KRUPP

SIX

POWER AND DEGLOBALIZATION

Gustav and Alfried Krupp von Bohlen und Halbach

Figure 6.1 Nuremberg trial of Krupp directors, 1947. Courtesy of Historical Archives Krupp.

Alfried Krupp himself produced a bizarre addition to the fictional literature about business life when, in prison after the Second World War, he wrote a pained and painful persiflage of two business careers under the Nazis with the title of “The Life and Works of a German Economic Leader, as Depicted in Nuremberg Documents.”2 The first biography begins: “His life was shaped by greed for money, blood and power. His grandparents on his father’s side carried out the bloody business of butchery, on his mother’s side his grandparents were greedy tax collectors. . . . Already as a child he screamed louder and longer than other children. . . . In him there was an untamable drive for everything concerned with technology, because even as a child, he felt or rather he knew, that a future war would be won by the side that was technically superior. Thus, even in the cradle, he used his rattle as artillery, his nightstand as a command position, and he used a bicycle that his parents gave him not just for locomotion but to bring danger to other peace-loving cyclists.” The fictional business leader went on to rob foreign factories, kill his workers, and employ forced female labor—that he then refused to feed—in his household. He was given millions by the Nazi government, which he immediately transferred to Swiss banks. He was tried at Nuremberg but by mistake acquitted and restored to all his positions. The style of these fictional biographies seems to have been taken from the defense affidavit of the chief Krupp munitions engineer, Erich “Kanonen” Müller: “After a childhood full of hardship, an extraordinary technical talent, manifest at an early age, together with iron will launched him, after he had passed his examinations with highest honors, and had first proved his technical ability inside and outside of Germany, on a quick ascent in a promising civil service career with the German Reichsbahn. His change over to industry, to the Krupp firm, is not to be explained by the tasks he had carried out till then, nor was it caused by financial or political considerations. Only his technical talent is his recommendation and the impulse to prove himself in a field completely new to him. [ . . . ] There was, for him, no general economic, no commercial and financial, no military and tactical, but only technical problems.”3

Figure 6.2 George Harcourt portrait of the Krupp family, 1930. Courtesy of Historical Archives Krupp.

ROOM FORM ANEUVER

Recently, in the aftermath of international debates about restitution and the responsibility of business in totalitarian regimes, a great deal of historiographical debate has concentrated on the extent to which businessmen had choices or a freedom to maneuver in the Nazi era. Many modern interpretations of National Socialism have taken what is sometimes called a “voluntarist turn” in emphasizing that the functioning of dictatorship depended not so much on direction from above as on a myriad of individual acts of complicity, which were sometimes motivated by ideology and sometimes by opportunism. Such a view can clearly also be applied to business history. Property rights were largely preserved under the dictatorship, and it has in consequence been argued by some historians that business decisions were not politically directed or determined. According to Christoph Buchheim and Jonas Scherner, for instance, state procurement authorities relied on conventional contracts, which provided market-based incentives in order to attempt to induce the cooperation of industry. There was thus little open compulsion and little attempt even to follow the example of Rathenau and Moellendorff in the First World War and use raw-material allocations as a planning instrument to redirect resources in the national economy, although some aspects of First World War planning such as “contractual guarantees of adequate returns” were adopted again in the 1930s.4

The modern debate is only a new round in a controversy that goes back to the postwar Nuremberg trials and to the cases brought by the U.S. military authorities against individual businessmen. The judges in the Flick case largely accepted the defense argument that business was subject to compulsion, in striking contrast to the Krupp trial, where the conviction of Alfried Krupp and the Krupp directors rested on the notion that the business leadership had had some room for maneuver. At the Krupp trial in Nuremberg, Alfried Krupp’s attorney, Otto Kranzbühler, asked Albert Speer’s former chief of staff, Karl Otto Saur: “did a firm have the possibility to refuse an order placed by the Armament Ministry on the ground that they would not make enough profit on it?” Saur replied, “No, they could never make that argument. . . . If, however, they could prove that with the arranged price or fixed price they could not work, then we had to find a new basis for that firm, or we would have to leave that firm out of our orders.”⁵ But the structures of the arguments presented in Nuremberg go back even further. In the late 1930s, Krupp executives took the example of the First World War to show that at that time the company “had no longer been free in its investment policy.”6

The “voluntarist” account misses something important: the market economy had not really worked well in the Weimar Republic, especially in the case of the heavy industries that were central to German rearmament and were at the core of the Nazi vision of a reordered economy. The steel industry in particular was plagued by massive overcapacity, and it was inevitable that the memory of near bankruptcy in the mid-1920s and again in the early 1930s shaped the outlook of companies when orders began to flow once again. They looked to nonmarket processes that would affect the outcome of the economic process, and which might provide a mechanism for absorbing heavy losses. Rather than being driven by the search for massive profits (on which the Nazi state placed limits in terms of ceilings on dividend payments), companies were driven by the experience of massive losses. Even before 1933, the market was highly political.

The steel industry was a vital case, central to the state’s obsession with armaments, and the most obvious industry in which industrial power translated into military might. Buchheim and Scherner conclude that even in this case “Germany’s private steel companies were not prepared to expand capacity to meet the rapid increase in demand arising from the state’s rearmament program despite the high profits that they were earning.”⁷ Was there something more than profitability at stake? Was it the memory of bad experiences in the First World War, was it political reluctance, was it the outcome of a struggle between managers who used different business strategies as a tool to fight out their personal rivalries?

Historians, especially in dealing with the question of industry under National Socialism, have often naively assumed that business is simply driven by a quest for profit. The Marxist historian Tim Mason concluded: “It was easy for the huge armaments firms to prosecute their immediate material interests, but in the process the responsibility for the overall economic system was left . . . to the political leadership.”8 The accounts that see business as being driven by profit miss something vital to the German tradition, which distrusted profits. This long-standing skepticism was reinforced by the lessons of the depression. Capitalism became a target of general vilification. The Nazi propagandist Joseph Goebbels denounced it, explaining: “we are fighting not against capital, but against capitalism.”⁹ He defined capitalism as the misuse of productive goods and of money. But this view of capitalism was also that of, for instance, Alfred Krupp in the mid-nineteenth century. The Krupp enterprise was built on the foundation of twenty-five years of nonprofitability. By the early twentieth century, the company was a large bureaucratic institution, and bureaucracies are not driven by the profit motive. Already in the nineteenth century, commentators had often referred to the Krupp works as a “state within a state.” In some bureaucratic enterprises, individual employees and especially senior employees could use political levers and influence to extend their power. Krupp, however, in large part because the ages of the principal family members were, by chance, conveniently spaced for succession, maintained itself very explicitly and self-consciously as a family company. The family became a carapace against the intrusions of the state, but within this particular family there was a clash of different generations that opened the way to increased state influence.

Already in the Weimar Republic, political decisions were crucial in affecting economic outcomes: in subsidies, wage levels, trade policy, access to credit, as well as military contracts. Gustav Krupp had become a central figure in industrial politics in 1931, at the most critical moment of the economic crisis.

In 1933 everything was still highly politicized, but everything also very obviously changed. The end of the depression, the resumption of military demand, the new political order: from the point of view of the management of the Fried. Krupp AG, it was not easy to separate the new developments. There were two obvious and immediate issues for the company and its management: first, the extent to which Krupp should engage with the new regime; and second, a deep concern about avoiding the mistakes made during the First World War, when rapid expansion and a complete orientation toward military production had created a crippling problem of overcapacity.

