The House That Krupp Rebuilt
The wealthiest man in Europe--and perhaps in the world--rose shortly before 8 one morning this week in a modest ranch-style house overlooking the city of Essen on West Germany's Ruhr River. Tall and spare, with steel-grey eyes and finely cut features, he slipped into a dressing gown and carefully selected an expensively tailored dark business suit from his wardrobe. After shaving, he sat down to his usual solitary breakfast of coffee and a single egg, read newspapers and personal mail as he ate. Though his normally taciturn air and faithfulness to morning routine gave little hint of it, the day was an important one in the life of Alfried Felix Alwyn Krupp von Bohlen und Halbach, ruler and sole owner of Germany's $1 billion Krupp industrial empire. On Alfried Krupp's soth birthday, his worldwide empire was ready to do him honor.
To his bachelor quarters first came his mother Bertha, 71, after whom German troops fondly named the famed "Big Bertha" cannon in World War I. Other relatives followed, presenting greetings and family gifts. Courteously, bowing slightly, Alfried Krupp* received a workers' delegate who stiffly presented him with a large steel candelabrum made in the Krupp factories. Then he settled into a black, chauffeur-driven BMW sedan for the 15-minute ride into Essen, the center of his empire and a city built almost entirely by the Krupps. There the day's most important ceremony began. On Muechener Strasse, hard by the sprawling Krupp works, he was ceremoniously presented with the keys to a new $2,000,000 research center that will soon house 200 busy scientists, discovering new worlds for Firma Fried. Krupp to conquer. Gathered around him in the center's library, the directors of every Krupp branch and subsidiary throughout Germany raised their glasses and drank a toast in 1955 Moselle to Alfried Krupp von Bohlen's first half century--and the bright future ahead.
Up from Rubble. Hardly a decade ago, the scene would have been unthinkable. Krupp and his eleven directors were in prison, convicted of war crimes. In Essen, a bomb-strewn jungle of twisted steel and rubble covered the site of the mighty steel plant, bristling with naked chimneys, that had once been Krupp's throbbing heart and muscle. Across Germany, Krupp's vast holdings were rapidly being dismantled and shipped off by the Allies, determined to stamp out "the merchants of death" who in two world wars supplied the cannon used by the long German columns to blast their way across Europe.
Today the factories of Essen--and dozens of other Krupp plants throughout Germany--are glowing with activity. Amid the magnificent trappings of the Villa Huegel, his 200-room ancestral mansion above the valley of the Ruhr, Alfried Krupp regally receives visiting heads of state such as King Paul of Greece, Brazil's President Kubitschek, Cabinet ministers and businessmen, extends his hospitality to men who once vowed to destroy him. In a gesture that symbolizes the rehabilitation of the Krupp empire and name, the U.S., which has long refused to admit convicted war criminals, last fortnight granted Alfried Krupp a visa to visit the country.
Under Alfried Krupp's leadership, the Krupp empire promises to be bigger and more prosperous than ever before. Last year, sparking the historic revival of West Germany, Krupp-owned concerns rang up sales of $752 million, are climbing fast toward their 1939 total of $1.2 billion. Krupp now employs more than 91,000 workers, owns 69 factories in West Germany, is turning out locomotives, ships, trucks, airplanes, industrial machinery, giant bucket diggers, false teeth--almost everything but guns. Krupp has enough orders to keep busy for two years.
Price of Freedom. The only dark spot in this bright picture is that the House of Krupp, like Germany itself, is divided into two parts. As the price of regaining his freedom and his remaining properties, Alfried Krupp was forced to give up management of the coal, steel and iron-ore portion of his empire, totaling six large plants and mines worth more than $500 million, and agree to sell them all by 1958. Though Krupp owns and draws profits from the companies, the separation destroyed the vertical integration--from iron ore to finished products--that had always been the company's chief strength.
