Today in our column
“Case History” we will talk about German industrialists – specifically the
Krupp and Thyssen dynasties. We will trace the growth of the German steel
concerns: how they developed, and what has become of them today. We will take a
look at the city of Dortmund, which we already discussed once – it was from
there that the steel mill moved to China.
The Industrial Revolution, which took place at the turn of the eighteen and nineteenth centuries in Great Britain, gave Europe not only the textile industry and the steam engine, but also determined the development of all the technologies and industries that made iron and steel cheaper. The use of coke instead of charcoal, introduced by Clement Clerke, reduced production costs, and puddling, discovered by Henry Cort, paved the way for a sharp increase in the quality and productivity of the iron and steel industry. England completely gave up the import of Swedish and Russian iron, and actually began exporting its own. In the end English iron and goods made from it conquered the European market completely – Continental production was left uncompetitive in comparison.
Many of Europe’s politicians were dissatisfied by the dominance that England had gained thanks to advanced technologies and trade, but it took the genius and ambition of Napoleon Bonaparte to challenge it. In 1806 he declared a continental blockade which was to deny English goods access to mainland Europe. The closing of most European ports to English ships was intended to deliver a crushing blow to Great Britain’s economy to the advantage of French industry and agriculture. But France was not the only country affected by this political move. For example, Germany, which depended heavily on the import of English iron, began to consider its own production of high-quality metal.
In support of English cast steel
It all began when, in 1807, a young burgher by the name of Friedrich Krupp received a small ironworks in Sterkrade, not far from Essen, as a gift from his grandmother. The Krupp family had been traders and craftsmen in Essen for many generations, and was fairly well-to-do. However, as the saying goes, there is a black sheep in very flock – Friedrich was more of a dreamer than a businessman. He wanted to learn the secret of English iron so that he could occupy an obvious niche in the market as soon as possible, and so he did not put himself to much trouble running the outmoded factory he had inherited. As a result the little factory’s affairs went into decline, and in anger Friedrich’s grandmother took back the gift from her shiftless grandson. Henry did not give up his aspirations, however, and even found two experts on English metallurgy – the brothers von Köchel, who claimed to know the secret formula – and together the three formed their own firm with money Friedrich inherited from his grandmother. The new enterprise was called “Friedrich Krupp in support of English cast steel and goods made from it.” Unfortunately, the experts turned out to be frauds, and the secret formulas and blueprints later turned out to have been copied from a chemistry textbook.
After parting ways with his partners Krupp was left with large debts, but he did not give up. He doggedly continued his attempts to establish production using English technology. Fortune eventually smiled on him, and in 1816 he carried out his first smelting. He was not first to do this in Germany – Friedrich had been preceded by another German, Johann Konrad Fischer from Schaffhausen. Either way, the foundation had been laid for steel production of English quality on German soil. Admittedly, this came just as the continental blockade ended and steel from the British Isles once again appeared in European markets.
In 1817 the Krupp enterprise began to turn out instruments for the leatherworking industry, drills, turning tools, coin presses, and rolling presses. In 1818 Friedrich expanded production and constructed a new factory in the western part of the city, which opened on 18 October 1819. The factory was designed to accommodate sixty smelting furnaces, though at first only eight of them were in operation. In 1820 he began turning out cutting tools, saws, and bells.
Friedrich Krupp never succeeded in putting his factory’s affairs in order before his death. It never became a going concern, despite all of his efforts. His family considered Friedrich a squanderer of his inheritance and did not support his undertakings. He was several times on the brink of bankruptcy, and on his death left his son, Alfred, debts totaling 10,000 thalers – an astronomical sum at the time – and a factory with only two workers.
Alfred Krupp and his family
By all appearances Alfred inherited his father’s stubborn nature. In 1826, at the age of 14, after receiving a ruined factory, instead of throwing up his hands he quit school and took his place at the smelting furnace. The formal owner of the factory was his mother, Theresa, but Alfred took responsibility for the enterprise and began to look for ways to rejuvenate the family business. Krupp’s workers were experienced specialists who were more qualified than the young owner, but the factory needed a leader who could find a way out of the current situation. Alfred Krupp was able to take up this role, simultaneously working at the smelting furnace, in the smithy, at the crucible press and in sales. He actively sought out future clients: sometimes on foot, sometimes in a carriage, he walked and rode through all of Essen’s environs. Its instruments gradually made the Krupp factory famous. At that time he put out turning tools, chisels, filing tools and instruments for leather-working. In three years’ time the number of workers reached eight, and the production slowly began to take off.
