Siemens A.G.

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Siemens A.G.

Wittelsbacherplatz 2
D-8000 Munich 2
Federal Republic of Germany
(89) 2 34 0

Public Company
Incorporated: 1966
Employees: 365,000
Sales: DM61.2 billion (US$34.51 billion)
Stock Index: Berlin Hamburg Dusseldorf Munich Brussels Paris Zurich Basel Geneva Amsterdam Vienna

Siemens A.G. is an electrical manufacturing giant and West Germany’s leading technology concern. George Williamson of Fortune once wrote that “second is best” might as well be its motto, referring to the company’s history of achieving success through well-engineered refinements of other people’s inventions. But opportunism is not the only interesting facet of Siemen’s history, which is also a story of a long family tradition and intimate involvement with some of the most important events of the 19th and 20th centuries.

Siemens & Halske was founded in Berlin in 1847 by Werner Siemens and J. G. Halske to manufacture and install telegraphic systems. Siemens, a former artillery officer in the Prussian army and an engineer who already owned a profitable patent for electroplating, was the driving force behind the company and remained so for the rest of his life. The company received its first major commission in 1848, when it contracted to build a telegraph link between Berlin and Frankfurt.

Construction of telegraph systems boomed in the mid-19th century and Siemens & Halske was well equipped to take advantage of the situation. In 1853, it received a commission to build an extensive telegraph system in Russia. Upon its completion, the company opened an office in St. Petersburg under the direction of Werner Siemens’ brother Carl Siemens. In 1857 Siemens & Halske helped develop the first successful deep-sea telegraphic cable. This led to the tansformation of the London office into an independent company under the direction of Wilhelm Siemens, another of Werner’s brothers, the next year. By 1865 the company’s English operations had become substantial. Its name was changed to Siemens Brothers, still under the direction of Wilhelm, who was eventually knighted as Sir William Siemens.

In 1867 Siemens Brothers received a contract for an 11,000-kilometer telegraph line from London to Calcutta, which it completed in 1870. In 1871 it linked London and Teheran by telegraph. In 1874 Siemens Brothers launched its own cable-laying ship, the Faraday, which William Siemens codesigned. The next year, it laid the first direct transatlantic cable from Ireland to the United States.

In 1877 Alexander Graham Bell’s new telephones reached Berlin for the first time. Immediately grasping their worth, Werner Siemens quickly patented an improved version of the device and began production. In the next decade, Siemens & Halske also developed and began manufacturing electrical-lighting and power-generating equipment after Werner Siemens discovered the dynamo-electric principle in 1866..

In 1888 Werner Siemens was ennobled by the Germany kaiser for his achievements. Two years later he retired and his company became a limited partnership shared by his sons Arnold and Wilhelm and his brother Carl-Werner Siemens died in 1892. But the House of Siemens continued to prosper. That same year, Siemens & Halske built a power station at Erding in Bavaria and founded an American subsidiary, Siemens & Halske Electric Company, in Chicago. The latter, however, closed in 1904. In 1895 Wilhelm Conrad Roentgen discovered the X-ray, and the very next year Siemens & Halske owned the first patent for an X-ray tube. In 1897 Siemens & Halske decided to go public and reorganized with Carl Heinrich, now Carl von Siemens after being ennobled by the Russian czar in 1895, as chairman of the supervisory board. He retired after seven years in that post and was succeeded by his nephew Arnold.

Siemens & Halske remained busy as the 19th century gave way to the 20th. In 1903 it established Siemens-Schuckertwerke GmbH, a subsidiary devoted to electric power engineering. In 1909 Siemens & Halske developed an automatic telephone exchange serving 2,500 customers in Munich. But when World War I broke out, orders for civilian electrical equipment slowed considerably and the company began production of communications devices for the military. Siemens & Halske also produced explosives, gun locks for rifles, and, later in the war, aircraft engines.