To offset this handicap, Krupp has thrown its industrial weight and know-how behind a spectacular missionary program of marketing, engineering and exploration around the world. Dozens of teams of Krupp engineers, geologists and metallurgists roam the globe, searching for new markets and new sources of raw materials. Krupp's exports last year totaled $102 million, about a fifth of it to underdeveloped nations. Half of its sales were made by its trade department, which runs 45 companies that do nothing but buy and sell industrial materials and products in world trade. When customers do not have ready cash, Krupp accepts raw materials that it can use or sell elsewhere. It is working hard, if with little success so far, to get U.S. companies to team up with it in what Krupp calls its "Point 4 1/2" plan to raise capital and help industrialize backward nations. It is also pressing the U.S. and Bonn governments for long-term credit backing for the plan.
On the Spot. Though Krupp's well-trained corps of engineers and officials is the vanguard of the firm's overseas expansion, Alfried Krupp himself works hard at the job, flies abroad for two or three months a year to iron out big details or lay long-range development plans at top-level conferences. In the past year he has visited Turkey, South America, Southeast Asia and the Middle East, conferred with Egypt's Nasser. Turkey's Menderes, India's Nehru, Ceylon's Bandaranaike.
In Turkey he worked out a deal to expand the big steel plant at Karabuk to double its present capacity to 400,000 tons. In India, where Krupp is helping construct a $178 million steel-producing center at Rourkela, including 100,000 one-family houses for workers, he personally solved a major problem by suggesting a practical road-haulage technique for transporting heavy equipment from Calcutta. Next month Krupp will go to Canada to meet Cleveland Financier Cyrus Eaton to discuss the development of a large iron-ore deposit in Ungava, Quebec, will don prospector's apparel to inspect the site.
Krupp engineers are also in Russia discussing details of a $3,000,000 synthetic-fiber and chemical plant now on Krupp's order books. In Greece the firm is building a $23 million oil refinery near Athens, is interested in setting up a steel plant to tap Greece's rich ore deposits. Kruppmen are at work on yet another steel plant in Pakistan. Other projects, from bridges to whole new industrial areas, are being pushed in Spain, Thailand, Bolivia, South Africa, Indonesia.
Gardens & Statues. Krupp's amazing comeback symbolizes the thrust, determination and vigor that have made West Germany one of the most prosperous nations in Europe, industrially the world's fourth most powerful. The energy and ingenuity of German industry has more than doubled the country's industrial production since 1950. Last year Germany manufactured more than 1,000,000 trucks and autos, became the world's second largest automaker. Steel output reached 2,000,000 tons a month for the first time, exceeding that of Hitler's Reich in 1938 and pushing Germany into first place in Europe, third in the world. Since 1951, Germany has jumped from fourth to second place in shipbuilding. Thanks to huge exports of $7.5 billion last year, gold and foreign-exchange reserves total $4.6 billion, more than triple West Germany's 1953 reserve and half again as much as the reserves of the entire sterling area.
Germany's unemployment rate is one of the world's lowest, and its workers' wages are up 60% over 1950 levels, 40% over 1953. Last year workers bought 157,000 new cars (v. 98,400 in 1955), plus 127,000 scooters and motorcycles. Food stores are jammed with goods; meat consumption is up 30% over 1950. This summer German tourists are traveling around Europe in record numbers, flashing hard currency with an abandon once reserved for Americans.
Part of the secret of West Germany's industrial recovery is the climate of free enterprise created by Economics Minister Ludwig Erhard. He has also pushed tax concessions and government-backed credits for exports, trimmed away many of the restrictions that plague business in other European countries. Today, 90% of all the goods flowing into West Germany from the dollar area have no import quotas v. 67% three years ago. Although there are some limits on foreign investment by German businessmen, they are so high as to be almost meaningless.
