Heidrun Edelmann. Heinz Nordhoff und Volkswagen: Ein deutscher Unternehmer im amerikanischen Jahrhundert. Göttingen: Vandenhoeck & Ruprecht, 2003. 363 S. + 36 Abb. (gebunden), ISBN 978-3-525-36268-6.
Reviewed by Alfred C. Mierzejewski (Department of History, University of North Texas)
Published on H-German (September, 2004)
A German Manager in the Welfare State
Heidrun Edelmann has written a conventional chronological biography of the first general director of Volkswagen, Heinz Nordhoff. It is the first scholarly study of Nordhoff and, for this reason alone, merits the attention of historians of post-war German business. Edelmann contends that Nordhoff was influenced by Catholic social teaching and by his impressions of American management practices. She argues that through the application of these ideas, he promoted labor peace in post-war West Germany, thereby contributing to the success of Germany's first democracy. Edelmann uses an extensive range of documentary sources, primarily from the VW Archive. Remarkably, she does not use the complementary files of the Federal Ministry of Economics (Bundesministerium für Wirtschaft) and the Federal Ministry of Finances (Bundesministerium für Finanzen) at the Bundesarchiv, Koblenz. This weakens her account of the privatization of Volkswagen in particular. Surprisingly, she does not list those documentary sources that she does use in her bibliography. She does provide a complete list of the published materials that she consulted. Edelmann's book provides insight into West German management attitudes toward profit and the social responsibility of firms. It also provides valuable clues as to why Volkswagen is inefficient and, for a good part of its history, has been unable to earn a profit.
Heinz Nordhoff was born in a Catholic family in Hildesheim on January 6, 1899. He attended Catholic primary and secondary schools. In 1918, he served in the German army on the western front and was wounded. After the war, he attended the Technische Hochschule Charlottenburg, where he received a degree in engineering in 1927. While there, Nordhoff was influenced by Professor Georg Schlesinger who supported the Weimar Betriebsrätegesetz (Works Council Law) that provided for a measure of democracy within firms. Schlesinger called for greater power-sharing among management and employees in the workplace, increased pay and shorter hours. Schlesinger was, in turn, influenced by Götz Briefs, one of the leading proponents of Catholic social teaching. Through Schlesinger, Nordhoff imbibed Briefs's ideas. Essentially, Briefs advocated harmony in the workplace and the avoidance of social conflict in general. This could be achieved, in his view, through the sharing of power between owners, managers, and workers without jeopardizing private property. Firms would earn profits, but only to an unspecified socially responsible extent. Edelmann contends that Nordhoff adopted Briefs's ideas and applied them later at Volkswagen. Reinforcing this influence, and setting a pattern for Nordhoff's subsequent business career, was his extensive involvement in Catholic student and social organizations.
After completing his studies, Nordhoff began a business career that saw him rise rapidly. He obtained his first job as an engineer with BMW in 1927. He left that position in the following year and spent 1928 in the United States touring automobile plants, especially those of the Nash company. Edelmann claims, without much documentary support, that Nordhoff was impressed by American management techniques during his stay. He returned to Germany and took a job with the Adam Opel AG in Rüsselsheim in 1929. The company was soon acquired by General Motors. This acquisition exposed Nordhoff, once again, to American management practices and marketing strategy. Nordhoff ascended the management ranks quickly, occupying positions in customer service and liaison with the national government. In Summer 1939, he became chief of Opel's Berlin office charged with seeking government contracts. In May 1940, Nordhoff was appointed to the management board of Opel. He added the position of chief of the Opel plant at Brandenburg in July 1942. Nordhoff also found a prominent place in Albert Speer's industrial management apparatus. He was a member of the Main Committee for Motor Vehicles (Hauptauschuß Kraftfahrzeuge) and the chief of the Special Committee for Three-Ton Trucks (Sonderausschuß Dreitonner). In the latter position, he was mainly responsible for helping Daimler-Benz prepare to produce the Opel Blitz truck in heavy demand by the Wehrmacht. Nordhoff's primary goal throughout the war was to protect Opel's competitive position for the post-war period. Once the United States entered the war, he expected Germany to lose.