Hitler emphasized the remilitarization aspect of work-creation measures. On February 8, 1933, he told the cabinet that “the next five years must be dedicated to the rearmament of the German people. Every publicly supported work-creation scheme must be judged from this standpoint: is it necessary for the restoration of the military strength of the German people?” But, characteristically for the conflicted and confused character of much of Nazi economic planning and policy making, just one day later, on February 9, he apparently accepted the fiscal argument that the speed of rearmament could not be further increased.10

REARMAMENT

Rearmament was important for Krupp, but at first more for political and psychological reasons than for commercial ones. At a supervisory board meeting of January 1936, Gustav Krupp gave figures for direct military orders as being only 9.3 percent of Krupp sales, and indirect military orders 10.8 percent. This proportion was still well below the pre-1914 levels of armaments production. But as in the nineteenth century, armament orders had more than a purely quantitative significance for the company’s management; they were a way of proving the company’s worth and establishing an entrée with the government. The annual report for 1934/35 nevertheless stated: “For the first time after years of interruption we have carried out substantial contracts for the German Wehrmacht and with that have returned to the honorable tradition of our house.”11

By 1933/34 Krupp had already returned to profitability, though not initially primarily as a result of military demand. Until 1935 the Gussstahlfabrik, which was the heart of the Krupp tradition, supplied relatively little in the way of armaments. The order book in March 1933 was slightly below that of September 1932, but then a substantial recovery began. Orders for trucks increased, in large part as a consequence of the new government’s concern with motorization and its lifting of the heavy rates of taxes on automotive transportation. A large number of the trucks went to the military. Production for “KM,” or war materiel, was 8.1 percent of the Gussstahlfabrik activity in 1932/33 but almost double that, 16.1 percent, in 1934/35; if semifinished products and trucks supplied to the military are included, those proportions go up to 12.7 and 25.0 percent.¹²

The company also took important symbolic steps in the direction of a new armaments economy. In 1934 Krupp participated as one of five large German firms in the establishment of the Metallurgische Forschungsgesellschaft mbH or Mefo (the others were Vereinigte Stahlwerke, GHH, Siemens-Schuckert, and the Deutsche Industriewerke Spandau AG). The aim was to create creditworthy signatures that would allow the Reichsbank to discount armament bills.

In the summer of 1934, the Army Procurement Office (Heereswaffenamt) gave the Gussstahlfabrik a relatively modest but symbolically important contract for eighty heavy howitzers and eighty-six 10 cm heavy artillery pieces. In 1935 Krupp obtained contracts worth RM 6.6 million from the Reichswehr and RM 8.2 million from the navy. As before and during the First World War, naval orders were especially important for the problematic Germaniawerft, which had long been the company’s financial Achilles’ heel. In the early 1920s, Otto Wiedfeldt had urgently demanded its closure. Gustav Krupp had been contemplating a sale of the shipyard since 1925. In January 1933 he started negotiations with the commander in chief of the navy, Admiral Erich Raeder, over the question of subsidies.13 In March 1933 the talks began again in the new political circumstances. Gustav Krupp opened with the frank observation that he wondered whether he could carry the losses of the Germaniawerft for much longer, and argued that the Germaniawerft was getting much less of the repair business that was crucial to surviving the economic downturn than rival shipyards in the North Sea ports of Bremen and Hamburg. He asked whether he could have a list of the naval orders that might be expected over the next years so that he could be more certain about the prospective level of activity, but succeeded only in extracting an offer of the navy’s “serious interest.”14 The problem with the threat of selling the shipyard was: who could possibly be interested in buying the Germaniawerft? Only a rival shipyard with an interest in capacity reduction and rationalization would be able to make a commercially viable purchase, but this would lead to reduced competition and increased prices for naval equipment. The navy consequently emphatically did not want a merger of the Germaniawerft with the partly state-owned Bremen company Deschimag (Deutsche Schiff-und Machinenbau AG), and appealed to Krupp to drop plans for a sale. But the Germania werft only began to benefit from submarine and destroyer orders in August 1934. On July 15, 1935, the first submarine was launched at the Kiel shipyard. The yard eventually won the prestige victory of having produced Germany’s most famous submarine, the type VII U-47, constructed from 1937 to 1938, which under the command of Günther Prien sank thirty Allied merchant ships as well as the British battleship Royal Oak.

One of the Krupp directors, Ewald Löser, later asserted that the navy in effect took over the Germaniawerft in 1937/38.¹⁵ But the process of increased navy influence was in reality a rather gradual one, in which the company lost influence in the course of increasingly bitter clashes over procurement policy. In 1937 Krupp appointed Admiral Heusinger von Waldegg, who had just retired from the Supreme Command of the Navy (OKM), to the supervisory board of the Germaniawerft. The hope was that a sympathetic appointment might resolve the clash over the forced pace of production of five destroyers, which were delayed in part because Blohm & Voss was dilatory in the supply of the boilers and turbines. Within a few months, the company was taken by surprise by new state demands. In February 1938, Hitler ordered an accelerated building of the cruiser “J,” which was eventually launched as the Prinz Eugen at the high point of the Sudeten crisis in August 1938. But after these ships were produced, there were no new naval orders, and the management needed to look for commercial shipping orders so as to maintain employment levels. Then finally, on February 7, 1939, the OKM dictated the whole production program of the Germaniawerft. From the perspective of the Essen management, the whole process was extremely frustrating. The experience of the Germaniawerft seemed no better than it had been in the desolate days of the Weimar Republic. In 1940 Löser reported that the Germaniawerft had produced no profit, even after 1935.¹⁶

Figure 6.3 A submarine launching at the Germaniawerft in Kiel, c. 1940. Courtesy of Historical Archives Krupp.

The problems that crept in with military work lay not just with the Germaniawerft and shipbuilding: the company was suspicious of other military orders as well. Both for naval and army orders, Krupp tried to look for some direct participation of government agencies in the cost of investment. It was reluctant to sink investments into what might be nothing more than a flash-in-the-pan remilitarization. At the supervisory board meeting of January 1936, Gustav Krupp spoke of external pressures that were causing increased difficulties: for instance, the government was pressing for a new crankshaft factory outside Essen for making aero-engine parts. The new factory was eventually constructed near Hamburg at Reinbek, but Krupp put in only 7 percent of the capital, and the investment was financed mostly through the Air Ministry. The E-Programm of 1937 required new production halls for naval artillery and armor, as well as for army tanks. Krupp emphasized in the negotiations that “on commercial grounds we cannot see the lasting need” for the additional capacity. Most of the cost of the program—some RM 88 million—was borne by the government.17 In the 1937 P-Programm, the second Mechanical Workshop of the Essen Gussstahlfabrik went over directly into the control of the Heereswaffenamt (Army Procurement Agency). The Supreme Command of the Army (OKH) and OKM also directly provided machinery for the Germaniawerft and for the manufacturing of torpedo tubes, shells, and armored cars in the Magdeburg Grusonwerk.

A way of trying to balance the increased significance of military orders and the uncertainty about future development lay in the old company strategy of cultivating global markets. Krupp tried to maintain its share of output going into exports. The proportion fell to 10 percent in 1935/36 but then started to recover. Between 1933 and 1939 the seven most important importers of Krupp products were the Netherlands, Italy, Japan, South Africa, Turkey, Switzerland, and Brazil. In July 1939, of RM 70.9 million earned from Turkish contracts, only 4.1 million were for railway equipment, but 34.6 million were for “war materiel.”18 Nevertheless, the exports were widely diversified: in the late 1930s, for instance, Krupp was supplying steel for the construction of the Bank of China.

