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

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D-44809 Bochum

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History of GEA AG

GEA AG is one of the world's leading suppliers for food and process engineering, and thermal engineering technology. The global group, headquartered in Germany, is active in more than 50 countries. GEA supplies proprietary engineered products and systems in the fields of process technology, thermal and energy technology, air treatment, and dairy farm systems. The GEA group's 150 operating companies generated DM 4.7 billion in sales in 1997: about one-fifth of it in Germany, two-fifths in other European countries, one-fifth in both Asia and the Americas, and about three percent in Africa. More than half of the group's 16,700 employees work outside of Germany. The group serves primarily companies in the food and beverage, chemical, pharmaceutical, cosmetics, petrochemical, and utility industries. The main subsidiaries of the GEA group are Grasso's Koninklijke Machinefabriken (Netherlands), Tuchenhagen GmbH (Germany), Niro Holding A/S (Denmark), and Westfalia Separator AG (Germany).

GEA's Thermal Technology Division develops and produces systems for heat rejection and exchange such as wet and wet/dry cooling towers; heat recovery and energy conservation systems; heat exchangers; waste heat boilers; and equipment for nuclear power stations. The Energy Technology Division offers air-cooled condensers for power stations and waste-to-energy facilities; air-cooled process heat exchangers and re-cooling systems; dry cooling towers; and oil tank farms. Main products of the Air Treatment Division are central and decentralized air-conditioning equipment; air-unit heaters; clean-room systems; and air filters. The Refrigeration Division offers reciprocating and screw-type compressors and compressor units; refrigeration engineering services; evaporators and condensers; chillers for air-conditioning systems; ice machines and freezers; and valves and other fittings for refrigeration engineering. The Liquid Processing Division's product range includes complete process lines for liquid and food processing; automated process control systems; heaters; degassing, carbonation, and nitrogenation plants; mixing and dosing systems; plate-type and tube-bundle heat exchangers; ultra-high temperature plants; cleaning-in-place (CIP) and sterilization-in-place (SIP) systems; valves, in-line instrumentation and pipework components; aseptic process systems; and form, fill, and seal machines. The Powder Technology Division's main products are industrial dryers; agglomerators, granulators, coaters, and pelletizers for powder processing; and powder bagging and packaging systems. Specialty Products include evaporators and heat exchangers; jet pumps and vacuum systems; keg cleaning and filling systems; crystallizers, homogenizers and other equipment. The Mechanical Separation Division sells separators and decanters (centrifuges), process lines for centrifugal separation, and butter churns. The product range of the Dairy Farm Systems Division includes vacuum equipment for milking systems, milking parlors and other milking equipment; milk cooling and heat recovery systems; cleaning equipment; herd management and disinfecting systems; and animal care products.

The 1920s: From Air Cleaning to Air Cooling

GEA traces its history to the formation of The Gesellschaft f├╝r Entstaubungs-Anlagen mbH, a limited liability corporation for dust removal equipment. This company was founded on February 2, 1920 in Bochum in the heart of the Ruhr, at the time one of Germany's most important industrial centers, where coal mining and steel production were the dominant industries.

The company's founder was Otto Happel, an entrepreneur gifted with both technical and commercial insight. The first company he worked for after he completed his commercial training was Balcke, a family-owned mechanical engineering firm in Bochum, another town in the Ruhrgebiet. One of his jobs was to design filters to clean the cooling air used in electricity generators and motors. The bag filters common at that time didn't function very well nor did they generate good profits. However, Otto Happel believed that there was a market for such filters and that he would be able to design better and more profitable ones. In 1919, Balcke agreed to help him establish his own business, which Happel started one year later in a small workshop in Bochum.

During the next two years, the company's first new product--a closed-circuit air cooling system that used air circulating in a metal tube built around the electrical engine--was developed for large electrical machinery. While this technology was already used widely in the United States, England, and France, it was unknown at that time in Germany. Happel pioneered this technology in collaboration with Professor Ludwig Prandtl, director of the Aerodynamic Research Institute in G├Âttingen, and together they invented a new air-cooling device: the elliptical finned tube.

In 1925, Otto Happel acquired the Metallwerk Westfalia GmbH in Bochum, a company that had made equipment for him earlier. All production was moved to the site of the new acquisition, and the company's name was changed to GEA Luftk├╝hlergesellschaft, Bochum. The company rapidly built a reputation, and in the following years different kinds of air coolers were developed based on the elliptical finned tube: for transformers, rectifiers, compressors, diesel and steam locomotives. Other new products included air heaters for heating systems and air coolers for air conditioning systems. In 1928, a new large factory and a laboratory for thermodynamic and aerodynamic tests were built on a property in Wanne-Eickel near Bochum that was large enough for further growth.