Discussion of Nordhoff's wartime activities raises the question of his relationship with the Nazi Party. Nordhoff never joined the NSDAP. However, he did become a member of the Deutsche Arbeitsfront and the Nationalsozialistisches Kraftfahrer Korps. Membership in the first was virtually mandatory for someone in a leading management position such as Nordhoff, while the latter organization was relatively innocuous. More troubling are questions about Nordhoff's use of forced labor at his Brandenburg plant. Opel did not employ SS slave laborers at either its Rüsselsheim or its Brandenburg facilities. However, it did use foreign forced laborers provided by Fritz Sauckel's organization. Edelmann claims that Nordhoff ensured, as a result of his Catholic social beliefs, that the forced laborers at his plant were treated properly. However, the sources that she uses to support this claim are weak, consisting primarily of statements by character witnesses at Nordhoff's denazification hearings. In the same vein, Edelmann claims that Opel did not produce military hardware. However, given the importance of the Opel Blitz truck for the Wehrmacht's logistics, this assertion rings hollow.
Nordhoff's prominent position in the wartime economic structure caused him difficulty after the war. He received a preliminary clearance from the Allies in October 1945. However, soon afterward the U.S. military government relieved him of his position at Opel and began proceedings against him. Helped by the intervention of prominent GM managers from Detroit, Nordhoff was finally given his Persilschein in November 1948. By then, he had already embarked on what would become the most important part of his career. On November 20, 1947, Nordhoff became general director of Volkswagen. The massive plant had been built by the Nazi government in the late 1930s to manufacture the small people's car that had been designed by Professor Ferdinand Porsche. The factory was actually used during the war to produce components for military aircraft and other items for the armed forces. When Nordhoff appeared in Wolfsburg, he was impressed by the fact that the facility was far larger than was necessary and by the poor quality of the few Volkswagens that had been produced under the supervision of the British occupiers. He decided to rectify these problems by increasing production volume and improving quality. He automated the production line and reorganized management on a line and staff basis. He determined early that if Volkswagen operated at capacity, the West German domestic market would not be able to absorb all of its output. Therefore, the firm would have to export.
During the 1950s, Volkswagen was both a beneficiary and a motor of the economic boom that took place. Rather than tracing chronologically Nordhoff's activities during this period, it might be more enlightening to look at a few themes which crystallize his ideas. Probably the most important was his application of his Catholic social concepts to Volkswagen. In this respect, Edelmann undoubtedly presents an accurate picture. Nordhoff held Volkswagen aloof from the national contracts that industries signed with the labor unions. Instead, he insisted on Haustarife, contracts agreed with the local union branch, in this case the metal workers. Instead of using this approach to pay lower wages, as one might expect, Nordhoff used this method to pay wages above the national average and to extend to his employees generous benefits. He began immediately in 1948 by granting VW employees free lunches and by promising them job security in the following year. Later, they received free health insurance, death insurance, and sick pay; they were given access to the company's vacation hotel in the Harz and could obtain interest-free loans to build homes or overcome emergencies. Heavy laborers received free milk. Workers were granted relocation allowances when transferred, discounted sales on VW automobiles and, what was most appreciated, discounts on purchases of gasoline. Beyond all this, as the company's sales mushroomed, the employees frequently received bonuses. Yet there was another side to this solicitous policy. Nordhoff was essentially an autocrat. He opposed codetermination when that issue was raised by the unions in the early 1950s. He also opposed the forty-hour week.
Another interesting aspect of Nordhoff's activities, which also throws light on his essentially undemocratic tendencies, was his relationship with Ludwig Erhard. On most fundamental issues, Nordhoff agreed with Erhard. But he disagreed with the economics minister on many practical matters. Nordhoff thought that Erhard's liberalization of the German domestic market in 1948 was the critical factor that lead to the subsequent boom. In November 1948, he supported Erhard against the general strike launched against the economics minister by the unions. When the question arose whether Erhard's economics ministry or the finance ministry should be made responsible for Volkswagen, Nordhoff stated his preference for Erhard. In 1954, Nordhoff supported Erhard's effort to pass a law regulating cartels. However, he opposed Erhard's efforts to influence his policies at Volkswagen. In 1955, he rejected Erhard's call to cut prices, part of the minister's effort to prevent inflation. Most importantly, Nordhoff disagreed with Erhard over how Volkswagen should be privatized.