Was this looking to export markets a defiance of the orders of the controllers of the German economy? Far from it. In 1938 Göring issued some of his most extravagant threats against the Ruhr industrialists in a meeting in which he was pressing the coal and steel men to export more in order to acquire the scarce foreign currency that Germany required in building up its military potential. According to one of the participants at that meeting, Göring argued “that German business has grasped the seriousness of the situation as well as he. If, nonetheless, his goal is not reached, then he will have no alternative to appointing a state commissioner to direct the economy and equipping him with all powers, including to seize specific sectors of business that in his judgment cannot do what the state must demand of them.”¹⁹ The company made a point of publicizing the geographic extent and dynamism of its export business.²⁰

The problem with trying to follow state, military, or, for that matter, party directions was that they were all wildly inconsistent and changed over time. At times, the government was calling for a concentration on military orders, at other times on exports. Any choice could be politically compliant—or, if the winds changed, politically dangerous. The confusion irritated many business leaders. At the outbreak of the war in 1939, Adam Tooze argues, “after three years under the haphazard steel rationing system, these firms had built up a head-steam of frustration that now vented itself on the army procurement office.”²¹

Figure 6.4 Ruhr steel industry profits (RM), 1933–40.

The irritation was doubtless born of financial pain. In the first years of rearmament, profits had surged. On a share capital of RM 160 million, the company made profits (according to its tax balance sheet) of RM 97 million in 1937/38, extraordinary levels that seemed to recall the high levels during the Wilhelmine naval expansion. But after 1937/38, profit levels fell off sharply, in the next year by 38 percent, and by 1939/40 they were only 21 million or 22 percent of the 1937/38 peak. The picture was similar at the neighboring GHH, where in the years after 1937/38 profits were 55 percent and then 44 percent of the peak levels, though in Hoesch profitability continued to rise.22

The rise and fall of profitability did not correspond directly to the political stance of the company, its owners and its management. In that sense, the simple argument that financial incentives determined the political orientation of this business is clearly inadequate.

POLITICAL GLEICHSCHALTUNG

Gustav Krupp was not a supporter of National Socialism before 1933. He remained a man of the late Wilhelmine era, uncomfortable with modern mass politics. He found Hitler and his movement too radical, too populist, and too socialist. And he was happy to leave political activity to his cultivated and intelligent brother-in-law, Tilo von Wilmowsky, the grandson of one of Wilhelm I’s last advisers and the son of the head of the Chancellery Office under Wilhelm II. Indeed, until Gustav Krupp became head of the industrial confederation Reichsverband der Deutschen Industrie (RDI) in October 1931, he tried to maintain a distance from any political activity.

Gustav Krupp had consciously avoided the session of the Düsseldorf Industrieklub on January 26, 1932, when Hitler, dressed stiffly and formally, gave a surprisingly reserved and moderate performance. Fritz Thyssen, a second-generation steel magnate, invited Krupp in October 1932 to a meeting with Hitler, but again Krupp refused to meet the demagogue. Krupp also declined to support Franz von Papen on January 7, 1933, in a meeting in Friedrich Springorum’s house in Dortmund, as Papen was preparing plans to share power with the National Socialists. But at this point Papen was talking of a cabinet of “national concentration” and believed that Hitler had abandoned his claims to the chancellorship. Krupp missed the subsequent intrigues, as he was on holiday (and then fell sick) in Campfer in the Swiss Engadin, but he was kept informed by letter and telephone by the general manager of the industrial confederation RDI, Ludwig Kastl. Kastl wrote on January 26 that Papen was planning a “Bombenkabinett” with Hitler and Schacht but that a continuation of the Schleicher government would be preferable from the standpoint of industry. Von Wilmowsky also pleaded for the Schleicher solution. On January 28, after telephoning Krupp, Kastl and Eduard Hamm of the Federation of Chambers of Commerce (Deutscher Industrie-und Handelstag) wrote to President von Hindenburg’s state secretary, Otto Meissner, that the economy needed political calm and stability.23 On February 1, after the new government was formed, Gustav Krupp wrote: “I can only with difficulty come to terms with the new turn of events. I fear, that as [Krupp’s son] Harald expresses it, the mixture of hydrogen and oxygen will be explosive.”²⁴ Henry Turner rightly speaks of “a widespread myopia on the part of Germany’s big businessmen.”²⁵ Gustav Krupp did not appreciate the extent of the vulnerability of the economic and political system of Weimar, or the power and radicalism of the populist impulse. But the terms of the Nazi New Order soon became clear. After Hitler had been appointed chancellor on January 30, the tone of government-industry relations changed dramatically. Papen continued to press for business donations in order to strengthen the nationalist and non-Nazi wing of the government coalition and thus provide a counterweight to Hitler, and he turned directly to Krupp. But Krupp refused, citing his position in the Reichsverband, and instead asked that another Ruhr steel magnate, Fritz Springorum, organize the collection of funds for Papen’s “black white red front” in his place.²⁶ Kastl in particular was outraged by the Nazi threats and violence, and wrote an extraordinary letter to Krupp in which he conjured up the likelihood of civil war: “What is happening in Prussia in the police and administration will have bad consequences. I find it terrible. The electoral terror and the fighting are unworthy of a civilized people. . . . There are continually the most terrifying rumors. In Munich yesterday I was informed from all different sides that there would be a putsch in the evening. A speech of Hitler, a torchlight procession, shooting, the imposition of a reich commissar, the calling of a monarchy. That is what comes from the threats of the interior minister. . . . The business with the monarchy is not over, because it is hoped in this way to break the power of the Nazis.”27

On February 20 Gustav Krupp, with over twenty other leading businessmen, was summoned to a meeting at Hermann Göring’s official residence, kept waiting for some time, and then subjected to an hour-and-a-half-long harangue by Hitler. Hitler was vague about any policy specifics but emphasized the importance of private property and the “fight against bolshevism,” and announced that Germany was about to have its “last election.” Krupp, as chairman of the RDI, gave no substantive reply, merely a polite expression of thanks. But his remark that “it is high time to at last reach clarity in domestic political matters in Germany” could be interpreted as support for Hitler (the statement is in fact ambiguous, and might have also been taken as support for the Papen position).²⁸ After Hitler’s departure, Göring spoke again about the forthcoming election, and Schacht then pithily asked the “gentlemen” to pay up.

It was at first because of his position in the RDI, rather than because of the importance of Krupp as a military supplier, that Gustav Krupp was highly vulnerable to political pressure. In the election of March 5, 1933, the Nazis obtained 43 percent of the vote and consequently fell short of an absolute majority. Shortly after, on the day on which Hitler finally announced the government program, which was generally well received by business in that it renounced radical experiments in autarky or with the currency, a meeting of the RDI’s presidium took place. Kastl had been highly alarmed: he found his connection with the conservatives in the new government, Finance Minister Lutz Graf Schwerin von Krosigk and Economics Minister Alfred Hugenberg, increasingly strained. Only Hugenberg’s state secretary in the Economics Ministry, the Nationalist Paul Bang, seemed a reliable support for the business viewpoint. Kastl was alarmed about the financial recklessness of the government. As he said in a letter to Krupp, “the measures are somewhat unplanned and in any event will cost money. In this way the currency can shake.” The idea of a devaluation of the currency, which had allegedly been propagated by Schacht, had been denied by the new government, but Kastl had doubts, and added that “such a measure would be the worst for us.” And at the end of the letter he added a political comment as well, to the effect that “when six-and seven-year-old boys and girls go around shouting ‘Juda verrecke’ [the Jew must die] that is terrible!”29 At the meeting of the RDI on March 23, Fritz Thyssen, the nationalist and embittered scion of one of the great entrepreneurs of the Wilhelmine era, who felt that the other leading businessmen were out of touch with the new spirit of the age, now launched into an aggressive denunciation of liberalism, the republic, and also the leadership of the RDI. He specifically attacked Gustav Krupp for conspiring with trade union officials against the new government; and he demanded that the leading figures of the RDI should resign to make way for men who were more in line with the national movement.30 After the meeting, Thyssen continued aggressively to denounce business leaders with whom he had quarreled, and indeed threatened opponents that he would use his powerful influence in the new state.³¹ He then fell out with Hitler because the regime took little notice of his plans for the creation of a corporate state and because he was worried about the regime’s militarism; and he allowed a ghost-written book to be produced on how “I paid Hitler.” But he continued to denounce: in his view, for instance, Gustav Krupp had turned himself into a “super Nazi.”³²