In 1929, the successful, medium-sized enterprise was hit hard by the Great Depression. During the next three years, sales dropped by more than two-thirds, and many workers either lost their jobs or were cut back to part-time work.

Not all news was bad, however. In 1934, the German Patent Office granted a patent for the elliptical finned tube with turbulators. That same year, GEA engineers entered new spheres of business which were designed to reduce customers' energy costs. Economizers and boilers for central heating systems and greenhouses were developed which re-used the waste-heat from power plants.

In 1935, Otto Happel together with the German engineer Dr. Kurt Lang, started working on air-cooled condensers for stationary steam turbines used for electricity generation. In 1939, GEA commissioned the first pilot project using an air-cooled condenser for stationary steam turbines at the Waltrop Colliery in the Ruhr. Although met with skepticism, Happel's team decided to pursue the technology further, which turned out to be successful for GEA in the following decades.

The War Era

When the Second World War began, about 200 people were on GEA's payroll, enjoying over-average benefits such as the company's own indoor swimming pool and a sports ground, and free fruit and vegetables grown in the experimental greenhouses. The company tried to maintain is business activities despite several bombardments, an endeavor which became impossible towards the end of the war.

Production started up again with about 70 employees in a small, undamaged building a few weeks after the war ended. At that time, many business transactions--including salaries--were barter deals. While reconstruction work progressed in the following years, the company was hit hard once again. The day after Christmas in 1948, GEA's founder Otto Happel died. His widow, Elisabeth Happel, who had given birth to her son Otto--named after his father--just eleven months earlier, took over the company's management. In the late 1940s and early 1950s, funds from the Marshall Plan provided for the reconstruction of power plants helped GEA get back on track.

Successful Start in the 1950s

The year 1950 saw two GEA firsts. The company produced and sold its first convectors--multiple stage radial blowers which controlled temperature electronically, used for heating, ventilation, and cooling--and it entered the field of systems engineering when the first complete air-cooled condenser was delivered to a small coal-run power plant in Hausham, Bavaria. Extensive series of tests carried out by the Process Engineering Institute of the Technical University in Karlsruhe provided a valuable database for GEA engineers, who developed larger units afterwards. Based on the principle of replacing water as the cooling element with by air, and thereby cutting operation costs and lowering negative environmental impacts, GEA engineers developed closed circuit coolers for large generators, and new cooler models for large diesel engines, chemical and steel producing facilities, and other cooling and condensation processes. In 1952, GEA was awarded a major contract which guaranteed work for the entire year. This contract included the delivery of air-cooled condensers for 90 locomotives to the German company Henschel.

In 1953, two new subsidiaries were founded: the GEA W&auml®eaustauscher Berlin GmbH in Berlin for heat exchanger production, and the GEA Konvektorenbau Happel KG in Wanne-Eickel. The latter was the beginning if a profitable business segment for convectors and air heaters. The first marketable GEA K 54 Convector was developed in only one year's time, and the first big shipment of 1,200 convectors went to a Hilton hotel in Ankara, Turkey. Under the leadership of managing director Helmut Schmiegel, GEA Konvektorenbau soon became German market leader in the field of air heaters. Schmiegel would manage this subsidiary for 30 years.

In 1958, the GEA Gesellschaft f├╝r Luftkondensation mbH was founded in Bochum to develop air-cooled condensers for steam and gas turbines--a growing market at that time. GEA Luftk├╝hlergesellschaft, the parent company, developed new air cooling solutions for various applications in process engineering. As one result, large orders were placed by companies from the petrochemical industry for oil refineries starting in 1959.

Expansion in Germany and Abroad in the 1960s

In the 1960s, GEA had to catch up with growing demand for its products in Germany as well as abroad. In 1962, GEA established a joint venture in Glasgow, Ireland--James Howden-GEA Ltd.--which included a production facility in Northern Ireland. It served the British Commonwealth and was later renamed to GEA Airexchangers Ltd. London. In 1963 and 1964, other new subsidiaries were founded in Austria, the United States, Italy, the Netherlands, and Spain, and licenses were granted to a Japanese and a Swiss company.

The GEA Konvektorenbau branch enjoyed a period of healthy growth. After founding its first foreign subsidiary in Austria in 1963, a new German factory was opened one year later in Obershausen in Hessen, thereby doubling its production capacity. In the following years, new products were developed such as the oil and gas-fired air heater in 1965, roof-mounted ventilation systems in 1966-67, and the first central air handling units in 1968.

When natural draught wet cooling towers were introduced to German power plants in 1965, GEA decided to market this new technology which fit well into its product line, especially for the utility industry. In the year of GEA's 50th anniversary, the company proudly presented the results of half a century of engineering work; 135 of GEA's air-cooled condensers for steam turbines, 8,000 air-cooling systems in various processing facilities, and 500,000 air heaters in all kinds of buildings had been installed all over the world.

