Over the past few decades there isn’t a single country on Earth that has not been touched by political or economic cataclysms. It seems that they are occurring more and more often. In a world like this it is becoming ever harder for a company to survive. Luckily, companies can now gain from the experience of those who have already solved contemporary challenges. Wolfgang Topf, one of the owners and executives of IMO Leipzig, told us how this German steel-fitting company made it through the reunification of Germany and became a highly-efficient capitalist enterprise.
– Herr Topf, could you first give us a few words about your company and the history of its founding?
IMO Leipzig is a steel-fitting company. We have always worked with metal structures: high-rise and underground construction, the building of different types of barns, towers, power plants, bridges, etc. Our company has done steel-fitting since 1890, and in 1965 it was reformed into a concern that only performs the construction of fitted structures. By that time it had changed hands several times. Beginning in 1948 the concern belonged to the government and was designated a national company. In 1969 it was incorporated into a consortium that included fourteen other companies, a research institute, and a project bureau. In all of East Germany it was the only combine of its kind, and it was under the auspices of the East German Ministry of Construction.
– What was the company’s specialization at the end of the twentieth century, when the country’s political and economic situation began to change?
We worked at different project sites. The greatest challenge economically for the company was the construction of atomic power plants. The most dangerous and demanding in terms of quality control was our construction of atomic reactors. In the late ‘80s a large part of our work on atomic power plants was in Lubmin and Stendal.
In the fall of 1989 political structures in East Germany began to collapse. Up until the end of the year the situation at the company was stable, and we didn’t sense any real changes – as before, we worked at the sites of atomic power plants in West Germany, where work was progressing as usual. All the same, we understood that things weren’t going as they should be in East Germany – there were delays in the delivery of materials from suppliers, some goods were in short supply.
And then in 1989 we had a bloodless revolution. What happened in the political arena – leadership shakeups, free elections, and other changes – affected the company as well. Just as in the political arena, we started having round-table discussions. They were organized by representatives of the company’s staff who cared deeply about our firm.
The goal of these round-table meetings was to find a way out of the situation we found ourselves in. It was imperative that we reorganize the firm’s structure, reorganize the way it hired personnel, and in many other areas. It was a difficult time.
As a result of these meetings the directors of a number of companies were fired. At one, where there was a heated discussion about the fate of the company, about changes to be introduced, the director presented our team a report on what he had done, and gave his ideas and told us how he saw the future of the factory. After his presentation the director asked the team if they trusted him, and they said no – the team didn’t trust him. This led to the election of a new manager. He was elected, and not appointed. The deciding factor in the choice was professional skills and what he had already done for the company.
– How did the company manage to survive this period?
Of course, it wasn’t easy. I think it was due to the team we had then. They did an enormous service for the company. There were many firms at that time that simply disappeared overnight.
In Berlin they established an organization that ran the privatization of East German state enterprises – at that time practically all companies in East Germany were state-owned. This organization, of course, was created to suit the interests of major West German concerns that had made their way into East Germany. So, our company was automatically put under this organization. The situation was complicated – we had to decide if we wanted to stay within this consortium or exit it and exist as an independent company. And when we did decide to leave, the privatization organization had a series of demands, one of which was the development of a concept for our development.
The most difficult aspect of our becoming a limited liability company was the preparation for the publication of a balance sheet which complied with German trade law. Everything was calculated: assets, liabilities, the company’s capital, the current balance, the volume of work completed and of work planned. The auditing and monitoring of our balances was to have been carried out by the corresponding specialists (economic monitors) from former West Germany. It was important that the debts did not exceed the balance of the company, but after the assessments were carried out it became clear that our debts totaled a few billion marks. In other words, our property had no value in many cases. With a balance like that and a company concept that we had drawn up, we went back to the privatization agency, which brought out its own verdict on the question of whether our company could undergo further financial restructuring and become viable in the marketplace. We were among the lucky ones.
– Why did they decide in your favor?
Because of the things that don’t show up in any balance sheet. They decided that we had a chance because of the array of services we offered and the quality of our work. Another thing: one important aspect of our company was that the work of the entire group regarding external economic ties went through us. We were involved in the construction of power plants in Algeria, Iraq, and West Germany. From 1970 to 1990 IMO Leipzig did its part in building most power plants in West Germany. That means that we worked with hard currency, we knew what it was, and even back then we had some idea of what it meant to run things differently. This was an advantage that most firms in former East Germany did not have. It was also an argument in our favor.
– How did the company undergo that transformation when the world around you – socially, politically, and technologically – was changing drastically?
We had to propose a project for market development, then for personnel development, financing development, a sales concept, and present all of this to the privatization organization, and they assessed whether it suited them or not. There were also changes taking place in that organization, by the way. There was a battle for financing to support the companies that got the green light to develop themselves further. After the murder of the manager, Herr Roweder, Frau Doctor Proil took her place, and the activity of this organized picked up. The firm was told: “Find yourselves new investors – don’t rely on government help.”
This entire process took place at the same time that a new currency was being introduced in former East Germany – the Deutsche Mark. Literally overnight every company in East Germany and almost all of the most important external economic activity died; products that until then had been sold for a certain price on the international market were no longer sold for a set price. Overnight all the structures and the foundations for carrying out external economic activity were broken.