In fact, some business leaders trusted Krupp sufficiently to try to involve him in a protest against Nazi policy. After the April 1933 anti-Semitic boycott of Jewish-owned stores and businesses, the Hamburg bankers Max Warburg and Carl Melchior, along with the former state secretary in the Finance Ministry, Hans Schäffer, approached Krupp as well as Carl Friedrich von Siemens and the electrical manufacturer Robert Bosch, and asked them to sign a memorandum laying out the deleterious economic and business consequences of the regime’s anti-Semitism. But the memorandum was never sent, and does not appear in any government files.³³

Krupp and Carl Friedrich von Siemens arranged to see Hitler on April 1, but by that time the attack on the RDI and its leadership was already in full swing. Hitler’s economic adviser Otto Wagener led a group of strongmen into the RDI building and demanded the immediate dismissal of Ludwig Kastl for having negotiated and supported the Young reparations plan, as well as the dismissal of Jewish employees of the RDI. He also called on Jewish businessmen to step down from the presidium of the RDI. Krupp began to negotiate about the dissolution of the RDI and its replacement by a corporatist and politicized interest organization. He also agreed to the dismissal of Kastl, although the presidium’s members voted overwhelmingly in protest against Krupp’s acquiescence. But even the protesters recognized that “political opposition would, for an economic association, be utter madness.”34 Kastl was replaced by his deputy, Jacob Herle, but within a year Herle too was forced out by the party after accusations of financial misconduct relating to political payments in 1932.

Krupp stayed on in the Reichsverband, but after the February 27, 1934, “Law on the Organic Construction of the German Economy,” which aimed at replacing the business associations by hierarchically structured groups, he became increasingly uncomfortable. He would have stayed as führer of Principal Group I (Industry), but in April 1934 asked Economics Minister Kurt Schmitt to be relieved of his position on health grounds, arguing that a younger and more energetic man could make more of a contribution to the construction of an organic and corporatist state.³⁵

THE KRUPP WORKFORCE

The Nazi attack led to changes not just in the RDI but also in the Krupp enterprise. Several members of the Krupp supervisory board were attacked by the Nazis as being Jewish. Anti-Semitism was not the only motive in play: a reorientation away from bankers and bank influence seemed inevitable, as the role of banks in German life was reduced in the aftermath of the economic and financial crisis. Kurt Hirschland stayed in the United States after a business journey in 1933. Jakob Goldschmidt, the discredited head of the failed Darmstädter Bank, was pressed to resign in January 1934. Samuel Ritscher of the state-owned Reichskreditgesellschaft, a highly respected banker, emigrated in 1936. On the other hand, Arthur Klotzbach was reckoned by the Nazis as half Jewish but remained in the Krupp directorate until his death in September 1938. Klotzbach’s son also continued to work for Krupp.

The most highly placed Jewish casualty of the Nazi revolution was the director of the research laboratory, Benno Strauss, who had been principally responsible for the development of nonrusting steel and for the very significant hard metal (Widia) production. In the late summer of 1934, he was attacked by the deputy director of the laboratory, Adolf Fry. At the same time, Fry also denounced three younger and dynamic Krupp managers, Paul Goerens, Heinrich Korschan, and Edouard Houdremont, all of whom would later play a prominent part in the Krupp story. Fry used Nazi arguments and language in his attacks, presenting Strauss as Jewish, and Houdremont and Goerens as foreigners who were thus undertaking “high treason.” Korschan was merely “suspected of untrustworthiness.”36 The reaction of the firm’s owner was to attack the denouncer, not the denounced. Gustav Krupp dismissed Fry without notice: in the letter of dismissal, he stated: “Your accusations have been examined in detail. It became clear that they have no proof or substance. In your actions you have not only damaged the reputations of the gentlemen concerned in the most serious way, but you have also endangered the reputation of the company. We thus dismiss you from our service with immediate effect.”37

Fry later moved to a state laboratory, the Chemisch-Technische Reichsanstalt, Berlin. Of the men he accused, only the person he denounced as Jewish had to suffer any consequences, but that aftermath was a terrifying one. Strauss was pushed into premature retirement, one year before the end of his contract, with effect at the end of 1934, though he was paid for a further year. He was celebrated at his retirement, which was handled with great dignity, and he was presented with a globe made of nonrusting steel, perhaps a symbol of both Krupp’s technology and of its internationalism.³⁸ But ultimately he was forced out of the business on racial grounds. He was interned in the war and died on September 27, 1944, in a labor camp. Houdremont responded to Fry’s attack by taking out German citizenship. Gustav Krupp on the one hand quite bravely resisted the politically inspired denunciations of an ambitious company employee, and he ensured that Strauss suffered no financial disadvantages; but equally he gave in to pressure to remove Strauss from the company.

Within the company, the provisions of the Weimar settlement, in which there had been an organized representation of labor in the Factory Council, were also changed. A new Works Council was elected on March 24, 1933. The communist candidates were banned (in 1931 they had obtained 22.4 percent of the vote), but socialist union representatives won 37.4 percent of the vote and Christian trade unionists 31.7 percent. The NSBO (National Socialist Factory Cell Organization) fared rather poorly, with only 24.7 percent of the vote. Two weeks later, after a law on works councils had been promulgated, the NSBO simply removed the socialist representatives from the main council. On August 29, finally, the Düsseldorf regional authorities removed all socialist and Christian labor representatives.

The Krupp management tried to reconcile the new Nazi labor activism with the old Kruppianer traditions of a workplace community dedicated to the common good. Nazi politicians also liked to cite Krupp favorably as an exemplar of the German style of business. In 1935 the Reichswirtschaftskammer selected Krupp as one of the factories to show journalists as being most successfully “engaged in mental resistance to industrial undertakings as bearers of capitalist tendencies.”39 In 1937 the Nazi trade union organization German Labor Front (Deutsche Arbeitsfront or DAF) honored Krupp with an award for exemplary training of apprentices.

The Nazi revolution coincided with a general renewal of the high-level management. Klotzbach, the leading figure in the directorate of the late Weimar Republic, stayed on (although he was considered as half Jewish under Nazi racial law), but new managers were added in order to deal with the new politics of labor in the company. Paul Goerens, a metallurgist, was appointed as “führer” of the Essen works, but he did not really behave in the style of a general director, and his tasks were more symbolic in dealing with the NSBO and the “Vertrauensrat” (Council of Confidence) that in 1934 replaced the Works Council.

When the member of the Krupp directorate responsible for finances, Wilhelm Buschfeld, died in October 1936, Gustav Krupp initially tried to replace him with Carl Goerdeler, the mayor of Leipzig who had in 1934 been selected as price commissar but who was increasingly at odds with the regime and seemed a perfect link to the conservative nationalist opposition to Hitler. Krupp had already asked Hitler in person about Goerdeler in June 1936, but in February 1937, after an intervention of the Essen party authorities, Hitler’s adjutant informed Krupp that “the Führer would not welcome the appointment of Mayor Goerdeler to the executive board of the Fried. Krupp AG.”40 But Krupp still had a plan for Goerdeler, and with Robert Bosch financed his journey around western capitals in order to widen his range of contacts.