But perhaps the company’s most successful contribution to the German war effort was the fire control system it produced for the navy’s battlecruisers, which proved its worth at the Battle of Jutland in 1916. There, the battlecruiser squadron of the High Seas Fleet met its British counterpart for the only time during the war. While the main fleets fought to a draw, the German battlecruisers used their superior gunnery equipment to batter their opponents, sinking two British ships and severely damaging several others. It was a highlight for the German navy in a battle from which it otherwise won no advantage.

On the balance, however, the war hurt Siemens & Halske badly. The Bolshevik government that seized power in Russia in 1917 also seized the assets of the company’s St. Petersburg subsidiary, which were worth about 50 million rubles. Siemens Brothers was taken over by the British government in 1915 and sold to British interests the next year. The company was not returned to the Siemens family after the armistice, although it retained their name for business purposes. Siemens Brothers eventually re-established links to its old parent and its general manager, Dr. Henry Wright, even became a member of the Siemens & Halske supervisory board in 1929. But Carl Friedrich von Siemens, a son of Werner’s who had headed the British subsidiary for six years and had many English friends, was shocked by these events. “They have stolen our name,” he was wont to lament.

Arnold von Siemens died in 1918, before the end of the war. He was succeeded by his brother Wilhelm, who died the next year. Carl Friedrich then became chairman. Despite the precarious state of the German economy in the 1920s and a bias among foreign customers against doing business with a German company, the company continued to make its mark in electrical manufacturing. In 1923 it started producing radio receivers for the consumer market. In the same year, recognizing the growing importance of Japan as an industrial power and not wishing to concede that market to General Electric and Westinghouse, Siemens & Halske set up a Tokyo subsidiary, Fusi Denk, later known as Fuji Electric. In 1925 Siemens began construction of a power station on the Shannon River in Ireland, and in 1927 the company began work on another hydroelectric power station for the Soviet government, near Zaporozhe. Back home in Germany, Siemens & Halske financed and produced a railway network in suburban Berlin that began operation in 1928. By the end of the decade, the company was accounting for one-third of the German electrical manufacturing industry’s production and nearly the same proportion of its employees.

Siemens & Halske was bloodied by the Great Depression, but it survived. It was forced to halve its dividend in the early 1930s and lay off employees in large numbers, but remained on relatively sound financial footing until the Nazi government’s rearmament project helped revive its fortunes in 1935. During the remainder of the decade, Siemens & Halske manufactured a wide range of equipment for all of Germany’s armed services. One of its most significant technical contributions at this time, the development of an automatic-pilot system for airplanes, was the result of a project initiated for the Luftwaffe.

The company’s activities during this time are difficult to evaluate. One the one hand, according to family historian Georg Siemens, Carl Friedrich von Siemens was repelled by the Nazis’ anti-Semitism from the start and only grew more disgusted with their goals and methods as time went on. Just before his death in 1941, he wrote to an assistant: “... my work no longer brings me satisfaction or joy. Those who were once proud that their work was devoted to the task of serving progress and humanity, can now only be sad that the results of their work merely serve the evil of destruction. Whenever I start to think, ‘why,’ I should prefer to creep into a corner, so as not to see or hear any more.” And yet there is no question that Siemens & Halske benefited from German rearmament during the late 1930s. Certainly the company did little or nothing to hinder Nazi militarism.

Carl Friedrich went into partial retirement in 1940 and appointed Hermann von Siemens, Arnold’s eldest son, to succeed him. By this time, Siemens & Halske was devoting virtually all of its manufacturing capacity to military orders and would do so for the duration of the war. In 1944 it helped develop and manufacture the V-2 rocket. Its factories also suffered substantial damage from Allied bombing raids. And after the Soviet army conquered Berlin in 1945, Russian occupation authorities completely dismantled the Siemensstadt factory works and corporate headquarters.

In 1945 Hermann von Siemens, who had also been a director of Deutsche Bank, was arrested by American occupation authorities and interned for two years. There is also no question that the company employed slave labor during the war. Georg Siemens points out that every major German industrial concern used forced labor because of manpower shortages caused by the war, and asserts that Siemens & Halske treated its laborers better than most companies. But in 1947, allegations surfaced that three of the firm’s directors had been active in importing slave laborers from occupied countries. In addition, testimony from death camp survivors also surfaced at this time that Siemans had supplied gas chamber equipment to the concentration camps. These allegations were never proven, however, and the company denies them both.

