Stinnes AG - Company Profile, Information, Business Description, History, Background Information on Stinnes AG

Humboldtring 15
45472 Mulheim an der Ruhr

Company Perspectives:

The most important strategic guidelines for Stinnes are value creation, improved customer benefits and increased customer satisfaction. By offering the customer intelligent as well as unconventional solutions to problems, the various Stinnes divisions can achieve their goal of being not only better and more cost effective than the competition, but also different from the competition. By being flexible, having the desire to experiment and the willingness to learn from our competitors, we can remain competent and adapt to today's ever changing market place.

History of Stinnes AG

Stinnes AG, a group of independent divisions consisting of almost 100 domestic and more than 100 foreign companies, is Germany's and one of Europe's largest transportation and distribution companies. As of 1965 Stinnes AG has been a wholly owned subsidiary of Veba AG, Germany's largest firm. The Stinnes group's three principal activities are trading in raw materials, especially coal and oil; chemical distribution and steel processing; and air, sea, and land transportation. An increasingly important business segment of Stinnes is the service industry, from do-it-yourself building materials, to ownership of the prestigious Hotel Nassauer Hof in Wiesbaden, to providing data processing services. Stinnes also operates a string of automotive service stations and runs passenger service on a liner between Lübeck, Germany and Helsinki, Finland. Stinnes is Germany's largest independent steel trader and Europe's largest chemical distributor. In the 1990s it accounted for about one-third of the sales of its parent company, Veba AG. Veba AG announced plans in 1998 to sell up to 49 percent of Stinnes in a public offering.

Early History

Stinnes AG has deep roots in modern German history. The company's founder, Mathias Stinnes, was born in Muelheim in the Ruhr valley during the time of the French Revolution, when the German states were heavily fragmented and decentralized. It is all the more amazing that entrepreneurship could succeed in an area of Europe where innumerable regional interests competed against one another. Added to this politically and economically unstable environment were the numerous invasions of the Napoleonic armies that devastated the very region in which Mathias Stinnes was born.

One of many children of a poor bargeman and his wife, Mathias was affected deeply by the winds of change buffeting him and his generation. The democratic ideas of the French Revolution and Napoleon's forced and short-lived consolidation of the German states signaled change. The legacy of that brief union was not lost on the diplomats gathered at the 1815 Congress of Vienna, who issued a call for a voluntary lifting of trade restrictions on the Rhine, the longest river in western Europe, of which the Ruhr is a tributary.

With so much change in the air, Mathias Stinnes and his two brothers did not follow in their father's footsteps, as generations before them had. Instead of remaining poor laborers, they opted to hire laborers and go into business for themselves. In 1808 Mathias Stinnes, with the help of his brothers, set up his own company, named after himself as elder brother, that hauled goods and raw materials on a boat via the Ruhr.

Stinnes's business grew, despite the community's deep-rooted distrust of someone who chose to strike out on a path different from his forefathers. When Mathias died in 1845, his steamboats plied the Ruhr, and he had become the largest private owner of inland shipping in the fragmented German states. Unusual for that day and age, he branched out into other businesses: the Ruhr area was rich in coal, and by the time he died, the Mathias Stinnes company owned shares in 36 mines, four of which his firm had built. Stinnes's traditional lines of business--trading in raw materials and transportation on inland waterways--were well established by the 1840s.

Mathias's sons took over the family enterprise in turn, each one dying at a young age. Despite the succession of political crises in Germany occasioned by wars of unification as well as the rise of an organized labor movement, the Stinnes firm continued to expand. In 1908, 100 years after the company was founded, it possessed 21 tugs and nine of its own ports along with their storage facilities and owned and controlled five mines. By then, however, a new company had arisen that in time would engulf the old Mathias Stinnes firm.

Hugo Stinnes, grandson of Mathias Stinnes, was born in 1870. Dissatisfied with the traditional family business, the 21-year-old Hugo persuaded his mother to sell her ownership in the firm and to lend him 50,000 gold marks to start up his own business, which he incorporated in 1902 as Hugo Stinnes GmbH in Muelheim. He still retained technical management of the Mathias Stinnes mines, however, and gradually the two companies became indistinguishable.

Hugo Stinnes was a dynamic, forceful, and imaginative entrepreneur whose horizons stretched well beyond the traditional family enterprises and the customary way of doing things. His original business--coal mining and transportation--was what he knew best; from there, however, he went on to found the biggest business empire that Germany, unified into a centralized state in 1871, had ever seen.

