Liebherr-International AG - Company Profile, Information, Business Description, History, Background Information on Liebherr-International AG

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Company Perspectives:

To maintain the high quality standards with which its products have to comply, Liebherr attaches great importance to in-house control of key technologies. To avoid outsourcing core competencies, major sub-assemblies also come from in-house development and production. They include, for example, the entire drive line and control technology for construction machinery, including the electrics, electronics, transmission, hydraulics, and diesel engine product groups. Another example is hydraulic rams and anti-friction bearings, which are increasingly used in products of other makes as well.

History of Liebherr-International AG

Liebherr-International AG is the Swiss holding company of the Liebherr Group, one of the world's leading manufacturers of construction and mining machinery. Liebherr products are developed and manufactured at 25 production plants in 11 countries in Europe, North and South America, and Asia. The company's Earth-moving Machinery division makes excavators, crawlers, loaders, and mining trucks, which account for about 30 percent of sales. Liebherr's Construction Machinery division makes a broad variety of construction cranes, as well as pipe-laying machines, concrete mixing plants, and ready-mix concrete trucks. The company's broad range of cranes includes stationary tower cranes, mobile cranes, and crawler cranes, which in addition to construction purposes are also used for cargo handling in harbors, on ships, and in logistics centers. Cranes account for about one-third of Liebherr's revenues. The company also makes aviation equipment, diesel motors, and gear-cutting machines, offers a line of household refrigerators and freezers, and runs six top-class hotels in Ireland, Austria, and Germany. Roughly 70 percent of the company's sales come from Western Europe. About half of Liebherr's total workforce is in Germany, where the company was founded. Liebherr-International AG is owned by the Liebherr family and managed by two children of the company founder, Hans Liebherr.

New Construction Crane Meets a Need in the 1950s

Hans Liebherr grew up in Kirchdorf, a small southern German town on the Iller river. At the time he lost his father in World War I, Liebherr was only two years old. At age 13, he started an apprenticeship in his stepfather's small construction business. During World War II, Liebherr served in the engineering corps of the German army, specifically in a unit that built bridges for the German troops in Russia. There he gained valuable insights into common challenges connected with construction projects. At the end of the war, Germany lay in ruins, and it was evident that the rebuilding of the country would occupy the nation for many years.

The currency reform in western Germany in 1948 marked the beginning of what was later called the German Economic Miracle. Back home from the war, Liebherr--now in his mid-30s--started working on the prototype of a construction crane that he envisioned would be needed by smaller construction firms in the postwar reconstruction years. The new kind of crane he had in mind would be easy to set up and transport, have a far better performance than the models available at that time, and still be affordable for smaller businesses. In a little wooden shed that he had set up, Liebherr, together with the local blacksmith and a few other men, built the 30-foot tower crane he had envisioned. After he was granted a German patent for his invention in August 1949, he exhibited his crane at the Frankfurt Trade Fair. The crane stirred a great deal of interest, but Liebherr received not one order.

Liebherr, however, believed in his idea and started building a number of his cranes. A few weeks later, orders started coming in. Liebherr's first crane model, the TK 10, could extend from 4.5 to 16 meters and carry from 650 kilograms to 2,000 kilograms in weight. It was folded up for transportation and could be set up within two to three hours. Conventional construction cranes were much bigger than the TK 10, and it took several days to set them up. In 1950, the business took off quickly. Liebherr modified the TK 10 and constructed a number of models with different performance parameters to meet the needs of various construction projects. Because all these models were built in series, Liebherr was able to sell them at very reasonable prices. All of his cranes could be folded up and transported as one unit.

Within a few weeks, the small workshop was turned into a small factory. Soon Liebherr employed 110 people who built about one crane per day. In his first year of business, Liebherr sold 160 cranes, generating DM 2.2 million in sales. In 1952, Liebherr introduced a new model, the TK 28, which was equipped with an adjustable arm. The necessary gears were made by outside suppliers according to Liebherr's specifications. In the year of its introduction, 267 TK 28 cranes were sold.