At first there were many blunders and disappointments: the desire to lower production costs often lead to even greater losses, technology had not been put in proper order, and the metal was not always of the necessary quality. Alfred was aided by his relatives – some gave money, others helped with record-keeping, while still others sold his products. Theresa Krupp began her own small farm so that she could provide her family with milk and vegetables, with the surplus being sold to support her son. A great supporter of Alfred, and later a reliable collaborator, was his cousin Karl Friedrich von Müller and his son Herman. Karl Friedrich was able to supply his cousin with credit and useful connections, while Herman took well to work as the firm’s accountant. Alfred gained time not only to promote his goods in new markets, but also to invent. Krupp and his younger cousins developed new products for his firm in a workshop, and a few of his inventions saved the enterprise from debts, crises, and the whims of fortune.
The first new invention was а spoon-casting machine, a machine that could produce up to 150 dozen spoons, knives, and other parts for silverware. In 1843 this invention enabled Krupp to open a joint venture with the Viennese entrepreneur Alexander Scheller: a large silverware factory intended for the production of export goods. Nevertheless the finances of the Krupp firm were always unstable and vulnerable – Europe was shaken by political instability and a series of crises, and Alfred’s drive to constantly expand the quantity and variety of his firm’s goods did not always pay off, most often instead leading to losses. But Krupp, in spite of it all, doggedly pursued an outlet onto global markets, leading constant negotiations – some of which lasted years – and going abroad for large periods of time, leaving the management of his numerous and not-too-profitable factories to his relatives.
A crucial moment for the Krupp firm came with the birth of railroad construction. Alfred carefully followed the development of technology and always strove to be on the cutting edge. Thanks to his invention of the seamless wheel for railroad trains in 1852-1853, he was able to take his enterprise to a new level. For decades these wheels were Krupp’s primary product, and most American railways used Krupp wheels. It is for this reason that the Krupp’s trademark is three interconnected wheels, and Alfred himself considered it his most significant accomplishment in engineering. As a result of the railway boom of the 1850s the firm’s staff totaled nearly one thousand workers.
In spite of financial difficulties, frequent misfortunes, and stiff competition with the Bochum consortium, leading to the contesting of Krupp patents and even scandal at the World’s Fair, Alfred Krupp managed to set up the management of his production facilities so that they began to bring in significant profits. After years of effort a system emerged that was able to withstand even the very severe economic crisis of 1857 – this devastating year for all of Europe marked Krupp’s largest rise in production. In addition to state railroad orders, the firm began to receive military contracts – in 1860 Krupp sold its first steel cannons to Prussia.
Production at Krupp’s was constantly being refined. In 1861 Krupp developed Fritz, a steam forging hammer of several tonnes’ weight, which made possible the mass production of steel with the help of new technologies. The technology of Bessemer, which he had bought in Great Britain, and the Siemens-Martin process were first introduced in Germany at a Krupp factory. The Bessemer converter made possible the production of steel from cast-iron by blowing air through it, cutting the conversion time from iron to steel from 24 hours to 20 minutes.
This steam forging hammer with a fifty-tonne blow, developed by Alfred Krupp in 1861, was considered a wonder of the world. It received the name Fritz in connection with the following incident. When demonstrating the hammer to Kaiser Wilhelm in 1877, Alfred Krupp let slip that an operator by the name of Fritz had such perfect control over the machine that he could lower the hammer without damaging an object placed in the center of the anvil block. The Kaiser immediately took off his diamond-encrusted watch, laid it on the block, and gestured for the machinist to begin. The machinist did as he was commanded, and the watch was undamaged. The Kaiser gave Fritz his watch, and the hammer was named in honor of its operator.
Alfred Krupp always cared about his workers. In lean years he organized the distribution of grain to workers’ families, and he created a sick fund for those who fell ill or suffered at his factories – he would later reform it by adding a pension plan. He built a dormitory for his workers, because many came to Essen to work from other lands and did not have roofs above their heads. He opened his own bakery so that his workers would have fresh bread. In return he required that his workers be loyal and put their all into their work – and this is exactly what he got. Even during the years of revolution in France, when the sentiments among the working class led to vandalism and riots in other European factories, order reigned at Krupp. Only two workers left their work, and another two were dismissed. “I answer loyalty with loyalty,” said Alfred Krupp.
Krupp deeply disapproved of the growing workers’ movement in German. He consistently battled against the Socialist Workers’ Party. It was not so much that he feared going bankrupt after the implementation of socialist ideas, so much as he viewed his employees as his property in which he wanted to cultivate the necessary opinions by means of orders and directives. Those who took part in demonstrations were fired or not hired at all, and before every round of Reichstag elections Krupp’s workers were ordered not to vote for the Socialist Workers’ Party.
Bitter losses and mistakes made Alfred Krupp understand that an enterprise should not depend on one person alone, but should exist and evolve regardless of who works there. In 1871, in the course of composing a set of rules and regulations regarding the firm’s operations, he wrote: “Just as a state should be governed only by reasonable laws, to ensure the normal work of a factory there should be a set of regulations – a code defining each person’s definite rights and duties in the enormous mechanism of production management.” The final version of this set of rules and regulations, called the “General Directive,” dated 9 September 1872, laid down the foundations of factory management, its production, including a code of the duties and rights of its workers. The code laid out the duties and rights of the factory’s workers as responsible for its work as a whole, as well as for their individual parts in it; the code also regulated the conduct of its employees outside the factory and supplemented the factory’s work schedule with a mandatory social program. This document played no small part in ensuring that the Krupp firm survived a series of crises and revolutions, followed by two world wars. Many of its component businesses are in business to this very day.