Hermann von Siemens resumed the chairmanship upon his release in 1948. The company had been devastated by the war and required years of rebuilding to get back on its feet. Its corporate headquarters were relocated to Munich in 1949. By the early 1950s, Siemens & Halske was once again producing railroad, medical, telephone, and power-generating equipment, as well as consumer-electronics products. In 1954 it established an American subsidiary in New York, Siemens Inc. Its first product sold to the American market was an electron microscope. In the mid-1950s Siemens & Halske entered the burgeoning fields of data processing and nuclear power. It introduced its first mainframe computer in 1955 and its first nuclear reactor went into service in 1959 at Munich-Garching.

Hermann von Siemens retired in 1956 and was succeeded by Ernst von Siemens, Carl Friedrich’s only son. In the mid-1960s, Siemens & Halske technology went to Mars after the company developed a disc-seal triode that was used in the transmitter of the American space probe Mariner IV. In 1965 it scored another coup when its 03 high-speed passenger train went into service with the German Federal Railway. And in 1968, it began constructing a nuclear power station at Atucha, Argentina, the first such facility in South America.

The company underwent a major reorganization in 1966, bringing all of its subsidiaries directly under control of the parent company and reincorporating as Siemens A.G. By the end of the decade, worldwide sales had reached DM10 billion; in 1970 they reached DM12.6 billion. In 1971 Ernst von Siemens retired and his cousin Peter succeeded him as chairman.

The 1970s were prosperous years for Siemens. Despite a slower worldwide economy that cut into customer orders in some areas and forced the company to cut its workforce, sales grew to DM20.7 billion and net profits to DM606 million in 1976. When the summer Olympic Games came to Munich in 1972, Siemens was its first official supplier of telecommunications and data-processing equipment. In 1977 the company entered into a joint venture with the American engineering firm Allis-Chalmers, called Siemens-Allis Inc., to market turbine generators in the United States. In fact, Siemens’ status as an electrical manufacturer rose to the point that Fortune wrote in 1978 that it had “replaced Westinghouse in General Electrices demonology.” Siemens had replaced Westinghouse as the world’s number-two electrical manufacturing concern, ranking “as GE’s major worldwide competitor in everything from motors and switchgear to generators and nuclear reactors.” It had also raised its share of the West German mainframe computer market to 21%, cutting sharply into IBM’s position as the Bundesrepublik’s leading mainframe supplier.

In the late 1970s, Siemens stumbled when it initiated a research-and-development effort in microcircuit technology, against the advice of a consulting firm employed by the West German government to counsel the nation’s industrial companies. It was thought that Siemens’ slow and methodical practices would render it unable to keep up with the small, quick Silicon Valley firms that were breaking ground in this area. Nonetheless, Siemens A.G., with its research-and-development budget of $1 billion (one-eight of all the money spent by West German industry on research at the time), eventually entered into a joint venture with Dutch rival Philips to develop advanced microcircuits. None of the company’s efforts on this front have been successful, however. Its components division lost money through 1987 and Siemens was forced to buy chips from Toshiba to meet its commitments until its own became available in early 1988.

In 1981 Peter von Siemens retired and was succeeded by Bernhard Plettner. For the first time, the Siemens family relinquished day-to-day control over the company it had founded over a century ago. But the 67-year-old Plettner had worked for Siemens for all of his adult life, and Peter von Siemens felt that his own son, at the age of 44, was still too young and inexperienced for the top job.

Under Plettner and new CEO Karlheinz Kaske, Siemens embarked on an expensive and ambitious program of acquisitions and research and development to try to make itself into a world leader in high-technology. Its effort to develop its own microchips was a part of that effort. So was the acquisition of IBM’s struggling Rolm Systems subsidiary in 1988. That deal cost Siemens $844 million, but gave control of the third-largest supplier of PBX telephone switching equipment in North America. Siemens’ strategy during the 1980s was designed to pay off over the long term and produced few tangible benefits in the short run. The company spent $24 billion on both research-and-development and acquisitions between 1983 and 1988, and the tremendous cash drain produced both a significant drop in earnings and a cut in the dividend in 1988. As one analyst told Business Week in 1988, “Siemens will be an interesting story in the 1990s.” And Heribald Närger, who succeeded the retiring Bernhard Plettner as chairman in 1988, will have to see that the company actually writes that story.