New Markets and a New Leader in the 1970s

In the 1970s, GEA Gesellschaft f├╝r Luftkondensation intensified efforts to break into the utility market with air-cooled condensers for big power plants. This technology, which made water obsolete as a cooling agent for power generation, was successfully installed and tested in a 72 megawatt (MW) power plant in Italy; a 160 MW power station opened in 1971 in Utrillas, Spain; and a 365 MW power station in Wyodak, Wyoming, opened in 1977. Based on these successful operations, air-cooled condensers became feasible for power plants of any size. Prompted by the 1973 energy crisis, GEA Luftk├╝hlergesellschaft developed heat exchangers that recovered process energy in large processing facilities in the chemical, steel producing, and other industries. GEA Konvektorenbau developed water-to-water heat pumps in 1974, and before long it dominated the European market for heat pumps for almost a decade.

In 1975, Otto Happel, Jr., who had just received his Ph.D. in engineering science, took over the management of the 3,000-employee company. In the same year, GEA won its largest contract to date, as Aramco, a Saudi Arabian company, ordered air coolers for a petrochemical plant worth DM 120 million.

Right from the beginning, Happel favored a more commercial orientation of the company, which had been run by engineers for half a century. Following the path his mother had set out on, he also worked on the further internationalization of the group. Between 1975 and 1978, GEA founded or acquired companies in South Africa, Brazil, France, and again in the United States. The latter included the engineering company GEA Power Cooling Systems, Inc. in San Diego, California, and the manufacturing firm GEA Rainey Corp. in Tulsa, Oklahoma.

In 1979, GEA diversified into the food and process engineering market by taking over the Eduard Ahlborn GmbH in Hildesheim, northern Germany, a firm specialized in plate heat exchangers used for thermal treatment of milk, fruit juices, and beer. As a result of continuous innovation and expansion, sales for the GEA Luftk├╝hlergesellschaft grew 20-fold between 1954 and 1979.

New Applications in the 1980s

GEA entered the new decade reorganized by divisions, departments, and regions headed by a central management company. In 1982, the company made the biggest single deal in its history when it received a contract worth DM 360 million for air-cooled condensers for a 4,000 MW power station in Matimba, South Africa. For this gigantic facility, GEA engineers developed new finned tubes using fans of ten meters in diameter.

However, the market for heat pumps collapsed completely between 1981 and 1983 for GEA Konvektorenbau, due to the second energy crisis in the early 1980s. With R&D shifting towards energy and environmental engineering after the two oil crises, GEA's Environmental Engineering Division began developing heat transfer systems for the removal of sulfur and nitrogen from the emissions released by coal-based power stations in 1983.

Between 1984 and 1988, new subsidiaries were established or acquired for the new GEA Food and Process Engineering Division established in 1985, including four German manufacturers of products such as evaporators, equipment for breweries, and cooling equipment, as well as two companies in France and Belgium.

A new management holding company--GEA AG & Co.--replaced GEA GmbH in 1988. Three new divisions--Thermal and Energy Technology, Air Treatment and Refrigeration, and Food and Process Engineering, coordinated by a three-person executive board--replaced the old structure. By then, the GEA group included about 30 firms, employed about 4,900 people, and generated about DM 946 million in annual sales.

1989 was not only a historical milestone for the German people, but also for the GEA group. In order to finance further expansion, the company went public in December 1989, and raised DM 775 million. The Happel family preserved 37.5 percent of the total share capital in ordinary shares. However, preference shares had nonvoting status, so that the Happels actually held 75 percent of the voting rights. At the end of the decade, the sum of sales and received orders went beyond the DM 1 billion mark for the first time.

Expanding Internationally in the 1990s

In 1990, another DM 280 million was raised for the new GEA AG through a capital increase. The financially strengthened group was now able to enter a new stage of expansion which began by moving into its newly built futuristic headquarters in Bochum. At the end of 1991, GEA took over Grasso's Koninklijke Machinefabrieken N.V., a DM 300 million Dutch refrigeration specialist with an international reputation. Consequently, GEA's Air Treatment and Refrigeration Division was able push sales over DM 800 million.

In 1992, activities were extended into eastern Europe when GEA purchased a Hungarian engineering firm specialized in dry cooling for power stations and a Czech company active in the fields of heating, ventilation, and air conditioning. One year later, the GEA group took its biggest step towards becoming a global player when it acquired the DM 700 million Danish group NIRO A/S, located in Soborg near Copenhagen. The firm (which specialized in equipment for industrial drying, homogenization, concentration, membrane filtration, and other processes for treating liquids and solid materials used in the food, pharmaceutical, and environmental industries) not only brought 50 years of know-how to the GEA group, it also lent its strong presence in North and South America, Asia, Australia, and New Zealand. As a result of the NIRO group's integration into GEA's Food and Process Engineering Division, the division's share in the whole group's sales doubled from 21 percent to 42 percent in 1993, and NIRO's president Ole Anderson became its head and joined the executive board of the GEA AG.