Gustav Krupp then asked von Wilmowsky and Carl Goetz of Dresdner Bank for advice, but most of all listened to Goerdeler himself, and so appointed the man who had been deputy mayor of Leipzig under Goerdeler, Ewald Löser, to the executive board of Krupp, despite some skepticism on the part of Goetz. Like almost all his predecessors as chief executive, Löser came from outside Krupp. He had no experience in heavy industry, and after leaving his position in Leipzig had been the director of the Berlin Hotelbetriebs-AG, a career path that attracted comment and even ridicule, not only from ideological Nazis, but even more from the tight fraternity of Ruhr businessmen. Löser saw himself very much as a figure shaped by his association with Goerdeler. He took particular care to obtain assurances from Krupp that “he would not be obliged to let the firm’s policy be influenced by party political considerations.”⁴¹

The most dramatic change was that a member of the family was brought back into management for the first time since the death of Friedrich Alfred Krupp. In 1938 Gustav Krupp appointed his eldest son, Alfried, then aged thirty-one, as a member of the executive board in charge of mining, war materiel sales, and artillery construction. He had already been an alternate director since 1936. With Alfried Krupp and Ewald Löser as directors, the stage was set for a clash of cultures. Löser came out of the old-style world of German conservatism and nationalism, while Alfried thought of himself as being much more in tune with modern and more radical politics. Conflicts looked inevitable, for exactly the same reasons as Alfred and Friedrich Alfred had in the past struggled with the company’s management over how rapidly the company should grow, how expansion should be financed, what sorts of technical initiative were appropriate. But the character of the political regime and the political environment produced by National Socialism ensured that such clashes would be much more violent and disturbing.

FINANCING

In the late 1930s, Gustav Krupp was worried that the costly mistakes—overinvestment and overexpansion—that the company had made during the First World War might be repeated. Instead he preferred to accumulate reserves. By contrast, Löser pressed to use accumulated profits to finance the expansion of the works. Krupp set a ceiling of RM 30 million for borrowing and became increasingly cautious. In 1939 Löser set out a business plan for growth to establish a company that would be competitive at the end of the armaments boom. It required investments of some RM 250 million, but Gustav Krupp subsequently cut back on the management’s proposals.42

The financing of investment was in general a controversial question in the aftermath of the depression and the collapse of capital markets. Beyond investments that could be financed through the plowing back of profits, or very specific military projects that were taken directly into the army or naval budget, the possibilities for raising money through bond issues was limited. The government did not want private companies to drive up interest rates by flooding the market with debt instruments.

In 1936 Krupp put together a 4.5 percent bond issue of RM 53.8 million, which did not represent new borrowing but simply a conversion of the 1927 bond issue to take advantage of the fall in interest rates in the 1930s. Two of the company’s traditional bankers, Deutsche Bank and Mendelssohn, were skeptical about the coupon, since this was the rate usual for state bonds and most industrial bonds were paying 5 percent. The Krupp finance director insisted that the lower coupon was a nonnegotiable matter of prestige.

In 1939 a new 4.5 percent bond issue of RM 40 million required considerable negotiation with the government authorities, as the Reichsbank had imposed a stop on new issues. The Reich Economics Ministry had initially given priority to bond issues by the Rheinisch-Westfälisches Elektrizitätswerk and the Gutehoffnungshütte. Löser argued the Krupp case on military grounds: Krupp was preparing to build a plant in Upper Silesia that would be protected against aerial attack. In order to acquire the necessary permission, Gustav Krupp needed to intervene personally with the director of the Financial Department of the Economics Ministry, Kurt Lange.43

Most of the major investment projects fitted in with the autarkic goals and visions of the Nazi regime. One of Hermann Göring’s major worries during the armaments buildup was Germany’s vulnerability because of its dependence on the easily interrupted supply of Swedish iron ore. The government’s response was the development of the Salzgitter Hermann Göring Werke, which was intended to mine and smelt domestic, low-grade iron ore. The opposition to the Salzgitter project from the Ruhr was intense, but it was led by the Vereinigte Stahlwerke rather than Krupp. Krupp actually worked hard to accommodate the regime’s new priorities. The long-term research efforts of Krupp in the 1930s included the pyrotechnical refining (Renn process) plant in Essen Borbeck for the utilization of siliceous ores. In 1936 Krupp agreed with the government on investment in the Fischer-Tropsch process for the production of synthetic fuels.

The new investments were costly, and they lowered Krupp’s returns, producing the major profit squeeze of the late 1930s. By 1938 the company, in a brilliantly argued memorandum drawn up by Johannes Schröder, a relatively young man who had come from Dresdner Bank to take a position as an assistant to the finance director, complained bitterly that it was earning a return that was less than the interest paid on Reich bonds.44 Schröder began with a historical account in which he tried to show Krupp as a victim of its patriotism. In the First World War, the company’s investments had been planned by the state. After the collapse of the empire and the institution of the Versailles Treaty, “the owner of the company had decided in the interest of an eventual rearmament of Germany to keep all the workers, the workshops, and the accumulated expertise.” Coming to numbers, Schröder argued that the value of the company had been grossly understated: it was RM 219 million according to the tax accounts, RM 67 million in the assessment for the wealth tax, but only RM 17.7 million in the commercial accounts. In addition, Schröder made the improbable claim that the firm’s machinery was hardly used between 1919 and 1933 because of the constant economic crisis. By increasing the calculation of the company’s value in this way, Schröder reached a figure of RM 390 million in 1933, and then pointed out that RM 22 million of profits were used to upgrade or replace antiquated or worn equipment. In consequence, he could produce the amazing figure of 1.74 percent as the company’s rate of profit between 1934/35 and 1936/37. One final argument concerned foreign exchange earnings from exports, which appeared to Göring’s planners as increasingly vital so that Germany would be able to import strategically needed raw materials. Between 1933 and 1938, Schröder showed, the company had earned RM 300 million in foreign currency, RM 127 million of which came from exports of coal and coke. This was a sum equivalent to the trade deficit of the whole of Germany in 1938! In short, even if the Göring office was unwilling to swallow the improbable accounting, Germany and its armament program could not do without Krupp.⁴⁵

Figure 6.5 Geographic distribution of Krupp exports, 1933–42. Courtesy of Historical Archives Krupp.

The negotiations with the military procurement authorities that followed this realization produced a new method of calculation, which allowed a substantially increased depreciation margin. The March 1939 decision of Göring’s office was the single most important contribution to the subsequently increased profitability of Krupp, and it was explicitly motivated, according to a notification from the government agency, by “the particular contribution of your enterprise to the development of heavy weapons, your contributions to metallurgy, and your willingness to supply the results of your research to other producers.”46 As a consequence, the profits from 1934 to 1938 were raised by RM 30.7 million, and from 1939 to 1945 the new calculation basis contributed RM 260 million to Krupp’s profits.

The statement from the Göring office about its motivation also reflects the view that Krupp was functioning best as a quasi laboratory in which new and innovative products could be developed, rather than as a mass producer of the goods required for German rearmament. Krupp techniques for making nonrusting steel were passed on to two other producers in order to secure high-volume production. Such outsourcing of production led to intense anxiety in Krupp. Widia tools, and also Widia used in shells, proved substandard when made elsewhere, and Krupp at the instigation of the OKH recentralized production. Alfried Krupp in particular urged production in big series, and the adoption of American business practices.

The expansion of weapons production also raised the question, which became much more acute after 1939, of the adequacy of energy supplies. Krupp bought in 1937 the Rossenray coalfield on the left bank of the Rhine but never developed the deep pits that would have been needed to realize its potential.

Figure 6.6 Hitler congratulates Gustav Krupp von Bohlen und Halbach on his seventieth birthday, Villa Hügel, August 1940. Courtesy of Historical Archives Krupp.

All in all, there was considerable balance in a strategy that continued to place importance on the global market, and which saw opportunities in the industrialization and import-substitution strategies adopted by many non-European as well as European countries in the 1930s. The furnaces for refining low-grade ore constructed in the Gruson works were a major export success: they were sold in Czechoslovakia, Spain, Korea, Japan, and Manchukuo. This was an anticipation of Krupp’s corporate course of the 1950s and 1960s, which emphasized the selling of large-scale industrial equipment to countries embarking on industrialization.