We didn’t work in Eastern Europe then – our main market was former West Germany. But then there was another blow waiting for us – the shutdown of the construction of all nuclear power plants, which happened practically instantaneously in late July of 1990. And then along with the privatization agency and in accordance with our new concept, we developed a program to downsize our staff.
Until 1989 we had 3200 of our own employees, plus around 1,000 people from Poland that we utilized at our nuclear power plant sites. In total: almost 4,500 people. On the night that the Deutsche mark was introduced from former West Germany, all of our Polish employees were immediately sent home.
By the end of 1991 the number of employees at the firm was only 1500. For example, we planned the early retirement of our employees beginning at 55. Of course, everyone resisted that move, but there was no other way. And in the end, when we met with them ten years later, many of them were thankful that they had managed to leave the company on fairly good terms.
There were more problems for people who did not fall within this pre-retirement category. In cases where a company was dissolved or someone was fired due to downsizing by the state company that handled privatization, there was a compensation package of 5,000 Deutsche marks.
The downsizing of personnel according to the plan we had drawn up continued up until 2003. Don’t think that in 1991 and 1992 we suddenly and immediately weeded out a large number of people. In 2003 we had reached a figure that was ten percent of the original figure, and since then things have settled down. Now 320 employees work directly for the company, plus around 70 people who work at enterprises we participate in.
– So the company is now one-tenth of the size it once was?
Yes, of course, we have grown smaller in number. But I can say that in terms of the quality of our work and the services we offer we have grown by two-thirds. The company’s efficiency also grew significantly – we’re incomparably more efficient than we were in 1990. I am constantly dealing with the disbelief of Russian business partners who come to Germany and ask: “How much steel do you fit each year?” I answer: “Sixty thousand tons. I need 220 fitters.” I have yet to find one business partner from Eastern Europe who will believe those figures, but that’s how it actually is.
– What enabled you to achieve this?
Excellent equipment, good professional training, and efficient work organization.
– How did the company develop in the early 1990s?
In 1991 in Leipzig twenty percent of people were out of work. However, in the years that immediately followed a series of companies moved here, or new firms were created which, of course, began by looking for employees. One of the largest projects then in the region of Leipzig-Halle was the construction of a petrochemical plant. We also had a bank boost – banks told us that they were ready to contribute their capital to the development of our company.
Thanks to the help of banks, as well as the readiness of our employees to band together and invest their own money into the company, we survived, and even bought our company from the agency for the privatization of former East German state enterprises. My colleague, the technical director, who was appointed by the privatization agency, and I, as the one responsible for finances, bought our shares by using credit – we didn’t have any money. The company’s employees bought 24.9% of shares, and Dresden Bank bought a share of 49.9%.
– Whereas your fitting department worked alongside other companies within the combine, once you separated from it then you, basically, were alone and without support. How did you build relationships with design and other types of contractors?
In reality we didn’t need the consortium and its companies to carry out our work. In the combine itself there was a dividing up of responsibilities and no centralization at all. This division of labor is probably a distinguishing feature of German companies, where you don’t have to do everything yourself. There is a firm that has its own nucleus of responsibilities. If it needs to expand those responsibilities, then it can buy additional services. Of course, this is why you always depend on your business partners.
Moreover, we had our own design bureau that we set apart from the main structure of our company. Now it is a separate, independent company. By doing this we created a bureau that can work for other clients as well, because we can’t give the bureau a full workload with only our own projects. On the other hand, there are individual special orders, where our own design bureau is more expensive than some outside bureau.
– 3-D technologies are now developing at an explosive pace. Do you use them in your work?
Yes, we work with the most cutting-edge computer programs. 3-D technologies give us the ability to recreate the site that we need, literally fly through it and from the inside look at all the parts and details that will later be installed at the real site. Programs like this are especially good at allowing you to get your bearings in static work – the engineering part of construction, the assembly of building cranes. They also give us serious help with welding jobs, or with work that involves major expenditure. All the same, the key to success and quality is always the presence of qualified fitters at the site.
Over the past few years in Germany there have been big changes – in particular in the nationality of the fitters that work at our construction sites. While we used to have workers from Poland, the Czech Republic, Slovakia, today we have workers from Romania and Bulgaria. What we see at our construction sites is competition and struggle for social and tax systems. And for us this is an enormous challenge, one which we can’t solve unilaterally. As I see it, the deciding factors here are integration and cooperation. For example, we have a branch in the Russian Federation, and we recently opened one in Kazakhstan. All of these changes we are now undergoing are leading to forward progress.
– How do you see the company’s future?
Much depends on the overall economic conditions and future development in general. In my view, in the near future, the construction of bridges, meaning any sort of bridges, will be a fairly stable business. Over the past few decades almost no funding has been put into this area. In Berlin alone about one thousand bridges need to be restored, some of which have not been touched since imperial times.
Logistics and automobile construction are also of interest. If you take our region in particular, BMW has stopped building, but Porsche is expanding and building.
Next is heavy mechanical engineering – things like foundries. In Leipzig there is an entire affiliate network of foundries. However, here there is a trend to outsource production abroad, since foundries consume a great deal of energy. Everything will depend on energy policy.
Another possible market for us is the construction of power plants, including small gas-driven ones. We know the ins and outs of selling certificates for carbon dioxide. At the moment I can boldly say that in Germany resurrecting old power plants, which in their time were shut down due to their large carbon dioxide exhausts, is now much more profitable than working with newly-built ones. However, this depends not only on us, but also on how Germany will fulfill its energy needs on an international scale.