Conquering New Markets in 1954

Cranes remained Liebherr's major product during the 1950s, 1960s, and 1970s. However, only a few years after he successfully established himself in one market, Liebherr ventured into new ones. After his innovations in the way construction materials were hauled at construction sites, he took on how dirt was dug out of the ground. The excavators of the early 1950s were extremely big, heavy, and slow. Thick steel cables running through pulleys maneuvered the bucket and digging arm, a technology that was inefficient in terms of precision and the application of leverage. Liebherr wanted to improve the performance of excavators by utilizing hydraulic power--which was already used to tilt the bed of dump trucks--to drive the bucket into the ground and pull it out. In eight months, Liebherr invented his first hydraulic excavator, which was much lighter had a much larger bucket than other machines of its kind. The new invention, which again revolutionized the construction industry, was a huge success. Soon Liebherr's excavators became a second leg for the company to stand on.

This, however, was not enough for Liebherr. The production of construction machinery was complemented by concrete mixers. At the same time, the company ventured into a completely new field when it started making household refrigerators in the mid-1950s. New plants were set up in Biberach, Bad Schussenried, Kempten, and Ochsenhausen for these new activities. By the end of the 1950s, Liebherr had grown to an enterprise of considerable size. The company employed roughly 2,400 people and generated DM 77 million in sales.

Liebherr's know-how in hydraulic technology led the company into another market. In the 1970s, the company started making aircraft equipment for the European Airbus, including the nose-wheel and modules for the air-conditioning system. The Airbus business was worth more than $500 million. Another area where the company had gained special know-how was gear manufacturing. Early on, Liebherr had adopted a policy to outsource as little as possible in order in keep control over the production of major components that went into the company's products. Among those components were gear boxes and motors for Liebherr's cranes and excavators, for which the company's engineering division developed even the machinery to make them. Over time, the company became a supplier of hydraulic gear-making automates to major automobile manufacturers as well as to competitors such as the American heavy machinery manufacturer Caterpillar.

Finally, Liebherr started setting up whole plants for other companies. For a client in Algeria, Liebherr built a complete plant for the production of excavators worth $500 million and even trained the personnel there. Among the company's biggest projects was the installation of a transmission assembly line for a truck plant in Russia worth about $225 million. In addition to these activities, Liebherr ventured into a completely unrelated field. One of Liebherr's strategies was to set up new production facilities in rural areas where, in his opinion, work and business ethics were better and labor cost cheaper. When a new crane plant was set up in the Irish countryside in 1958, Hans Liebherr realized that there was no place where visitors could spend the night, so he initiated the construction of two modern hotels nearby. Eventually, the number of hotels run by Liebherr increased to six.

Building a Global Enterprise in the 1960s-70s

Not only did Hans Liebherr build a diversified enterprise almost from the very beginning, but he also expanded into new geographical markets early on. The erection of the crane plant in Killarney, Ireland, marked the beginning of the company's international expansion. During the 1950s, Liebherr production subsidiaries were established in France, Switzerland, and the United Kingdom. In the 1960s, the company set up its first production plant in Austria. In the following decades, Austria emerged as Liebherr's second most important location besides Germany. The first plant for excavators and bearings was followed by production facilities for crawler-excavators and pipe-laying machines, refrigerators and freezers, harbor cranes and offshore cranes for ships and floating drilling platforms, as well as the construction of two high class hotels. A new factory for mobile cranes that were mounted onto a chassis and could therefore be moved rapidly between construction sites opened in Ehingen, Germany, in 1969. Early orders for them were received from England as well as from the Soviet Union.

In the 1970s, Liebherr expanded even further, setting up new sales offices and production plants overseas in Brazil, Canada, and South Africa. However, Hans Liebherr's main focus was to gain a foothold in the United States, which was not an easy task. In 1970, Liebherr set up a brand-new excavator plant near Newport News, Virginia. The most difficult task, however, was to find dealers in the country who were willing to start offering their clients products from a European newcomer that was competing with the well-known American manufacturers. What made it even harder was the fact that the most profitable part of a U.S.-dealer's business was selling replacement parts and offering repair services to their customer base. However, since there had been no Liebherr products on the market, it would be a while until that kind of business could be expected.