The Krupp enterprise also undertook military production. Among its productions was Krupp armor, developed in 1893, which long remained the standard for armor protection.
Kings of the Ruhr
Germany is the birthplace of one more surname famous for creating a giant metallurgical factory. Just like the Krupp holdings, the Thyssen properties became a “state within a state” – the concern’s founder, August Thyssen, was rightly called “The King of the Ruhr.” His great-grandfather was a baker, his grandfather a gymnasium director, and his father – a co-owner of a small factory. Taking a loan from his father, August made several successful business deals and bought land near the city of Mülheim, founding a steel mill there.
А proponent of vertical integration in industry, Thyssen bought up related businesses at every opportunity. His idea was to use his own ore and coal to smelt high-quality steel and iron, process it at his own machine shops and deliver the finished product to the consumer with his own transport and trade network. In 1871 Thyssen founded the firm Thyssen & Co in Mülheim. By the beginning of the First World War the firm had 60,000 employees, with production totaling one million tonnes of iron and steel a year. The company had its own railroads, ships, and docks. It had branches in France and Belgium, in the Netherlands and India, in Russia and South America.
August Thyssen (seated, far right), 1924.
son, Fritz, took the reins of power of the firm while his father was still
alive. The dramatic life of Fritz Thyssen was interwoven with the fate of
twentieth-century Germany. In 1923 he suddenly became a celebrity, taking part
as a German mine owner in passive resistance to the orders of the
French-Belgian occupation forces during the Occupation of the Ruhr. He was
arrested and stood trial before a court martial in Mainz alongside other Ruhr
industrialists who had resisted the occupiers.
Fritz returned home a hero, and five years later the law school of
Frieburg University gave Thyssen an honorary doctorate for the incident.
Consequently he went through a period of interest in National Socialism and open support for Hitler, as well as bitter disappointment at pogroms against Jews and the persecution of Catholics. Fritz Thyssen was among the higher echelons of power in Nazi Germany, but allowed himself to openly criticize Hitler’s associates and stand up for unpopular politicians. This led to serious disagreements with the Fuhrer, and as a result Thyssen’s citizenship was revoked, his property confiscated. He was eventually sent to a concentration camp, from which he was freed by Allied forces in 1945, only to be brought to trial as an accomplice of Nazism. The court freed him but confiscated part of his property.
The steel kingdom was finally restored by Fritz’s heirs in 1967, when several firms founded on the basis of Thyssen capital were united into a single trust.
The end of a life cycle
The histories of these two iron-and-steel dynasties joined at the very end of the twentieth century – in 1999 – as a result of the merger of two firms: Thyssen AG and Friedrich Krupp AG Hoesch-Krupp, which joined to form the concern ThyssenKrupp AG. Today it is the world’s largest producer of high-alloy steel, as well as of metal-working equipment. The concern is among the world’s top producers of stainless steel plating, elevators, and escalators. ThyssenKrupp has clients in more than 160 countries worldwide, and possesses affiliates in more than 80. The number of its employees exceeds 182,000, and its commodity turnover totals € 49 billion.
The union of these two enormous steel empires took place at a time when ecofriendly sentiments had begun to gain influence in Germany, and the country had begun to rethink its stance on heavy industry. In addition, forecasts for the iron-and-steel industry were becoming more and more disconcerting. These political and economic processes brought about a number of decisions for the streamlining and reorganization of production at ThyssenKrupp. As a result, the steel mill in Dortmund already mentioned in this article was closed and offered for sale at scrap-metal prices. Even the Second World War, which destroyed more than 90% of Dortmund – the question was even raised of whether the city was worth rebuilding at all, but by June of 1945 its coal mines had all been restored, and on 31 December a blast furnace began operation – could not do what effective management could. At the beginning of the 2000s the city fell into a depression, and the artificial lakes and yacht clubs built near the factory were no comfort at all to former workers and engineers who were left without jobs.
This story yet again demonstrates that man-made objects have their own lifecycles. At first they are on the forefront of technical innovation, then they take the form of stable businesses with fully-developed production processes, but sooner or later both the technologies and markets change, and the production facilities developed to suit them go out of use. As we can see, the German wheel of steel completed its turn, leaving Dortmund memorial blast furnaces, steel converter, and the Hoesch Steel Museum as mementoes.
Meanwhile the lifecycle of the city went on: Dortmund began a new stage, rejecting heavy industry in favor of modern green technologies. This is what we will tell you about next time.