German industry has responded with a dedicated drive for new markets that extends to the smallest details. One big West German steel company happily complied with a Turkish nabob's request to redesign a rock garden in his backyard, as a result won a $1,000,000 contract to modernize a cement plant. Krupp engineers snapped up the job of erecting a statue of King Rameses in one of Cairo's main squares for Nasser's government, aware that the small contract would be excellent publicity for the firm. Germans are Hans-on-the-spot with parts and servicing, often neglected by U.S. and other firms. When German salesmen went to Mexico City after the war, they took with them spare parts for machinery that the Mexicans had bought in 1900. From Katmandu to Kansas City, German salesmen never stop in their search for new markets, new opportunities. While the Englishman from Sheffield is knocking off for a gin on the terrace of a hotel in Nairobi or New Delhi, the German from Essen is in his room pecking out orders on a typewriter. Last year he and his countrymen pecked out a record $7.5 billion in exports.
Kings of the Ruhrgebiet. Thousands of small-and middle-sized industrialists have contributed to West Germany's economic revival--the cutlery makers of Solingen, the locksmiths of Velbert, the china makers of Bavaria. But the vast might of Germany's economic resurgence is wielded by the kings of the Ruhrgebiet, the 2,000-square-mile, teardrop-shaped patch of land along the Ruhr River that shelters Europe's tightest concentration of industry. Many of the Ruhrgebiet's cities have tripled in size since the war. Though it occupies only 2% of the West German area, the Ruhrgebiet employs 10% of the nation's labor force, has almost a third of the industrial plants, produces 90% of the hard coal. From behind the rolling green hills that border the Ruhr River thrust the stark, black smokestacks of such industrial giants as Mannesmann, Germany's biggest industrial complex and the world's largest steel-tube producer; DEMAG, which has produced furnaces that turn out 3,700,000 tons of steel a year all over the world; and Klockner, which once sold the nails from its war-ruined factories to feed its workers, now produces 2,000,000 tons of steel and 5,300,000 tons of coal yearly.
Of all the kings of the Ruhrgebiet, the heads of the 146-year-old House of Krupp have long been the most prominent and most powerful. Kaiser Wilhelm I called the company a "national institution." It was courted by Bismarck, the Kaisers and Hitler. Though its role in arms-making has linked it before the world with the evils of German militarism, it built its empire largely on such products as locomotives and industrial machinery. Krupp still uses as its trademark a pattern of three superimposed wheels.
Father's Dream. The Krupp dynasty was started by a young Essen merchant named Friedrich Krupp, who switched to making steel when Napoleon's blockade of England cut the Continent off from supplies of high-quality British steel. Friedrich died a failure at 40, leaving his 14-year-old son Alfred the company name, a rundown factory and an obsessive devotion to steel. Though his relatives called him "stupid" for following his father's dream, Alfred started at 15 to learn to produce high-quality steel. He went to England under an assumed name to study British methods, in young manhood rebuilt his factory, soon had orders pouring in from all over the world.
He built up his firm by producing steel rails and the first seamless steel train tires for the railroads that were pushing across Europe and the American West. Krupp also turned out steel cannon, but for many years had little success in selling them until German militarists finally awoke to the fact that the new cannon were easier to load and more accurate and durable than the traditional bronze models. With Krupp cannon, Prussia defeated Austria in 1866 and France in 1871. By 1887 Krupp had sold 24,567 big guns to 21 nations. Alfred Krupp became known in Essen as "Alfred the Great" and abroad as the "Cannon King."
Alfred bought coal and ore mines in Germany and Spain, built power, gas and water plants and his own fleet of ships. Above the smoke and soot of the Ruhrgebiet, overlooking his busy factories, he built Villa Hiigel, a monstrous, boxlike pile made of stone and steel because Alfred feared fire. There he entertained the royalty and dignitaries who streamed to Essen to pay tribute to his genius. When he died in 1887, the Kaiser sent a special deputy, and messages of condolence poured in from all over the world.
Wedding Right. Alfred's eldest son, Friedrich Alfred, did not like either business or steel, spent most of his time poking through zoological books in his Capri home. Yet the Krupp company had built up such momentum that in the 15 years of Friedrich Alfred's reign the number of Krupp workers rose to 43,000, the huge steel foundry at Rheinhausen was built, and all high-quality steel plates in Germany came to be called Krupp-Panzer. Four years after his death in 1902. Friedrich Alfred's daughter and only child. Bertha, married a Prussian counselor to the Vatican named Gustav von Bohlen und Halbach.* Before he left Villa Huegel on the day after the wedding, Kaiser Wilhelm II issued an imperial edict giving Gustav and any male descendants who inherited the Krupp properties the right to use the Krupp name.