WAR AGAIN

On September 1, 1939, Germany invaded Poland, and unleashed a new world war. As the conflict went on, the government’s willingness to tolerate hesitance or debate over munitions orders decreased, and disputes over priorities rapidly turned into accusations of incompetence and treason. But the radicalization of the state also in general increased the pains that businesses took in cultivating their political relations. The larger the state becomes, and the less cohesive economic policy-making is, the greater is the attention paid by business leaders to capture political as well as economic rents.

But in the case of Krupp, it is not clear that individual directors and managers were looking out for the overall position of the firm as much as carving out individual empires. They chose different and conflicting strategies. During the war, Löser in particular became the focus of increasing controversy, in part because of his business style, in part because of his politics. In 1941 he tried to appoint his brother-in-law Erich Thiess as the head of the internal audit office. This attempt to build up an internal power base could easily be interpreted by his opponents as cronyism. When put together with Löser’s political stance, such maneuvering made for a great vulnerability. In 1942, after “Berlin offices” had commented on Löser’s critical remarks about party interference, Krupp reminded Löser that “only support of the Führer is possible; there must be no doubts about this, and no remarks that may be misunderstood.”47

In 1941 the executive board was unchanged, but six new deputy directors were added: they included Edouard Houdremont, who was in charge of central steel operations; Erich Müller, in charge of artillery; and Fritz Müller in mining. Erich Müller, generally known as “Kanonen-Müller” in order to distinguish him from Fritz, had played a decisive role in the reordering of the war economy in 1940. He achieved fame as the pioneer of the prestigious ultraheavy artillery project that produced “Dora,” the 80 cm cannon that was used only once in the course of the war, in the siege of Sevastopol. Müller took a conspicuously different political path from that of Löser. Hitler had become incensed when he saw the low figures for munitions output in the early weeks of 1940, and summoned the architect of the Autobahn network, Fritz Todt, as well as a range of business figures including Erich Müller. On April 8, 1940, in a conversation with Hitler during the course of a train ride, Müller argued passionately against General Karl Becker of the Army Procurement Office, and added insinuations about the general’s personal life. There was also a reprise of an earlier scandal, as one of the complaints of the Krupp company against Becker was that he had been pressing Müller to work closely with the denouncer Adolf Fry from the Chemisch-Technische Anstalt.⁴⁸ The business leaders wanted to replace the army munitions regime with a state institution headed by somebody like Todt, who would be closer to businesss. Todt was indeed appointed to head a new Ministry of Munitions. Relations between the new ministry and the house of Krupp immediately showed a substantial improvement over those that had prevailed in the last years of peace. In November 1940 Müller was appointed by Todt to chair a new committee (Sonderausschuss “X”) to oversee guns and artillery production.⁴⁹

Figure 6.7 The heavy railcar-mounted cannon “Dora,” c. 1941. Courtesy of Historical Archives Krupp.

While the Krupp managers took different paths, the owners started to worry as much about the family position as about the financial position of the company. Gustav Krupp feared the tax implications of the death of the company’s owner, Bertha Krupp, and consequently thought of altering the legal status of the enterprise. He had become an increasingly isolated and remote figure, more and more distanced from the actual conduct of business. His own health was faltering; he had a series of strokes and largely withdrew to Schloss Blühnbach, his mountain estate near Salzburg. Klöckner and Friedrich Flick advised against creating a family foundation. At the instigation of Gustav Krupp, Alfried Krupp began negotiations on the Obersalz berg with the Führer’s secretary Martin Bormann; and Krupp wrote to Hitler on November 11, 1942, that his personal experience confirmed “that the concentration of responsibility in a single head, especially in critical times, of which I have experienced several, cannot be valued highly enough.”50 Hitler was highly sympathetic to the request, and ordered the head of the Reich Chancellery, Hans Heinrich Lammers, to draw up a draft decree. On November 12, 1943, a Führer decree (which became known as “Lex Krupp”) specified that “the owner of the Krupp family wealth is empowered to create a family enterprise with a particular regulation of succession.” A final clause of the decree allowed interventions by the justice and economics ministers. On December 15, 1943, a family statute was worked out, and on December 29 the Fried. Krupp AG was converted into a simple company, whose principal owner, Bertha Krupp, immediately nominated her eldest son, Alfried, as her successor and transferred her shares in the company. In addition, a family council was put in place, as well as regulations for compensation and a family fund for Alfried Krupp’s brothers and sisters.

The new ownership structure had an immediate impact on the company’s management. Alfried had found relations with Löser increasingly strained. He thought Löser to be vain, ambitious, arrogant, and deceptive, and presented him as “unsocial” and “capitalist in the bad sense,” as he had rejected the idea of building workers’ accommodation for the new wartime employees. Löser in turn believed that Alfried was too influenced by Nazi ideology and had too many “dubious friends” in the party and in the office of the head of the German Labor Front (Deutsche Arbeitsfront), Robert Ley.51 Löser left the firm once it ceased being an AG, and Alfried took the position of chairman of the executive board.

Alfried Krupp indeed cultivated his political links, but without much energy or enthusiasm. As a student, he had already joined the SS in 1931 as a “patron.” On the other hand, it was only when he was already a member of the Krupp board that he joined the party, in 1938. When Albert Speer met Alfried for the first time, on May 28, 1942, he was immediately impressed and concluded that the young Krupp should join the central industrial munitions council and also that he should become deputy chairman of the Iron Association. Göring however preferred another candidate, Hermann Röchling from the Saar, who was playing a major role in the integration of the French economy into the German war effort. And Speer rapidly found that Alfried Krupp was in reality not a very effective presence in meetings and discussions. In 1945, after the German defeat, the British military authorities noted that “in spite of the many important posts which he now holds, on the boards of the firm’s subsidiaries as well as on those of external companies, very little has been heard of him. This appears to be due to lack of colour and initiative in his personality rather than to his youth.”52 This was Golo Mann’s verdict also: the last Krupp was not “evil, but was pretty much a nothing.”⁵³

Speer in the end found it easier to deal with other Krupp managers, in particular with Edouard Houdremont, the specialist for steel alloys who since 1940 had headed a group concerned with scarce metals and had worked on nickel and on using chrome and molybdenum as substitutes for the tungsten and nickel that Germany found it difficult and expensive to import. In November 1944, Speer noted: “The visit to Krupp produced the pleasant discovery that under the new director of Krupp, Herr Houdremont, a large part of the outmoded Krupp spirit has already vanished. Everywhere new young employees can be seen, who grasp the problems with more energy than up to now was the case.”⁵⁴

Did Alfried’s new position and his half-hearted search for political influence really make any difference to the firm’s strategy? With the outbreak of war in September 1939, the historian Werner Abelshauser considers that there was no more room for “entrepreneurial autonomy.”⁵⁵ The Gussstahlfabrik was subject to the directions of the Supreme Command of the Armed Forces (Oberkommando der Wehrmacht or OKW). But the problem was that the demands were continually changing. Hence the enhanced efforts of business to tip developments in a particular direction. The situation could be regarded as a classic problem of monopsony, but it was monopsony with a curious twist, what might be termed polycratically (dis)organized monopsony.

Procurement priorities were constantly clashing, and frequently altered. At the outbreak of war, 24 percent of armaments orders were canceled, because they had become obsolete in the wake of planning changes. In August 1939, the army tried to stop the continued Krupp production of civilian trucks. Krupp at first resisted, but at the beginning of 1940 a complete stop on civilian construction was imposed.56 Nevertheless, agricultural machinery was produced until 1942, although the number of types was reduced. The death of Fritz Todt on February 8, 1942, and the appointment of Albert Speer changed the conditions under which German business operated. In May 1942, directors of Rings and Committees (the new organizational structures of the Speer ministry) were instructed to carry out their duties “not by persuasion but by clear and sharp instructions and orders to industry.”⁵⁷ After heavy bombing attacks in June 1943, the Gussstahlfabrik was inspected by the Technical Commission of the Armaments Commission to ascertain the effectiveness of reconstruction. What the inspectors saw was chaos. At this point Speer and the plenipotentiary for labor Gauleiter Fritz Sauckel considered imposing a commissar to run the factory. From spring 1944, after heavy Allied bombing, the Gussstahlfabrik was placed under the direction of a special emissary of the Speer Ministry, but less and less could be produced there. In October 1944, after a new bombing attack, further production became impossible, and in any case Essen was by now effectively cut off from the rest of Germany.