It appears that direct control of Siemens A.G. has finally slipped away from the family whose name it bears. The only family member who appears in the 1988 annual report is Ernst von Siemens, Werner’s 84-year-old grandson, whose place on the supervisory board is purely honorary. But the history of Siemens is still essentially that of the Siemens family. Werner von Siemens, scion of a family that made a marginal living farming wheat on the slopes of the Harz mountains, once wrote in a letter to his brother Carl Heinrich: “From my young days it has always been my ambition to found a business of international repute.” In this he certainly succeeded.

Principal Subidiaries:

Osram GmbH; Dr.-Ing. Rudolf Hell GmbH; Vacuumschmelze GmbH; Reaktor-Brennele-ment Union GmbH, (60%); Interatom GmbH; Heimann GmbH; Rofin-Sinar Laser GmbH; NRG Nuklearrohr-Gesellschaft mbH; Siemens Finanzierungsgesellschaft für Informationstechnik mbH; Sietec Siemens-Systemtechnik und Portfolio GmbH & Co. OHG; Siemensstadt-Grundstücksverwaltung GmbH & Co. OHG; Siemens Beteiligungen AG, (Switzerland); Siemens S.A., (Brussels); ATEA N.V., Herentals (Belgium) (80%); Siemens A/S, Ballerup (Denmark); Siemens Osakeyhtiö, (Finland); Siemens S.A., St. Denis (France); Bendix Electronics S.A., (France); Siemens A.E., Elektrotechnische Projekte und Erzeugnisse, (Greece); Siemens Ltd., Sunbury-on-Thames (U.K.); Siemens Ltd., (Ireland); Siemens Telecomunicazioni S.p.A., Cologno Monzese (Italy) (65%); Siemens S.p.A., (Italy); Siemens Neder-land N.V., (the Netherlands); Siemens A/S, (Norway); Siemens AG Österreich, (Austria) (74%); Siemens S.A., (Portugal); Siemens-Elema AB, Solna (Sweden); Siemens AB, (Sweden); Siemens-Albis AG, (Switzerland) (78%); Siemens S.A., (Spain) (93%); Etmas-Elektrik Tesisat ve Mühendislik A.S., (Turkey) (51%); Türk Siemens Kablo ve Elektrik Sanayii A.S., (Turkey) (55%); Osram S.A., Molsheim (France); Osram Società Riunite Osram Edison-Clerici S.p.A., (Italy); Osram S.A., (Spain) (90%); Siemens Corporation (USA); Siemens-Bendix Automotive Electronics L.P. (USA); Siemens-Bendix Automotive Electronics Ltd. (Canada); Siemens Electric Ltd., Pointe Claire (Canada); Equitel S.A., (Argentina); Siemens S.A.I.C.F.l.yM. (Argentina); Siemens S.A., (Brazil) (84%); Siemens S.A. (Colombia) (79%); Siemens S.A. de C.V. (Mexico); Siemens S.A. (Venezuela); Osram Argentina S.A.C.I. (66%); Osram do Brasil-Companhia de lâmpadas Elétrocas S.A. (Brazil); Osram S.A. de C.V., Naucalpan (Mexico);Siemens Western Finance N.V., Willemstad (Curacao); Siemens Ltd. (India) (51%); Siemens K.K. (Japan) (83%); Siemens Components (Advanced Technology) Sdn. Bhd. (Malaysia); Siemens Pakistan Engineering Co. Ltd. (Pakistan) (64%); Siemens Components (Pte) Ltd. (Singapore); Taicom Systems Ltd. (Taiwan) (55%); Siemens Ltd. (South Africa) (52%); Siemens Ltd. (Australia).