Even the coal business would change under the farsighted entrepreneur: in the years before World War I, Hugo Stinnes entered into a partnership with the much older August Thyssen. Together, the two established the Muelheimer Bergwerksverein, which took over used mines and made a profit out of them. Soon Hugo Stinnes's firm had branches of its coal business in Great Britain, Italy, and the Russian Empire. He entered the shipping business on his own, and his fleets competed with and would eventually absorb the family fleets. He experimented with recycling gas from coke furnaces and became the foremost promoter of electricity in Germany. Hugo Stinnes tirelessly expanded into new business arenas, not for the mere sake of expansion, but to integrate all of his businesses "vertically," a feat that he would not fully accomplish until after World War I.

War Years

Despite the shortages of various raw materials because of the Allied blockade of Germany's ports, Hugo Stinnes GmbH emerged unscathed from the war and with an even bigger portfolio. With the Kaiser in exile and a new democratic government in place, Hugo Stinnes became a member of the Reichstag and thus politically influential. The French occupation of the Ruhr valley, where many of Stinnes's assets, especially mines, were located, convinced him that vertical integration of his business, from raw materials to the finished product--including transporting the finished product and controlling the sources of energy in Germany to complete this process--must be accelerated.

A veritable frenzy of expansion followed, in the course of which Stinnes established a partnership with Stahlwerk Breuningshaus steelworks and proceeded to purchase companies that would fully complement this line of business, such as rolling mills, rivet and wire works, a machine tool factory, and other related companies. In 1920 Hugo Stinnes acquired a mining and foundry business that employed 18,000 workers and joined with Germany's largest manufacturer of electrical equipment and appliances, Siemens, to enter that line of business in a partnership. Interested in new energy sources, especially petroleum, Hugo Stinnes's firm began acquiring oil wells abroad, along with refineries and the ocean vessels necessary for conveying the precious fuel. Shipping and transportation companies were purchased as a matter of course, and with Hugo Stinnes's increasing involvement in politics, his business interests turned to newspaper presses, publishing houses, and printing establishments, which his firm acquired in short order. Helping this process of acquisition was the cataclysmic German inflation of the early 1920s; property could be bought for almost nothing.

At the time of his premature death in 1924, not only was Hugo Stinnes Germany's most influential and powerful industrialist, but he was also the owner of the largest firm (in terms of assets and revenues) in the country. Hugo Stinnes GmbH consisted of more than 4,500 businesses and employed tens of thousands of workers.

A year and a half after Hugo Stinnes' death, the company was on the brink of ruin. Profligate sons succeeded him and competed against each other; banks recalled their loans, and finally, son Hugo, Jr. sold half of the company's shares to two American banks in return for a huge loan. Much of the company's assets and property were destroyed during the succeeding war years; immediately afterward, the Stinnes firm reverted to the control of the Allied occupation authorities. Half of the firm was still owned by banks in the United States.

The Hugo Stinnes company probably would have gone under, its stock sold to the highest bidder--most likely to a foreign company--without the intervention of Heinz P. Kemper. Because he had no Nazi party affiliation during World War II and had for many years directed an American subsidiary in Germany, the American occupation authority selected him to head Stinnes. As its director, Kemper dismissed Hugo Stinnes, Jr. from the helm, thereby ending the Stinnes family's connection to that firm.

Postwar Reorganization

Reviving the company and returning it to prosperity was nearly impossible, especially since its assets were spread throughout Germany and British and French authorities were far less friendly and compromising than the Americans. There was also the urgent matter of repurchasing the half of Stinnes still under American ownership, since the Americans were in a position to make a takeover bid for the other half. Unfortunately, Stinnes finances were in turmoil, and there was no money for repurchase.

The firm began to slowly recoup some of its losses and show a profit, thanks in part to the reform of German currency in 1948 and to the formation of the West German state, or Federal Republic of Germany, in 1949. The company was hardly out of deep water, however. The U.S. government informed Kemper in the mid-1950s that Stinnes stock held by U.S. banks would be sold to the highest bidder and Germans would be excluded from bidding. Desperate to save the company, Kemper turned to the German government in Bonn for help. Chancellor Konrad Adenauer gave Kemper a sympathetic hearing. Adenauer in turn had a friendly relationship with U.S. President Dwight D. Eisenhower, who was able to pull enough strings to allow the Germans to participate in bidding for their own stock. The Stinnes company, however, did not possess the required capital--DM 100 million--the likely price of repurchasing the stock. So, the German government intervened once more; Finance Minister Ludwig Erhard worked to set up a consortium of German banks that could provide the necessary loan, all of which would have to be repaid to the last pfennig. In the United States, Kemper successfully outbid his competitors, including some of the most powerful firms in the Common Market, and the Hugo Stinnes firm was once more a wholly German-owned company.