Naval orders were especially problematic, just as they had been during the peacetime phase of rearmament. Löser had for a long time wanted to sell the Germaniawerft. Instead, in December 1941, the Krupp corporation bought 54 percent of the share capital of the rival shipyard Deschimag, which was partly owned by the state of Bremen and partly by the German government. But in 1943 Admiral Doenitz imposed a stop on the production of large ships in order to concentrate on the expansion of the submarine fleet. Deschimag took a substantial number of orders but increasingly lagged behind in fulfillment. The plant supplied only forty-three of the eighty-eight type XXI 1,600-ton submarines. Franz Stapelfeldt, the general manager of Deschimag, was arrested by the Gestapo in October 1944 after a visitation by Speer’s chief of staff Karl Otto Saur, and remained in prison until March 1945. As an outcome of the Stapelfeldt scandal, the Krupp management simply refused to take responsibility for operating Deschimag as a privately run naval shipyard: it was safer, it seemed, to leave the responsibility to the state.

Other Krupp acquisitions under the Nazi regime included the Austrian Berndorf silverware plant (the mid-nineteenth century creation of a much older Krupp concept of global markets) after the death of the chief representative of the Austrian branch of the family, Arthur Krupp, in 1938 and the Anschluss of Austria. In October 1939, Löser also made clear his interest in taking over a blast furnace and cokery in Upper Silesia. Hermann Göring wanted to push Krupp into taking over a Silesian steel works, in large part as a consequence of an attempt to shift some production farther east and away from the range of British bombers, but was reluctant to give Krupp any coalfields in the East. There were intensive negotiations with the Göring office over the Bismarckhütte, the most modern Silesian steel plant, as well as less enthusiastic discussions over the Laurahütte and the Falvahütte. But the state-owned Reichswerke Hermann Göring took the only suitable source of coking coal, the Dubensko mine; and in the end, in September 1941, Krupp abandoned the idea of a Silesian expansion. In the meantime, Friedrich Flick had ensured that opinion in the Göring office shifted against Krupp when he told State Secretary Paul Körner that Krupp directors had let it be known in the Ruhr that they were being “forced” to take over the Bismarckhütte.58

There were also Krupp acquisitions and engagements farther east, as the German offensive expanded into Soviet territory. Speer allocated the Azov work in Mariupol in Ukraine to Krupp, as well as an engineering firm in Kramatorsk and an agricultural equipment plant in Berdjansk to a Krupp trusteeship; but these plants were abandoned shortly afterward, in 1943, because of military developments. In 1942 Krupp also participated in the “Ivan Programm,” producing munitions and shells under license in the Donets basin.

The major theme of the midwar years was the attempt to shift production eastward, primarily for strategic reasons, in that the Ruhr was exposed to Allied bombing attacks, but also because the government was pressing Krupp to shift its character and make a transition to mass production as part of the mobilization for war. Such a transformation could occur much more easily on a green-field site than in the more chaotic conditions of the Gussstahlfabrik, which looked more like (and indeed was) a chance aggregation of historically accumulated craft workshops.

In the late 1930s, the naval command suggested the construction of a new plant for heavy naval artillery, away from the vulnerable Ruhr district. The site eventually chosen was a two-thousand-hectare area at Markstädt, near Breslau. On September 24, 1941, the Fried. Krupp Schlesische Industriebau GmbH was established as a joint subsidiary of the Fried. Krupp AG and the Afes (the Krupp holding company established in the 1920s). Originally, the plans specified 8.8 cm and 10.5 cm antiaircraft weapons; in March 1942, in a discussion in the Führerhauptquartier in Rastenburg, Hitler personally changed the priorities to light and heavy howitzers, and Speer told the group (which included Erich Müller, the Krupp artillery expert) that the new Krupp works near Breslau would be a perfect production location. Then the Heereswaffenamt reduced the resources allocated to construction, and reduced the number of machine halls. In June 1942, Krupp was instructed to undertake the additional construction with its own resources. By July Saur was demanding that the whole project be stopped. Alfried Krupp then intervened personally with Albert Speer, and construction resumed in October 1942. The advantages of the project listed by Krupp included not only location but also a saving in skilled labor, and the possible employment of prisoners and Jews for the construction of the machine halls.59

The construction became more urgent after a major British bombing raid on March 5, 1943, on the Essen works. The Krupp site had become a major target for the bombing offensive of the RAF in western Germany, which in the course of the war dropped one and a half million tons of explosive on Essen.⁶⁰ In fact, the Allies dropped more explosives tonnage on Essen than the steel output of the Krupp works (520,000 tons in 1942/43 and 475,000 tons in 1943/44).⁶¹ Consequently German planners wanted to shift the bulk of munitions production to more protected eastern areas. Hitler now ordered the construction of two additional halls at the Markstädt site, for tank equipment and aircraft shafts. The production of some components for the light howitzers started as early as February 1943, even though only a tenth of the machinery needed was in place.

Skilled workers were sent from western Germany, but the proportion of skilled labor remained relatively low (6 percent). The Speer authority suggested that the slave labor that had been engaged for the construction should also continue to be employed in production. The objections of the Krupp management largely concerned the absence of sanitary facilities and the threat of infection of the skilled German workers.62

In January 1943 the Markstädt factory was renamed as the Berthawerk, and the Heeres-Rüstungskredit-AG took over a “war risk clause” guaranteeing compensation for government orders in the case of a stopping of military procurement. As the highest priority was now given to the production of tanks in Essen and Magdeburg, the Berthawerk was unable to supply the first hundred light howitzers due in May 1943. The initial hopes of establishing a green-field factory operating along the principles of fordist production proved illusory.

There were also more and more problems with the supply of coal in the eastern works, which proved to be an increasing constraint on steel production. Alfried Krupp tried to negotiate with Göring for the acquisition of a stake in the Karwin-Trzynietz AG mining operation and ironworks, to supply pig iron and coal. But the concerns were sold instead to Deutsche Bank and Dresdner Bank. After the March 1943 air raid, Alfried Krupp tried in addition to get a source of coal, and intervened through Martin Bormann. But again the request was unsuccessful.

Because of both the fuel situation and the slowness with which new plant capacity was constructed, production was sporadic. Two tilting electric furnaces were shipped to Markstädt from the dismantled Ilva works in Piombino, Italy, but never used. When Saur visited the Berthawerk on October 15, 1943, he complained violently about the “slackness” of the management and inserted a special commissar into the Berthawerk to supervise the howitzer program. Alfried Krupp complained that this constituted a “moral discrimination.” But he was also forced to recognize that the performance of the plant was inadequate, and that the future of the Berthawerk as part of the Krupp empire was in question.63 He put the Berthawerk under a new manager, Hans Girod, who had a reputation for brutality. But Saur continued to complain about the insufficient work. In December 1944 he was still referring to the “hair-raising conditions.” Only one month later, the plant was evacuated because of the approach of the Red Army.

