Company Perspectives:
The 12 Guiding Principles of Metallgesellschaft: 1. We increase our earning power and financial strength through market orientation and cost-consciousness. 2. We increase the value of our company for our shareholders. 3. We concentrate on our core business areas. 4. We act according to our objectives within the scope of our strategic orientation. 5. We want to be among the leaders in our international markets. 6. Our customers pay our wages and salaries. Therefore we place them at the centre of our thoughts and actions. 7. We promote the ideas and initiative of all our staff. 8. Our objective is constant quality improvement. 9. We desire effective communication and welcome objective criticism. 10. We develop our staff and executives in accordance with our corporate commitment. 11. We are active innovators while preserving meaningful traditions. 12. We are a company which is aware of its responsibilities in our society and to the environment.
Company History:
Metallgesellschaft AG (MG), based in the heart of Frankfurt since its foundation, is a conglomerate providing raw materials and technological services. It is divided into five branches: trade, finance, engineering and contracting, chemicals, and building technology. On the brink of bankruptcy in early 1994 because of huge losses incurred from oil-futures and derivatives trading, MG bounced back to profitability in the 1994/95 fiscal year but still faces an uncertain future.
Early History
"The trade in and manufacturing of metals and metal oxides" were the business aims of the firm according to its articles of association. The company was founded on May 17, 1881, by the Anglo-German merchant Wilhelm Merton and his two partners, Leo Ellinger and Zachary Hochschild, with a share capital of 2 million marks. It had its roots in the firm of Philipp Abm. Cohen, already established some 150 years previously, with its headquarters in Hanover. Initially this company was involved in banking, then increasingly in metal trading, and was incorporated in Frankfurt in 1821. In 1856, Cohen entrusted his business interests to his son-in-law Ralph Merton, who had emigrated from London to Frankfurt. One of Ralph Merton's sons, William, born in 1848 and later to change his name to Wilhelm, became an associate partner in 1876, having worked for many years both in London and in Frankfurt. Close business as well as personal ties were formed with the firm of Henry R. Merton (HRM), the metals trading firm of the English branch of the family, named after another of Ralph's sons.
MG, with 40 employees and one telephone--the first telephones were installed in Frankfurt in 1881--at the outset traded in copper, lead, and zinc, later diversifying into nickel and aluminum. The firm Philipp Abm. Cohen had also been involved in silver trading, but abandoned this line in 1872, leaving the way open for the founding of the Deutsche Goldund Silber-Scheideanstalt (Degussa).
Since the domestic mines could not satisfy the country's metal requirements, the company rapidly developed extensive relations abroad and within a short time MG was represented in such cities as Basel, Amsterdam, Milan, Brussels, Stockholm, St. Petersburg, Moscow, Vienna, and Paris. Within a few years, therefore, a network of subsidiaries spanned the globe. In 1887, the American Metal Company was founded in New York; in 1889, the Companhia de Minerales y Metales in Mexico; and in 1889 the Australian Metal Co. The last was the result of an expedition the company organized together with HRM and Degussa into the ore-rich Broken Hill district, where lead and lead concentrates were produced in vast quantities. This constituted the start of MG's trading in ore, which would assume greater and greater importance in the future.
From 1889, these ores were analyzed and tested by the specially created technical department. This technical department was to be the seed from which grew the largest enterprise that MG has ever created; from it arose in 1897 the Metallurgische Gesellschaft Aktiengesellschaft, a fully owned MG subsidiary, to look after MG's industrial and technical interests. Under the abbreviation it uses for telegrams, LURGI, this enterprise has become known as a leading worldwide engineering business. The appointment of the scientists Clemens Winkler and Curt Netto to the supervisory board was clear evidence of the importance technological skills had acquired for MG.