Another problem was the decision to modify the company's excavators to match American taste. The undercarriage was extended--as were the fuel tanks--and had a more robust design. However, as the construction industry slipped into recession in the mid-1970s, sales of heavy-duty machinery declined sharply in the United States. Suddenly, Liebherr had a backlog of excavators made for the American market that could not be sold in Europe, where the company tried to keep up with the high demand. To use the free capacity in its Virginia plant, the company started making cranes there and received a $15 million order from the U.S. Navy. However, the deal turned out to be costly for Liebherr, since the company had to make changes in the crane design on an already very low bid to meet the desired requirements. All in all, the crane production cost the company the profits it had made with excavators in 1979, and the manufacture of cranes in Virginia was ceased soon afterwards.

Despite initial difficulties, Liebherr managed to sign up 50 dealers in the United States by the end of the 1970s and had gained a market share of between 3 and 4 percent. By that time, the Liebherr group of companies employed 15,000 people in ten countries and brought in $1.1 billion in sales. The enterprise had grown from a mid-sized, family-owned business into a multinational corporation, ranking number 431 on Fortune magazine's list of the largest industrial companies outside the United States.

Financial Conservatism, Decentralization, and Transfer of Ownership in the 1980s

Up until the 1990s, Liebherr was firmly under the company founder's control. Hans Liebherr's management style was legendary. His success was built on his unshakable belief in frugality and delegation of responsibility. In 1980, Hans Liebherr told Fortune reporter Robert Ball that he believed that owing money to other people was gambling. He was aware that his enterprise could have grown faster with the help of bank loans but adhered strictly to his maxim that money could only be spent after it was earned. Liebherr flew economy class and drove a seven-year-old Mercedes. Besides financial conservatism, Liebherr believed in decentralization. Every new subsidiary's top management was fully responsible for its operation. Fewer than 20 people worked at the group's headquarters.

Hans Liebherr relied on two methods for steering his enterprise: monthly reports and unannounced visits. All of the 26 subsidiaries filled in a one-page report at the end of each month that contained the most important financial and operational figures. One of Liebherr's foremost concerns was that administrative cost did not run out of hand. To complement this information, he regularly visited each of the production plants in Germany, Austria, France, and Switzerland. Without any warning, he often walked into the production halls and spoke with the workers and foremen there before talking to any manager.

In the early 1970s, Hans Liebherr moved his residence from Germany to Switzerland in order to avoid the hefty German inheritance tax. Then Hans Liebherr transferred stock ownership in his enterprise to his children. The company was split in two parts: a German holding company for all business activities in Germany and another holding company based in Switzerland for all the other subsidiaries. Hans, Jr., Markus, and Hubert Liebherr received equal shares in the German holding company. Willi and Isolde Liebherr were co-owners of the Swiss holding company. However, despite the transfer of ownership, Hans Liebherr remained in control of his enterprise through a power of attorney with each of his children. In 1983, the company's headquarters were moved to Switzerland after the establishment of the new Swiss-based management holding company Liebherr-International AG.

After Hans Liebherr's daughter and four sons had finished their education in their late 20s and early 30s, they all started working as full-time executives at their father's business. The company founder's oldest son, Hans, Jr., studied engineering and economics. Willi Liebherr became a mechanical engineer, while his younger brother Markus studied engineering with an agricultural focus. Hubert, the youngest of the Liebherr brothers, became a construction engineer, and their sister Isolde studied business administration. Hubert Liebherr managed an excavator plant in Algeria, Isolde was responsible for the hotels, and the other Liebherr siblings had management positions in production or marketing. However, around 1990, Hubert Liebherr gave his share in the family business back to his father.

Second Liebherr Generation Takes Over in 1990

When company founder Hans Liebherr died in 1993, at age 78, his industrial enterprise generated roughly $2.5 billion in sales annually. Now it was time for the second Liebherr generation to take over management of the family enterprise. Hans, Jr. took over responsibility for the crane and concrete mixing business, Willi for earth moving equipment, and Isolde for the refrigerator production and hotels. Markus Liebherr, however, had changed his life plans and gave most of his shares in the company back to his brothers and sister. Hans, Jr., Willi, and Isolde met every other week to discuss the basic decisions concerning investment, product development, and finances.