Growth in the 1970s and After

The Marshall Plan for the resurrection of the German economy as well as the economic benefits of West German unification laid the foundations of the German "economic miracle." The Hugo Stinnes company once again became one of Germany's largest transportation and raw material supply companies, with sales in the multibillion dollar range by the early 1970s. In 1976 the company's name was changed to Stinnes AG, in recognition of the fact that the firm was no longer in the hands of the Hugo Stinnes family and as a reflection of the traditions of both Mathias Stinnes, the founder, and Hugo Stinnes, the daring entrepreneur. By then, Stinnes AG had joined the Veba AG group of companies, Germany's largest firm. In 1965 Veba AG had bought 95 percent of Stinnes stock, thus turning the company into a subsidiary. By becoming part of this holding company, Stinnes turned into the biggest transportation company in West Germany, since Veba AG sold one of its largest barge lines to Stinnes in return for the Stinnes glassworks and the chemical firm Chemiewerk Ruhroel.

By the early 1990s Stinnes AG had become a multibillion dollar company, operating the largest transportation industry in Europe and also serving as the owner of Brenntag AG, the largest supplier of petrochemicals on the continent. Headquartered in Mathias Stinnes's home town of Muelheim on the Ruhr, Stinnes has branched out into every continent on the globe and into every country in Europe, including eastern Europe and Russia. In the early 1990s Stinnes consisted of a multitude of major companies, most of which concentrated on the three business operations of Stinnes: trading in raw materials, distribution, and transportation. Two-thirds of Stinnes's revenues were derived from foreign markets, and one-third of its greater than 35,000-member work force were employed by Stinnes businesses outside of Germany.

In the early 1990s Europe's biggest transportation (in terms of land traffic) network was the Schenker Eurocargo group, which merged with Stinnes in 1991. A fleet of trucks and other conveyances--including railroads--transported merchandise throughout Europe, including Eastern Europe. Schenker-Rhenus AG, along with its subsidiaries, employed a total of 20,000 people and was without doubt Stinnes's largest component. Stinnes's Schenker International division was a major air and sea transporter of freight and operated 14 travel agencies as well. In the trading division, Stinnes Intercarbon was the top supplier and marketer in Europe of coal and its byproducts. Also in the trading division, the Stinnes firm Frank & Schulte GmbH processed and supplied ores, minerals, and metals to anywhere in the world via its 20 subsidiaries. In the distribution segment, consisting of approximately six major companies, Brenntag AG was the number one supplier of industrial chemicals to chemical manufacturers and the cosmetics industry throughout Europe. An increasingly important segment of Stinnes business was the service sector, especially home improvement chain stores. A small but important enterprise was the replacement tire market operated by Stinnes Reifendienst, which held the number one market position in Germany; this Stinnes division also owned more than 200 service stations throughout Germany, the Netherlands, Switzerland, Austria, and Alsace.

After the unification of East and West Germany, Stinnes, unlike many former West German companies, was in the forefront of investment and expansion into the former German Democratic Republic. Stinnes was also one of the first West German companies to establish corporate branch offices in the eastern German states and to establish major delivery routes into and out of those states. Brenntag AG opened a major distribution center in Magdeburg in former East Germany and quickly established branches of the firm throughout eastern Germany. Shortly after unification in the fall of 1991, Stinnes's earnings from eastern Germany alone totalled DM 1.5 billion--more than US $1 billion.

So hungry was the Eastern European population--which for decades lived under restrictive communist governments--for western goods in the early 1990s, that Stinnes was fortunate to have cultivated strong economic ties long before the fall of communism in eastern Europe and Russia. For one thing, the opening up of the east led to new raw material sources for Stinnes, the largest supplier of raw materials in Europe. Because of this, the Stinnes division Frank & Schulte had a year of record profits during the period of slow worldwide growth in 1991. Ores, minerals, and alloys were increasingly being obtained by Frank & Schulte from its Eastern European markets, which represented the best opportunity for growth for that company. Brenntag opened an important branch in Warsaw and offices in Prague and Moscow, only the beginning of its full penetration of the Eastern European market. The majority of Stinnes's divisions were racing to develop or extend their business in the east, including Russia, where the future of the vast Stinnes firm seemed to lie.