Gustav bought new iron-ore mines and coal mines, built bigger presses and mills. When World War I broke out, Krupp was the biggest industrial firm on the Continent, with 82,500 workers. During the war Krupp built the Big Bertha, the 42-centimeter mortar that smashed the Liege forts and cleared the way for the German advance into Belgium and France. Its name was also applied later by newspapermen to the German gun that shelled Paris from 75 miles away.
After the German armies were driven back, the victorious Allies chopped off half of Krupp's steelmaking capacity, carried the equipment away, destroyed 2,000,000 machines and tools. But they could not destroy the spirit of Krupp's workers, who halted the dismantling process by going on strike during the French occupation. Furious, the French threw Gustav in jail for seven months. By the time Hitler came to power in 1933, the firm had built itself up again by producing a steady flow of peacetime goods. It had also violated the Versailles Treaty by secretly carrying on armaments research, producing small quantities of tanks, guns, even submarines. Gustav von Bohlen early became a backer of Adolph Hitler, soon began producing a flood of arms at Hitler's behest, joined the Nazi Party in 1939. During World War II Krupp once more became Germany's chief source of armament, employing more than 160.000 workers. To the growing list of famed Krupp guns it added the "Big Gustav." which shelled Sevastopol, and the versatile "88." the gun most respected by Allied soldiers.
Off to Jail. In 1943 Allied bombers started the rain of bombs on Krupp's Essen plant that eventually destroyed a third of it. That same year the aging, ailing Gustav got Hitler to declare legal the famed Lex Krupp, giving the Krupps the privilege henceforth to name one successor as the sole owner of the empire. He would arrange substantial allowances for the rest of the family, among whom stock had previously been split. Gustav stepped down, and Alfried, a sensitive, retiring young man. became ruler of the vast Krupp holdings. For the rest of the war, he left most of the company's operations in the hands of its directors.
When U.S. troops rolled up to Villa Hugel in 1945. Alfried Krupp came downstairs, protesting (in English) that he was merely a businessman. The Americans disagreed. He was bundled into a jeep and driven off through the rubble-strewn streets to be interrogated.
Gustav escaped trial when a medical examination proved him senile (he died in 1950), but the temper of the times demanded a Krupp in the dock. Though both the British and Russians declined to try Alfried, he and eleven directors were put on trial before a U.S. court at Nuernberg, were convicted of plundering the industries of conquered countries and exploiting slave labor. Alfried was sentenced to twelve years in prison and forced to forfeit his property, the only property seizure of the war crime trials; his directors got sentences ranging from two to twelve years. The head of the Krupp empire went off to Landsberg prison, where he washed dishes, did laundry, worked in a blacksmith shop (one product: a crucifix for the prison chapel), and ordered his days to the sound of the bugle and whistle.
Orderly & Properly. There was nothing in Alfried Krupp's sheltered life to prepare him for this ordeal. The first of Gustav's and Bertha's eight children, he grew up in an atmosphere suggestive of Novelist Thomas Mann's Buddenbrooks. Kaiser Wilhelm II was his godfather. Young Alfried's world centered around Villa Hugel, which was not only a well-regulated German household to its inhabitants but the focus of social life for the Ruhr. The children saw little of their parents or other children, spent most of their time in the care of teachers and servants. Once a day, from exactly 5 p.m. to 6 p.m.. they were summoned to play with father--whether they wanted to or not. "We never fought nor laughed loud nor shouted.'' says Krupp. "Everything had to be orderly and properly done.''
