SALZGITTER AG History

Address:
Stahlwerke Peine-Salzgitter AG Postfach 41 11 29 W-3320 Salzgitter Druette 41
Federal Republic of Germany

Telephone: (5341) 211

Private Company
Incorporated: 1957
Employees: 39,000 (1989)
Sales: DM10.76 billion (US$7.20 billion)

Company History:

In the 1930s it was known that vast deposits of iron were present around Salzgitter in the German federal state of Lower Saxony. Their potential capacity was estimated at 1.5 billion tons from exploratory boring carried out in the 1920s. The disadvantage with this ore, however, was that it contained a high proportion of silicic acid. It was only with the development of new metallurgical engineering processes that this acidic ore could be smelted successfully.

Projects such as smelting the ore deposits in the Salzgitter region were given priority in the Four Year Plan embarked upon by fascist Germany in 1936 with the aim of creating a self-sufficient economy, and making possible German industrial self-reliance, even in the case of war. Together with the ironore deposits, the site of Salzgitter as a location for iron works was favored because of its central position; the relatively rapid and economical connections that could be made with existing transport routes such as the railway, inland canals, and motorways; and the infrastructure already in place in the region. The National Socialist economic planning also relied on the premise that the steel companies of the Ruhr River basin would support the project and participate in its operation. However, negotiations between Hermann Göring and the representatives of the steel industry failed, as the latter regarded this enterprise as a competitor. Finally the state took on the building of the works and the Reichswerke AG für Bergund Hüttenbetriebe Hermann Göring (the Hermann Göring Imperial Iron and Steel Works) were founded in 1937.

Other installations were built in quick succession, and by April 1945 six coke furnace batteries, ten blast-furnaces, three blenders, six converters, three Siemens-Martin tilting furnaces, and two electric arc furnaces were in operation. Total raw steel capacity amounted to 1.8 million tons a year.

At the same time as the building up of Reichswerke, as it was known, housing for workers was constructed on a massive scale. In 1942, the town of Salzgitter was enlarged by the incorporation of 29 surrounding parishes and the special building of housing for the workers. Before the start of World War II, the work force was partly recruited and partly, compulsorily enlisted by the state to work in Salzgitter. During the war, the German work force was increasingly replaced by workers forcibly recruited from the German-occupied countries, especially those in Eastern Europe. Eventually prisoners of war as well as prisoners from concentration camps were forced to work and live in inhuman conditions at Reichswerke. The state used criminal methods to control this work force. The number of victims was very high. This chapter in Salzgitter's history was brought to an abrupt end with the occupation of the iron and steel works by Allied forces on April 10, 1945.

The number of people living in the Salzgitter area had grown from 20,000 in 1933 to 117,000 by 1944. By the same year, Reichswerke and its subsidiaries were employing 66,177 people.

In the Treaty of Potsdam, the victorious Allied powers stipulated that the German armaments industry should be dismantled as a part of the war reparations. A plan which had been reworked numerous times for the British and U.S. zones contained a list of 682 installations to be dismantled wholly or in part. Of these, 72.7% fell within the British zone. Reichswerke was included on the list of 116 plants to be dismantled, which was handed to the chief minister of Lower Saxony on October 16, 1947.

The structure of the economy of the Salzgitter industrial region was geared to one line of production, due to the presence of Reichswerke. The closing down of the iron and steel works, Reichswerke's main pillar, created deep conflicts of a social and political nature. In the mid-1950s, unemployment in Salzgitter lay at 35%, in Lower Saxony at 19.8%, and in West Germany as a whole at 12.2%. Under such conditions, the inhabitants of this industrial region and the Reichswerke work force fought against the dismantling of the Reichswerke and for the preservation of their jobs. The clashes with the police and with the occupying British forces came to a head in March 1950. Workers who remained gathered at the plants that were to be blown up. Drilling machinery was destroyed and explosive devices torn out of the boreholes; workers ripped out the fuses or sat down on foundations, prepared to be blown up.

The ending of the dismantling of German industrial capacities in the respective Western-occupied zones of what was now West Germany was accelerated by the general changing conditions in postwar Germany. In Reichswerke's case, the resistance of a whole region, and in particular of the work force and the management, played a special role in combating the policy of dismantling pursued by the Allied occupying forces. In January 1951 the three Western Allied high commissioners announced the end of all dismantling. The reconstruction of the iron and steel works began on March 25, 1953.

The companies belonging to the Reichswerke complex were released from the control of the Allied High Command on an order given on June 27, 1953. The powers to run and the responsibility for reorganizing the Reichswerke complex were handed over to the West German government. In the course of the restructuring ordered by the government, the Reichswerke AG für Erzbergbau und Eisenhütten was put into liquidation and its fixed assets transferred to the companies established in the industrial region. The mining plants, including buildings and equipment, became the property of the Erzbergbau Salzgitter AG, while the plants belonging to the iron and steel works were transferred to the Hüttenwerk Salzgitter AG. The Aktiengesellschaft für Berg- und Hüttenbetriebe, formerly Reichswerke, was formed in 1955, comprised of a number of affiliated companies.