Changes in the Late 1990s

According to a past chairman of Stinnes AG, Guenter Winkelmann, the company could not exist without international markets. For this reason, Stinnes was particularly affected by the recession in North America, Australia, and Great Britain in the early 1990s. A more embarrassing setback came to the company in 1994, when it was revealed in the leading German newspaper Die Welt that a manager at Stinnes had embezzled millions of Deutsche marks from the company, through systematic fraud at one of the company's insurance subsidiaries. The manager, Baerbel Ruske, had been in charge of Hamburger Hof, an insurer that had prospered after reunification by doing brisk business in eastern Germany. Hamburger Hof had issued insurance policies on an estimated half million east German residences. Commissions on these policies were evidently siphoned into Ruske's account, and he was said to have come away with 11.9 million marks before being caught. Initial reports stated that Ruske's depredations would cost Stinnes six million marks, though Stinnes Chairman Hans-Juergen Knauer later amended the figure significantly downward, to only 800,000 marks.

By 1995 Stinnes was already Germany's largest independent steel trader; the company boosted its status even more with the acquisition of Krupp Hoesch Stahlhandel, a unit of Krupp AG. The Stinnes subsidiary Stinnes Interfer bought the unit. Krupp Hoesch Stahlhandel operated a network of six steel trading facilities, mostly in northern Germany. Its sale took its parent, Krupp AG, out of steel trading altogether. That company had complained that the business was becoming too consolidated, with large companies such as Stinnes Interfer making it difficult for the small Krupp unit to compete. After the acquisition, Stinnes Interfer was a giant, with a network of 37 steel trading branches and 1,500 employees.

As the company was growing in steel, it trimmed other areas. In 1997 Stinnes shed its hard-coal trading business. The sale of the business went 50 percent to a German company, Rheinbraun Brennstoff GmbH, and 50 percent to the Dutch SHV Energy NV. The sale had to await approval from the European Union Commission, which monitored such sales according to the European Coal and Steel Community Treaty. Further cuts in Stinnes's business were announced in December 1997, when parent company Veba AG announced it would sell about half of Stinnes.

Veba AG had been working hard to cut costs in the mid-1990s and next decided to concentrate its energies on fewer businesses. The massive conglomerate was characterized as a diversified utility company, and it controlled many municipal electrical utilities. But like its subsidiary Stinnes, it was involved in hundreds of businesses and its corporate structure was unwieldy. At the end of 1997, Veba AG announced that it would step back from direct management of Stinnes by floating up to 49 percent of its subsidiary on the stock market in late 1998. At that time Stinnes AG accounted for almost a third of its parent's annual sales. But the divestment of the subsidiary would not only give Veba AG a massive infusion of cash, but Stinnes would be able to fund its own growth and expansion. With the announcement of the coming sale, Stinnes also claimed it would give up its recycling business, its inland shipping, and direct control of its tire service businesses and do-it-yourself construction outlets. Stinnes's three core areas were to be chemical distribution, land transport, and trading in building materials and air freight. Stinnes still had hopes for more acquisitions and expansion in these three areas. But after being divested from Veba AG, it expected to be able to pay for its future growth by stock sales and to control its own destiny more precisely.

Principal Subsidiaries: Stinnes Interoil AG; Frank & Schulte GmbH; Brenntag AG; Stinnes Interfer GmbH; Stinnes BauMarkt AG; Stinnes Reifendienst GmbH; Stinnes Intertec GmbH; Schenker-Rhenus AG; Schenker Eurocargo (Deutschland) AG; Schenker International AG; Rhenus AG; Poseidon Schiffahrt AG; Frachtcontor Junge & Co.; Hotel Nassauer Hof GmbH; Stinnes-data-Service GmbH; Logware Informationssysteme GmbH; Stinnes-Organisationsberatung GmbH.

Additional Details

Further Reference

Burgert, Philip, "Krupp Sells Unit, Exits Steel Trading," American Metal Market, October 2, 1996, p. 2."German Veba's Reorganization Draws Praise from Analysts," Dow Jones Online News, December 4, 1997, p. DJON9733808602.The Making of a Business Empire; 175 Years of Stinnes; Portrait of a German Company, Econ Verlag, 1983.Norman, Peter, "Veba Shake-up Includes Stinnes IPO," Financial Times, December 5, 1997."People in Finance: Hugo Stinnes," The Banker, October 1982, pp. 74-75."Stinnes AG--Company Report," DAFSA, August 1, 1992.Stinnes, Edmund Hugo, A Genius in Chaotic Times: Edmund H. Stinnes on his Father, Hugo Stinnes (1870-1924), Bern: E.H. Stinnes, 1979.Young, Ian, "Stinnes Agrarchemie Builds Five Centers," Chemical Week, February 3, 1993, p. 13.

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