshilfegesetz (Investment Assistance Law) of 1952 had allowed investments in coal mining in the Ruhr, which had amounted to DM345 million in 1950, to rise to DM900 million in 1957. Production capacity reached a record level of nearly 130 million tons, which now could barely be utilized. By 1968 total production levels had fallen by 30%. The policy of coal price subsidies also prevented the Ruhr mining industry from competing properly with other suppliers on the basis of real market prices.

The answers to the coal crisis lay above all in intensive rationalization and mechanization, involving the concentration of businesses and work force reductions. In the Hoesch mining businesses, for example, the average productivity per miner between 1950 and 1957 changed only marginally from 367 to 400 tons per year, but by 1968 it had increased to over 800 tons per year. In 1956 production at Hoesch reached its highest level at 6.8 million tons; after this it was cut to a level of 4.8 million tons in 1968. On June 30, 1966, the Kaiserstuhl mine, Hoesch’s oldest mine, dating from 1899, was closed. The Kohleanpassungsgesetz (Coal Adjustment Law) of June 14, 1968, sought to bring about a fundamental reorganization and rehabilitation of coal mining in the Ruhr and smoothed the path towards the foundation of Ruhrkohle AG, in which 52 pits, 29 coking plants, and power stations with a combined production of 950 megawatts were merged. Hoesch too exchanged its pits for an 8% share in the new company, and so bid farewell to 10,500 mine workers, who had been part of the company’s history for over seven decades.

In 1966 Hoesch was merged with the Dortmund-Hörder Hüttenunion, which had been founded in 1951 through the merger of the Hermannshütte at Hörde, established in 1841, and the Dortmunder Union, established in 1854. Both the Hermannshutte and the Dortmunder Union had joined the Vereinigte Stahlwerke in 1926, through their respective membership of the large groups Phoenix (from 1906) and Deutsch-Luxembergische Bergwerks und Hütten AG (from 1910). After the Vereinigte Stahlwerke had been broken up by the Allies, the companies had remained independent until their merger. With raw steel production of nearly two million tons, making up 12% of total German steel production, the new company became one of the largest iron and steel companies in Germany.

With the Hüttenunion’s integration into the Hoesch group, the 43% stake in the Hüttenunion owned by Koninklijke Nederlandsche Hoogovens en Staalfabrieken NV of IJmuiden, Netherlands—a stake that went back to the days of the company’s participation in the Vereinigte Stahlwerke—was converted into a 14% stake in Hoesch AG. At the same time, an outline agreement was reached between Hoesch and Hoogovens that paved the way for close cooperation between the companies and set the course for Hoesch’s first international commercial alliance. Through a founding agreement, signed on July 17, 1972, Estel N. V. was established as a joint venture, the central company of the new multinational business. With raw steel production of 11 million tons and nearly 80,000 employees, Estel ranked third in Europe and seventh in the world.

As a result of the steel crisis, which caused Estel to take losses after 1975, Hoesch broke away from Hoogovens, through the resolution of an extraordinary shareholders’ meeting on November 16, 1982. The successful turnaround of Hoesch under the leadership of the new chairman of the board of management, Detlev Rohwedder, was the result of a comprehensive program of restructuring in the steel sector and of a strategy of opening up and developing new spheres of activity. This reduced the company’s dependence on the steel market and set the profits of the business on a broader base. Between 1983 and 1987, only DM1.5 million was invested in modernization in the steel sector, which moved towards specialization in new and improved fine metals, and in uncoated and refined-surface sheet steel products. The Hoesch group in the early 1990s consisted of the steel and steel refining division, the processing and industrial technology division, the trade and services division, and the automation and systems technology division. The steel division accounted for less than 30% of the total turnover, while the processing and industrial technology division and the automation and systems technology division with a combined share of over 50%, are becoming increasingly important. The company is an outstanding example, applicable outside as well as within the Ruhr area, of well-managed structural evolution.

Principal Subsidiaries

Hoesch Stahl AG; Hoesch Hohenlimburg AG; August Bilstein GmbH & Co., AG; Hoesch Verpackungssysteme GmbH; Hoesch Rothe Erde-Schmiedag AG; Nippon Roballo Company Ltd. (Japan); Hoesch Maschinenfabrik Deutschland AG; Camford Engineering PLC (U.K.); Hoesch Bausysteme GmbH; Isselwerk GmbH & Co. KG; Eisen und Metall AG; Hoesch Rohstoff GmbH; Herzog Coilex GmbH; Hoesch Export AG; mbp Software & Systems GmbH; RAFI GmbH; Schroff GmbH; Hans Kolbe & Co. (37%).