Hans Liebherr had left behind a financially healthy business. Due to his conservative financial policy, the company was free of long-term debt. All investment projects were financed out of the company's cash-flow. In the 1990s, after profiting from the construction boom brought about by the reunification of East and West Germany, the Liebherr group increasingly focused on the emerging markets in Asia, North America, and the Far East. In 1995, Liebherr helped establish a manufacturing plant for truck gears in Tatarstan for the Russian truck maker Kamaz. In 1997, the company acquired Axel Friedmann Verkehrstechnik, a manufacturer of air conditioning systems for high-speed trains, adding a new branch to the group's portfolio. The new business division profited from Liebherr's know-how in air-conditioning technology for airplanes. In the same year, the company founded Liebherr-Mietpartner, a new subsidiary that established a network of over 70 rental centers for construction equipment throughout Germany. Also in the 1990s, Liebherr acquired North American dump truck manufacturer Wiseda, an important step into the U.S. market for mining equipment. In 1999, a new Liebherr refrigerator plant was set up in Plovdiv, Bulgaria, which started putting out low-priced models for the European market in 2000. New production lines in Asia included a crane plant in Thailand and four manufacturing joint ventures in China.

In 1999, Hans, Jr. stepped down from his active involvement in the family business but remained on its supervisory board. Willi was named the Liebherr group's chairman and Isolde became vice-chairman. Some observers interpreted this as a sign that one of Willi's six sons and daughters might follow their father in running the company. Three years later, Liebherr's organizational structure was changed when four business divisions--earthmoving machinery, construction machinery, refrigerators/freezers, and aviation equipment--replaced the former management holdings in Germany and Austria. The first three were managed from Germany, while Liebherr's headquarters for aviation equipment was moved to Toulouse, France, the European aviation industry's center. The mobile and maritime crane plants in Ehingen, Germany, and Nenzing, Austria, however, reported directly to the group holding in Switzerland.

Relentless diversification, globalization, and investment in modernization and product innovation helped Liebherr sustain a comparatively favorable position in terms of sales and profits. Sluggish growth and decreasing sales in Germany and Western Europe were offset by the growing demand in emerging markets such as Asia and the Far East. The sharp decline in demand for construction equipment in Germany, and a drop in orders for aviation equipment after the terrorist attacks in the United States on September 11, 2001, were partly offset by an increasing number of orders for mobile harbor and offshore cranes. However, after an average sales growth of 12 percent from 1997 until 2001, the company's revenues dropped slightly in 2002.

Despite a difficult global economic climate Liebherr had an optimistic outlook on the group's future and invested in a number of new ventures. In 2002, the company announced a new business venture with German truck maker MAN Nutzfahrzeuge to jointly develop and manufacture a new diesel motor which was slated to be introduced in 2005. Also in 2002, Liebherr launched an investment project to expand the wellness sections of Liebherr's two upscale hotels in Austria to accommodate the trend towards health-tourism. In 2003, the company broke ground for a new production plant for maritime cranes in Rostock, a harbor city on the German Baltic coast, and invested in an excavator plant in China. The year 2003 also saw the launch of Liebherr's new heavy-duty crane for the erection and maintenance of offshore wind-power systems. With the third Liebherr generation attending college, Willi and Isolde Liebherr believed that the company would be able to grow from its own resources--without the help of outside investors--and to withstand growing pressures from accelerating global consolidation and competition. That was the way it had grown to its current size: as a family-owned business.

Principal Divisions:Earth-Moving Machinery; Construction Machinery.

Principal Subsidiaries:Liebherr-Holding GmbH; Liebherr-Werk Nenzing GmbH (Austria); Liebherr-Aerospace Toulouse SAS (France); Liebherr Machines Bulle S.A. (Switzerland); Liebherr Mining Eqipment Co. (United States); Liebherr Industrias Metálicas, S.A. (Spain); Liebherr Container Cranes Ltd. (Ireland); Liebherr Sunderland Works Ltd. (United Kingdom); Embraer-Liebherr Equipamentos do Brasil S.A.; Liebherr Brasil Ltda.; Xuzhuo Liebherr Concrete Machinery Co. Ltd. (China); Liebherr (Thailand) Co., Ltd.

Principal Competitors: AB Electrolux; BSH Bosch und Siemens Hausgeräte GmbH; Caterpillar Inc.; Demag Holding; Cummins, Inc.; Kobelco Construction Machinery America Inc.; Komatsu Ltd., Hitachi, Ltd.; Potain S.A.S.; O&K Orenstein & Koppel GmbH; Whirlpool Corporation.


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