Alfried was ten when he first went through a Krupp steel plant. At 17 he graduated with high grades from the nearby Bredeney Realgymnasium, a month later started work as an apprentice at the Krupp works in Essen. He had to leave Villa Huegel on his motor bike at 6 a.m. to get to the shop in time, once had his name put up on the plant's "lazy list" for being late. After his father decided that he should study steelmaking, he was shipped off to the Munich Polytechnikum --his first departure from home--later finished up at Aachen, Germany's toughest technical college. In 1936 he entered the firm as a deputy director and in 1938, according to Nurnberg trial records, joined the Nazi Party. That same year he entered Krupp's artillery-construction division, where he directed the design, sale and development of weapons until 1943, flying throughout Europe to inspect plants in Nazi-occupied territory.
Kruppianer Spirit. Krupp was confident from the first that his prison sentence would be reduced. In 1951. having made an investigation of Krupp's war guilt. U.S. High Commissioner for Germany John J. McCloy commuted the sentences of Alfried and his directors to time already served. Said Lawyer McCloy: "I can find no personal guilt in Defendant Krupp, based upon the charges in this case, sufficient to distinguish him above all others sentenced by the Nurnberg courts." He therefore ordered Krupp's property returned to him though Krupp later had to sign the Mehlen Accord which split up his empire. On a foggy February morning, after six years in prison, Krupp walked forth from Landsberg prison, went off with brother Berthold to a champagne breakfast in a nearby hotel. Said he to correspondents: "I hope it will never be necessary to produce arms again."
He began rebuilding the Krupp empire as soon as he was permitted to return to his Essen headquarters. To finance the comeback, he dug out the firm's accumulated deposits from still-existing bank accounts, borrowed upwards of $17 million from commercial banks, used the $2,600,000 that he (and each of his brothers and sisters) got from the Allied sale of Krupp properties. With the help of this capital and generous tax write-offs from the West German government, Krupp had spent some $40 million in plant rebuilding by 1955. Since 1954, the firm has been making a profit.
The road back was not entirely rocky. Since 40% of the plant remaining after Allied bombings had been dismantled and shipped all over Europe, the Krupp firm was able to rebuild with modern equipment that produced faster, better and more cheaply than its old equipment, then being used by the British, French and Russians. Even more important were the thousands of Krupp workers whose loyalty to the firm drove them to frenzied efforts to rebuild. This "Kruppianer spirit" was the fruit of a cradle-to-grave system of social security started by the company more than 100 years ago. Now it owns housing space for 12,000 families, builds new houses at the rate of 500 a year. For nearly every active Krupp worker, there is a retired worker drawing a healthy company pension. Krupp runs a hospital for its workers, maintains theaters, sports grounds, clubs, even operates its own food stores to force down the price of food for workers. Though unionized, Firma Fried. Krupp has never had a company strike.
Circus Manager. To help him in the task of reconstruction, Alfried Krupp picked a deputy in startling contrast to himself and his tradition. "When I came back from prison," says he, "we had become a machinery and trading company, deprived of our traditional steelmaking role. We needed new blood, a new approach, a fresh policy. I decided we should start looking for a man who did not know steel." Krupp found his man in 40-year-old Berthold Beitz, the breezy general director of the Iduna-Germania Insurance Co., who had boosted his company from 16th to third place in postwar Germany. Krupp met Beitz through a mutual friend, studied him carefully for months before finally asking him to become Krupp's general director. Said Beitz: "I thought the Krupps were trying to borrow some money from my company, and he was too shy to mention it."
Krupp's choice proved to be a shrewd one. Beitz is typical of a new group of bright young executives who are taking over the reins of West German industry in positions formerly reserved for age and long experience, bypassing tradition in favor of aggressive, hard-driving methods. Beitz alienated many an old Kruppianer with just such methods (he shocked workers by asking to be called Beitz instead of Herr Generaldirektor), earned the nickname "the American" for his breezy ways and love of jazz. But he fired up the conservative management, tightened up the firm's operations, soon had Krupp humming with new energy. "I am a circus manager," says Beitz, "and I must crack the whip. Action--action right now--is what we must have."