MG developed and flourished in the generally favorable climate of the late period of the Gründerjahre--the period, beginning in 1871, of rapid industrial expansion in Germany. In the company's first ten years, its capital was raised to 6 million marks and the dividend payments were between 7 and 33 percent. From the outset MG had proved exemplary in its social provisions. For example, a pension fund was established for employees long before this became a legal obligation. The founder of MG's social policy was legendary. He founded numerous institutions, using the anonymity of the holding company, the Institut für Gemeinwohl, which were concerned with research into social questions and with providing practical assistance. The feeling that those involved in the business world generally lacked grounding in academic background knowledge in commerce, economics, and social sciences led him to found the Akademie für Sozial-und Handelswissenschaften. The University of Frankfurt would emerge from this academy, once again backed by Wilhelm Merton's strong personal and financial involvement.
Early 20th Century
By 1906, the year of its 25th anniversary, MG was a steadily growing, prosperous concern, involved in many sectors, and active internationally in trading and engineering technology, in the fields of mining and metallurgy. In the same year, Wilhelm Merton brought about the long-envisaged creation of a separate finance company and a broader financial base for the group through the founding of the Berg- und Metallbank. This was merged with the Metallurgische Gesellschaft in 1910, after it was realized that a precise division between the industrial business and its financing was creating unnecessary duplication of work and was not economically favorable to the group.
Although Wilhelm Merton is recorded in autobiographical notes as saying of MG that: "Our trading company will not be involved in any kind of advertising" and is credited with the remark that it would be far more pleasant "to be able to pursue one's business without the need of the stock exchange, the public or the press," he broke fundamentally with his principles in one important way--the publication Metallstatistik, which had appeared annually since 1892, giving an overview of metal production, consumption, and prices worldwide, made MG's name, to quote Wilhelm Merton again, "known, and I might add, respected." In general, however, Wilhelm Merton strongly objected to any interest in the firm which he considered to be excessive.
World War I hit MG hard. The good relations established abroad were broken off, imports of raw material dried up, the sister company HRM fell under the British Non-Ferrous Metals Industry Bill of November 1917, designed to eliminate enemy influence and control over the British ore and metal trade, and the deliveries of Australian ore failed to appear. This meant MG had to obtain its metal supplies from neutral countries for as long as possible and eventually to use up domestic sources or intensify their exploitation. Three aluminum works were built, in conjunction with the firm Griesheim Elektron: in Horrem, close to Cologne; in Berlin-Rummelsburg; and in Bitterfeld near Halle.
In the middle of World War I, on December 15, 1916, Wilhelm Merton died suddenly on a business trip to Berlin. His partner Hochshild had died in 1912 and Ellinger had died in the summer of 1916. This meant none of the founders were left. Wilhelm had prepared his sons to continue the businesses and Richard and Alfred took on the top management positions in MG and in Metallbank.
After the war, they were faced with three main tasks: overcoming the consequences of inflation; reestablishing ties abroad; and adjusting MG's organization to the altered circumstances. Representation abroad was cautiously and gradually reestablished, and a cooperation agreement was signed and shares exchanged with the successor to HRM, which had gone into liquidation during the war.
MG was reorganized into four and later five constituent parts between 1919 and 1922, reflecting its different areas of activity. Through the acquisition of water transport companies (Schleppschiffahrtsgesellschaft Unterweser in 1919 and Lehnkering AG in 1926); a land transport company (Kommanditgesellschaft S. Elkan & Co., Hamburg in 1922); and the founding of a land transport company, Montan Transport GmbH, MG created its own transport services. In 1928, MG and the group Berg -und Metallbank and Metallurgische Gesellschaft which had merged in 1910 were brought together with the aim of operating more efficiently. In the field of metal working, the Vereinigte Deutsche Metallwerke AG (VDM) was founded in 1930 through mergers and partnerships. MG had the majority shareholding.
In the 1920s, the company's constant efforts to reestablish contacts abroad, especially through Richard Merton's strong personal involvement, bore fruit. Together with the already mentioned exchange of shares with the British Metal Corporation is the example of the takeover by MG in 1926 of the Ore and Chemical Corporation (OCC), founded in 1923, in New York. In 1922 MG's stock was changed from registered shares to bearer shares; it was consequently registered on the Frankfurt stock exchange in 1922 and on the Berlin exchange in 1926.
After the battle against inflation had been won, MG would only have a few years to benefit from a peaceful and favorable business environment, as the world Depression and political changes would once more affect the