The economic development of the Aktiengesellschaft für Berg- und Hüttenbetriebe was marked in the 1950s by the consolidation of the individual companies and the group's further expansion. In January 1960 the group had a share of at least 50% in 41 companies, and out of those it had a 100% holding in 34 companies. At the end of the 1950s the pig iron and steel production sector showed extraordinarily healthy figures. Peak profits reached in the business year 1959-1960 were surpassed in 1960-1961. By contrast, in mining and other raw material businesses, turnover and profits diminished on increased mining. Until the mid-1960s the group's board of directors focused attention on measures that concentrated on mining and production in the most competitive plants. That meant in particular restructuring in the steel sector, the uniting of several shipyards into one company, and especially intensified efforts to increase profitability in individual companies. The director intended to get rid of interests in businesses whose viability could not be restored in the long term. By the mid-1960s the following groups had been formed within the Salzgitter AG: mining, raw materials, processing, industrial planning, trade, and transportation.

In 1968 Hans Birnbaum was elected chairman of the board. Under his leadership a reorganization of the Salzgitter group was set in motion. Beginning November 1972, the structure of the group was redivided into three business areas by the uniting of companies that until then had been split into different groups with other related businesses. The first business area embraced the group's steel interests and the delivery and services companies associated with it. The second business area's main focus was on the shipbuilding and railway carriage-building side. The third business area grouped together the remaining companies in the Salzgitter concern, notably the machine construction, steel construction, and building materials sectors. Previous to the restructuring, the Salzgitter group had taken over the shares jointly held by Peine and Salzgitter in the Industrie-Aktiengesellschaft. Since the plan of creating Nordstahl AG with Klöckner-Werke AG, Salzgitter AG, and the Ilselder Hütte had collapsed in the spring of 1969, the Stahlwerke Peine-Salzgitter AG had been formed. In April 1970 Salzgitter AG had bought up more than 25% of the capital in the Ilselder Hütte works and found itself in possession of a network of interconnecting companies.

The Salzgitter group consolidated to give it a sustained presence in the various fields of steel production. The two iron and steel works became so closely bound that in the end a single, modern, and efficient steel group developed. Salzgitter AG had become the third-largest steel producer in the federal republic.

When Hans Birnbaum took over the position of chairman of Salzgitter AG, one of his objectives was to diversify the group's interests through an intensified reworking of the company. His attempt failed in part. As a result, the shares in Büssing Automobilwerke AG had to be ceded to the Gutehoffnungshütte Aktienverein (GHH) in 1971. However, in return Salzgitter AG took over the GHH shareholding in the Howaldtswerke-Deutsche Werft AG (HDW) shipyard. In the group's plans for the 1970s, the consolidation of the steel and shipbuilding sectors were a main priority on the one hand, while on the other it was also endeavoring to adapt these sectors to the changing market conditions. Therefore in 1970 the steel-girder construction firm Noell in Wurzburg was taken over, the Hildesheim foundry Kloth-Senking was acquired in 1973, and a shareholding in the Sachsgruppe acquired. A new shipbuilding program was elaborated at the end of the decade. It concerned not only the further consolidation of HDW and the preservation of the largest possible number of jobs in Hamburg and Kiel, but also activities outside shipbuilding. Incinerating plants, desalination plants and water purification plants as well as energy-saving systems and products, for example in the processing of liquid gas, were also created in the HDW capacity.

The emphasis on steel interests took into account a development which had already been put in place at the end of the 1960s--the decline in iron ore mining. The ore in the Salzgitter district is mined from depths of between 300 meters and 1,200 meters. The ore had a relatively small iron content. Further, the price of foreign ore was constantly falling.

A particularly important chapter in Salzgitter AG's history concerns its exports to the East. Business with the East was of great importance to West Germany. The 1970s--apart from 1977--saw constant growth and an export surplus. The share of West German exports to the East had for years fluctuated around the 6% mark. This was not the case for Salzgitter. Between 20% and 35% of its total export turnover was derived from trade with the Eastern European states. In 1977 alone, Salzgitter AG received three large orders from the Soviet Union with a total value of DM605 million. Other products, and in particular rolled products, also found takers in the Eastern area and here again above all in the Soviet Union. In the business year 1988-1989, the share of export turnover to Eastern Europe still represented 12%.

With the appointment of Ernst Piepers to chairman of the board on August 1, 1979, the group's policy continued to be pursued along the same lines, but a fourth area of activity was introduced, embracing general contracting and engineering for industrial plant as well as consulting engineering.

At the beginning of the 1980s the individual fields of business were rationalized or extended. At that time a crisis existed in the steel and shipbuilding industries, badly affecting the Salzgitter group. At the end of the 1980s, it was possible to distinguish a clear upturn in business.

Due to rationalization and automization of the group's business, as well as the growing importance of the high-tech fields of business, the number of employees decreased steadily through the decades, from some 82,000 in 1963-1964 to some 56,800 in 1971-1972 to 39,000 in 1988-1989.

The fiscal year 1988-1989 was the most successful year in the company's history. The merging of Salzgitter AG with Preussag AG took place in 1989. With this move, the emphasis of activities was centered above all on steel, ship and carriage construction, information technology, trade, and distribution, as well as on the energy sector.

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.