When the Bundestag passed a law providing for the privatization of Volkswagen in 1960, Nordhoff was pleased. However, he did not approve of the model that Erhard proposed for the implementation of this measure. Erhard wanted Volkswagen to offer its stock at a low par value so that the firm's employees could buy some for themselves, giving them a stake in the company's future and allowing them to accumulate capital. Nordhoff doubted that most Volkswagen workers would be interested and was unsettled by the prospect that his employees would, in effect, become at least part owners of the firm and therefore become his employers. This opinion led Nordhoff to favor continued state ownership. Ultimately, as is well known, Volkswagen was only partially privatized, with the federal government and the state of Lower Saxony retaining substantial blocks of shares while a foundation was created to dispose of the firm's profits.
Nordhoff's record as manager was clouded by his inability to chart a strategy for the company's future. This was expressed most clearly in relation to two issues: the development of a replacement model for the Beetle and the selection of a successor. Nordhoff did not overcome the problem of finding replacements for the air-cooled Beetle. He was interested primarily in maintaining a high volume of sales. Since demand for the Beetle remained strong well into the 1960s, his stance seemed justified. Moreover, he was not interested in technological innovation for its own sake, a laudable trait that differentiated him from managers at other German engineering firms. However, it should have been clear that a new model would be needed as public tastes changed, standards of living rose, and as competitors offered improved types. Yet, Nordhoff starved the design department of talent, failing even to give it a chief for years. Edelmann understates this problem by pointing to the 1200 and 1500 models as innovations. In fact, they were just Beetles with larger engines, improved running gear and less Spartan interior appointments.
Nordhoff was also unable to groom a successor, although he spoke repeatedly of the need to nurture young talent. One prospect whom Nordhoff brought along was Karl Hahn. However, Nordhoff became disenchanted with his favorite when Hahn attempted to introduce American marketing techniques to Germany. Indeed in 1963, Nordhoff said glumly that it was unlikely that a successor for him would be found within the VW organization. The managing board solved this problem for him by appointing Kurt Lotz one of its number in 1967 with the clear intention of grooming him to succeed the aged and sick Nordhoff. Lotz set the process in motion that resulted in the production of four cars with water-cooled engines, one of which, the Golf, became the immensely successful successor to the Beetle.
A final theme is the lack of profitability at Volkswagen. Except for the 1950s, when market conditions were especially favorable, Volkswagen has rarely earned a profit. In Spring 1948, when Nordhoff became general director of the company, Volkswagen was losing money. The problem reappeared in 1960. Although sales continued to increase, profits did not follow. The cause was exceptionally high labor costs due to Nordhoff's generous social policy. In 1965 and 1966, when sales actually declined as West Germany experienced a mild recession, the company fell into a serious crisis. Nordhoff and his lieutenants delayed reducing production and laying off employees. During 1968, when demand for automobiles increased and sales of Volkswagens rebounded, Volkswagen still could not earn a profit. Its bloated, expensive workforce and its reliance on an antiquated model were the causes.
Heidrun Edelmann provides the observer interested in post-war West German business history with a book jammed with information and leads, most of which she does not exploit. Her account helps us understand why Volkswagen, one of the largest automobile manufacturers in the world, to this day can barely earn a modest return even when operating at full capacity. Nordhoff's policies, continued by managers such as Daniel Goeudevert, have burdened the company with unbearable labor costs. Even Ferdinand Piëch, its leader through the 1990s, was unable to solve this problem completely. Moreover, Edelmann's book offers us a glimpse into the reasons why the German economy as a whole has become uncompetitive. The highest paid workers in the world work the fewest hours annually of any workers in the world. No level of efficiency and innovation can offset these handicaps. Ironically, Heinz Nordhoff, an icon of German industry, is as much responsible for this situation as any politician or union leader.
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Alfred C. Mierzejewski. Review of Edelmann, Heidrun, Heinz Nordhoff und Volkswagen: Ein deutscher Unternehmer im amerikanischen Jahrhundert.
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