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Germany: Krupp Looks East

3 minute read

“Why go all the way to Indonesia or Bolivia when East Europe is on our doorstep?” So says Berthold Beitz, 51, general manager of Germany’s huge Krupp combine. Beitz has been spending so much time behind the Iron Curtain recently that his colleagues now call him “the ambassador from Essen.”

Last week he returned from Bulgaria after closing a deal in which Krupp will equip and manage a $25 million synthetic fiber plant. Krupp also signed a contract recently to build a cement plant in Yugoslavia, has made a deal to sell diesel-powered fishing boats to Bulgaria, and is holding talks with the Polish, Hungarian and Rumanian governments about machine-tool and other plants.

Krupp’s Drang nach Osten—push to the East—is partly based on new European trade patterns. The agriculturally protectionist Common Market keeps out East Europe’s traditional food exports, so that the Eastern countries are forced to seek new ways of earning hard currency. They hope to do so by exporting industrial products from the new enterprises built in partnership with Krupp. Ignoring politics, Krupp has pioneered West-East deals in which it provides the technological know-how and much of the machinery to labor-rich Eastern Europe, shares both the risks and profits with Communist governments. Manager Beitz predicts that in ten years Krupp’s trade with Eastern Europe (only $12.5 million in 1963) will equal its sales to Germany’s Common Market partners.

Dead Issue. The former armaments giant certainly could use the business. After making a spectacular postwar recovery that lasted into the end of the 1950s, the firm has had three lean years in a row. Between 1960 and 1963, its earnings were estimated to be below 4% of its sales—barely enough to meet the interest charges on Krupp’s large indebtedness. Last year’s sales were up about 10%, to an estimated $1.43 billion, but some bankers still feel that Krupp has been resting on its laurels, relying too much on the Kruppianer tradition and too little on aggressiveness and new products.

Rebuilding the corporate structure partly dismantled by Allied postwar regulations, Krupp reacquired such major divested properties as Bochumer Verein, a profitable high-quality steel plant, and Capito & Klein, originally part of the big Rheinhausen steel mill, went on to buy several big steel fabricators. It failed to sell Rheinhausen as required by an Allied directive, and the deadline has been extended so often (every year since 1958) that the sale is now regarded as a dead issue. Krupp might have done better to sell: Beitz admits that Rheinhausen is losing money, and outsiders guess that the loss has been running lately at $2,000,000 a year. Other soft spots: Krupp’s truck-building and plane-making interests.

No Weapons. The company is now looking inward as well as Eastward. Krupp last year reorganized its research establishment, increasing its staff to 1,500, and put automation and nuclear research at the top of the priority list. It is building trucks and air transports for the new German army—though it still produces no weapons. There are suggestions that Krupp may change its corporate form. The present sole owner, shy, retiring Alfried Krupp, 57, merely presides over the firm, leaving the energetic, extroverted Beitz to run the company through a streamlined four-man Direktorium of his handpicked aides. Alfried shows no signs of ending Beitz’s stewardship, but he may eventually vest ownership in a family foundation. Indeed, it is possible that this huge one-man company may heed the advice of many German bankers and sell its shares to the public.

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