Sailing & Skat. Alfried Krupp leaves the day-to-day direction of his empire to Beitz, who has learned to anticipate his boss's wishes so well that he rarely bothers him with anything but major problems. Krupp himself rarely issues outright commands; he simply makes suggestions, seldom overrules his directors. When he does, his decision is not questioned.
Alfried Krupp's private life is far removed from the pomp and circumstance of his position. A lonely man who has few personal friends, does not attend any church, he long ago moved out of Villa Huegel now lives alone in his 15-room house near by. His first marriage to once-divorced Anneliese Bahr, daughter of a prominent manufacturer, ended after four years in 1941, when his father, who had opposed the marriage, threatened to disinherit him. The son by the marriage, Arndt, 19, is studying in Switzerland, is expected to succeed his father as head of Krupp (though Alfried can designate any Krupp he wishes). After his release from prison, Alfried married thrice-divorced Vera von Hossenfeldt, a longtime friend who had lived in the U.S. during the war. Vera described Alfried as "the only man I ever loved," but she divorced him four years later and returned to the U.S., where she now lives on a 400,000-acre ranch in Nevada.
Aside from sports cars (he has two) and photography, Krupp's chief recreation is his 66-ft. schooner Germania V, on which he cruises for one or two months a year. Krupp also likes to play skat--at one-tenth of a pfennig a point.
Big Gamble. Alfried Krupp's big gamble is one that he hopes will win him reunification of his divided empire. Though the five-year term for selling his separated properties is up next March, he has shown little hurry to sell, has so far disposed of only two coal mines. If sales on "reasonable terms" cannot be made in time (and no German firm would interfere in Krupp's personal problem by bidding on the properties), regulations permit Krupp one-year extensions. Alfried Krupp would rather not take advantage of this temporary escape clause; instead, he is hoping that the Allies will annul the sales agreement and leave Krupp with all its empire. For three years, General Manager Beitz, who chafes at Alfried's moderate approach, has been badgering Bonn officials, nagged the U.S. State Department, wheedled British officialdom in hope of having the Mehlen Accord canceled. Last February Chancellor Adenauer finally wrote to the British, French and Americans asking for its reconsideration. So far, there has been no formal response, and the U.S. State Department is not sympathetic to a change in the accord now.
Alfried Krupp is confident that the climate will change; he has already seen the extent to which the cold war has softened earlier attitudes against German industrial concentration. In many cases, deconcentration has been allowed to become only a paper fiction; e.g., Friedrich Flick's steel combine "sold" one steel mill to Flick's sons. Though Krupp keeps a close watch on his separated assets (Beitz sometimes calls the companies' managers in for reports), he has made no big move toward secret reconcentration. Alfried Krupp could legally sell his coal and steel holdings in Germany and invest the proceeds of the sale in plants just across the border in France or Luxembourg. But he refuses to take the loophole. Says he: "We have a moral obligation, and I will not look for escapes."
Guns & Reality. Meanwhile, Firma Fried. Krupp is pushing ahead into new areas, expanding production at home. It is scouting for new ore supplies for the separated Rheinhausen steel plant, building its own fleet of ore boats--examples of confidence that the Krupp empire will soon be united again.
Krupp still hopes never to make guns again, but Alfried Krupp likes to tell friends, with half-concealed amusement, of the irony of his situation. After the war, the Allies were rock-firm in their pronouncement that Krupp would never again be allowed to make munitions; now, the U.S. and Great Britain would like Krupp to resume making war materiel so that Germany can carry its share in NATO. "Why in the world," says Berthold Beitz, "would we want to produce guns? Look at our orders for peacetime goods. Besides, what war is going to be fought with guns anyway?" Would Krupp produce armaments if pressed to do so by Bonn or NATO? Says Alfried Krupp: "That is difficult. I suppose that under certain conditions we would. We must not forget reality."
*As he is known to outsiders. In Essen it is either Alfried or Herr von Bohlen. * A distant relative of U.S. Ambassador to the Philippines and former Ambassador to Moscow Charles E. ("Chip") Bohlen. whose greatgrandfather and Gustav's grandfather were brothers.
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