In 1994, the group continued expanding in the field of food and process engineering with the acquisition of Westfalia Separator AG, the world's second largest supplier of centrifuges for the food, pharmaceutical, chemical, and petroleum industries with 4,000 employees and DM 810 million in sales.

With the acquisition of the Otto Tuchenhagen GmbH & Co. KG, a DM 330 million German firm with headquarters in B├╝chen near Hamburg specializing in process integration and automation systems for the brewery, dairy, beverage, and other industries, GEA became the world's second largest supplier for food and process engineering technology after Alfa Laval. In 1995, when GEA celebrated the group's 75th anniversary, sales had surpassed DM 4 billion, generated by more than 17,000 employees. The group was now able to offer fully integrated processing equipment instead of only system components.

The latter half of the 1990s began with another organizational restructuring effort, the results of which were introduced in February 1997. The GEA AG management holding company was headed by an executive board of three managers jointly responsible for the group's business affairs. Nine divisions (including Thermal Technology, Energy Technology, Air Treatment, Refrigeration, Liquid Processing, Powder Technology, Specialty Products, Mechanical Separation, and Dairy Farm Systems) each managed by a division president, constituted the next management level.

Between 1990 and the end of 1997, group sales tripled and net income almost doubled in the same period. The number of employees peaked in 1995 at 17,740, and decreased slightly in the following years, reaching 16,747 in 1997. 32 percent of GEA's DM 4.7 billion total sales in 1997 came from the food processing industry; 24 percent from the chemical, petroleum, and other basic industries; 12 percent from refrigeration products; nine percent from heating, ventilation, and air conditioning products; eight percent from both the energy and waste management as well as mechanical engineering industries, and seven percent from agriculture.

In November 1998, GEA announced only slightly increased sales, but net profits growth "well in the double-digit range," showing that the decline of Asian markets was more than compensated by cost reduction measures. In 1998 GEA also took over the French Hugonnet Group, a producer of milk cooling systems, and announced the takeover of the U.S. firm Zajac, Inc., expected to be complete by January 1, 1999. Zajac, an engineering contractor for the pharmaceutical, cosmetics, and beverage industries, was expected to strengthen GEA's presence in the North American market and to complement the Liquid Processing Division's product line.

In early February 1999, GEA and the German raw materials conglomerate Metallgesellschaft AG, Frankfurt am Main, announced they were planning to merge and that the Metallgesellschaft would take over the GEA AG by acquiring a majority share of 74.85 percent of the common stock from institutional and private GEA shareholders, including the Happel family which held 50.1 percent. The European Commission was reviewing the transaction for antitrust violations. It was expected that the GEA name as well as its other trade names would be maintained.

Principal Divisions: GEA Happel Klimatechnik (Germany); Grasso's Koninklijke Machinefabrieken N.V. (Netherlands); Niro A/S (Denmark); Westfalia Separator AG (Germany); Tuchenhagen GmbH (Germany); GEA Erge-Spirale et Soramat (France); GEA Integrated Cooling Technologies; GEA Spiro-Gills (U.K.); GEA Rainey; GEA do Brasil Intercambiadores (Brazil); Polacel (Netherlands); GEA Engine Cooling Systems; GEA Klimator (Poland); GEA Aircooled Systems (South Africa); EGI-Contracting/Engineering (Hungary); GEA Iberica (Spain); GEA Scambiatory di Calore (Italy); LVZ (Czech Republic).

Additional Details

Further Reference

Barber, Tony, "Metallgesellschaft Aims To Buy GEA," Financial Times, February 9, 1999, p.20.Bauer, Ina, "Metallgesellschaft Shares Soar on Plans to Buy GEA," Wall Street Journal Europe, February 9, 1999.GEA 1920-1995, company document, Bochum, Germany: GEA AG, 1995."GEA Sells Sugar/Sweetener Unit To Danish Group," European Report, September 5, 1998.Hagos, Ghion, "German-Invested GEA Technology Equipment (Shanghai) Co. Ltd. Opens," Asia Info Services, November 13, 1996.Lindemann, Michael, "GEA Posts Sharp Advance in Sales to 4.2 Billion Deutschmarks," Financial Times, March 2, 1995, p. 26.----, "Sales at GEA Fall Short of Forecasts," Financial Times, May 7, 1996, p. 21.Marsh, Peter, "GEA Hails Profits Recovery," Financial Times, March 10, 1998, p. 33.----, "GEA to Spend DM2bn on Expansion," Financial Times, May 11, 1998, p. 26."Tuchenhagen Shifting Location," Minneapolis Star Tribune, September 12, 1995, p. D4.

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