A large part of the conflicts with the government revolved around labor shortages, which severely affected the Krupp tradition of highly skilled production. This issue went back as far as the peacetime years. There were increasing labor shortages after 1936, and in 1938 Krupp recruited three hundred workers from the “Ostmark.” In April 1939 an initial group of ninety Czech miners arrived in Essen. In 1940 small numbers of Dutch and Belgians began to work in Gussstahlfabrik, and by September 1941 there were also over a thousand Italians. But many of these foreign workers quickly moved away from Krupp to look for more attractive conditions of work.⁶⁴

Prisoners of war did not have this kind of freedom, but their employment immediately raised severe feeding and housing difficulties. In 1940, some 1,275 French POWs were engaged in Essen. But the company needed much larger numbers for wartime production, and Russian POWs as well as recruited workers began to arrive at the Gussstahlfabrik in early 1942. The Krupp foremen and managers rapidly complained about their poor physical condition and consequent inability to work, but remarkably little was done to improve the conditions of work. Most were never given adequate clothing or shoes, and many preferred to go barefoot rather than deal with the injuries inflicted by heavy wooden clogs. Adam Tooze records that “Krupp (and this is certainly true for most other German businesses) employed foreign workers because there was no alternative. . . . After 1942, employing foreign labor was simply the entry ticket for the war economy.”65

At a high level of management, a discussion of the working conditions in the Krupp factories developed, but it produced no effective—not to speak of just or moral—solutions. Gustav Krupp’s brother-in-law, Tilo von Wilmowsky, a Christian conservative who was increasingly alienated from the regime, had been informed about the conditions of Russian workers by the director of the Konsumanstalt, and tried at first unsuccessfully to contact Löser before addressing Alfried Krupp. He protested about the economic folly of not using the “productive powers” of the workers, and the scandal that workers had been recruited with written promises and then were held in Essen behind barbed wire and with inadequate food. But Alfried offered little in the way of a response.⁶⁶ What paltry improvement occurred took place more as a result of state than of company initiatives. It was not just the Krupp managers who were concerned about the consequences of poor nutrition and housing, above all because of the impact on labor productivity. Albert Speer also complained about the unproductive use of the Russian workers. The barbed wire was taken away and rations increased to the levels of German “normal consumers.” In the autumn of 1943 new incentives, additional pay and leave, as well as a meaningless promise to limit the time of labor service to two years, were added.

Figure 6.8 Forced labor at Krupp Essen works, c. 1943. Courtesy of Historical Archives Krupp.

In June 1942 another large group of Russian workers arrived, this time as a result of compulsory recruitment. By November 1942, 2,522 Soviet POWs and 5,469 Russian civilian workers were working in the Gussstahlfabrik. The peak of foreign employment (almost 25,000) was reached at the beginning of 1943, with the largest contingent coming from France (8,423). Overall, during the war some 100,000 forced-labor workers were employed by the Krupp company.

As in Silesia, coal shortages originating in labor shortages began to be a bottleneck for production in the Ruhr. Overwhelming numbers of Italian miners simply left the coalfields. In the summer of 1942, large numbers of Russians were sent to the Ruhr mines to replace them. How should they be treated? The regime sent quite inconsistent messages. Some government figures seemed to advocate harsh treatment for the most cynical reasons, emphasizing that the brutality would necessarily create a solidarity based on shared complicity between the regime and German employers, managers, and workers. Others worried about the implications of cruelty on labor productivity and industrial output. On October 4, 1942, the leader of the German Labor Front, Robert Ley, told Ruhr managers, including representatives of Krupp, that “the coal must be mined, so or so. . . . if not with you, then against you, gentlemen. . . . We have burnt all the bridges behind us, intentionally. We have practically solved the Jewish question in Germany. Even that alone is a colossal achievement.” If a “Russian pig” was beaten, the responsibility would fall on individual workers, “because you and I won’t do that.”67 Labor Commissar Sauckel by contrast was worried about reducing the Russians’ capacity for work and ordered that “every mistreatment should be avoided; on the contrary, it is necessary to avoid anything that might diminish their will to work.”⁶⁸ Three days after the brutally frank meeting with Ley, the director of the Krupp Personnel Department, Max Ihn, instructed managers to ensure a correct (more humane) treatment of Russian workers.

In September 1942, the company authorized a RM 2 million investment in order to build parts for automatic weapons and detonators in Auschwitz, with the aim of using slave labor from the concentration camp. In this case too, labor considerations seem to have driven the company’s production strategy. But the plant was in the end constructed not by Krupp but by another and unrelated company (Union Gesellschaft für Metallindustrie Sils, van de Loo & Co.). One year later, another Krupp memorandum tried to explain delays in manufacturing these parts to the impatient military authorities. In the end, the production of detonators was moved from Essen to Wüstegiersdorf in Silesia instead of to Auschwitz, and 250 female inmates of Auschwitz were selected for work in the detonator plant by the Krupp work manager Weinhold. But the workers were relatively well cared for; they received medical attention, and there is only one recorded case of a death, a woman from Novi Sad who died of tuberculosis. The conditions at Wüstegiersdorf were indeed substantially better than in Essen.⁶⁹

In late 1942, Löser asked for a precise calculation of the comparative costs of domestic and foreign labor. The additional transport, security, and administrative costs paid to the state and the SS for using foreign workers amounted to much more than their low pay levels saved, and meant that the foreign workers (at least in the case of males) became more expensive than their German counterparts. Similar calculations were made in other enterprises, and can be used to show the increasingly irrational as well as murderously immoral character of the German war economy. But these were hypothetical calculations, in that there were no alternative German workers available; and in the light of labor shortages, compulsion became the key to the organization of the labor force.

From February 1942, West European workers reaching the end of their contract terms were more and more often forcibly retained (Dienstverpflichtung). For Russians, this compulsory retention was applied from March 1943. In September 1942, the Munition Committee in the Speer authority asked Krupp where Jewish prisoners might be sent as part of the labor contingent. Krupp announced that the firm was willing to take around 1,000 specialized Jewish workers and made specific requests for 258 turners, 242 fitters, 150 milling operatives, and so on; but this formulation was (perhaps deliberately) unrealistic, and no Jewish workers were actually sent in response to the Speer initiative. With increasing shortfalls in production, Krupp managers became more desperate to find workers. In the bombing raid of March 5, 1943, a large number of barrack huts were destroyed and forty-six workers killed. After this, workers were dispersed in the region around Essen, and spent long hours in weary and sometimes deadly guarded treks through an increasingly dysfunctional and cruel city. In June 1944, however, after the Essen prison too had been destroyed by bombs, Alfried Krupp asked the local authorities whether he might employ the prisoners in locomotive construction. The Rolling Mill II and the Electrode Workshop also requested concentration camp prisoners.

But the bombing and the destruction of accommodations also meant that the employment of any kind of labor became an increasingly futile and inhuman process. In some instances in Essen and in Magdeburg, forced workers were prevented from taking shelter against the bombing raids even in public air raid shelters, although the company’s own shelters were used by foreign workers.70 In August 1944, 520 Hungarian female prisoners from Buchenwald worked in Rolling Mill II, but their effective employment was thwarted by increasing disruption because of bombing. The women were forcibly marched back to Buchenwald on March 17, 1945.⁷¹

By the time of the German collapse in May 1945, the Krupp company had become indelibly associated with the Nazi regime: as an iconic German firm; as a consequence of the deliberate Nazi strategy of drawing companies into its program of economic and military mobilization; and as a consequence also of the inevitable tensions produced by the transition from one generation to another within a family firm. As early as March 1945, Edouard Houdremont noted that relations between the Krupp managers in the Rheinhausen steel works, on the left bank of the Rhine, and Allied occupation authorities would be of crucial importance for the future of the whole company.⁷²

Since October 1944, the Essen works had produced almost nothing, as the military front moved closer. But the U.S. Army reached Rheinhausen only on March 5, 1945, and the Villa Hügel only on April 11. Essen had been largely evacuated on the orders of Deputy Gauleiter (party district leader) Fritz Schlessmann. Alfried Krupp was arrested by American soldiers but quickly allowed to return to the villa under house arrest before he was taken away again on June 19. On April 27 the Krupp directorate was already presenting a plan for the reconstruction of the Essen works, and on June 25 asked for permission to restart fourteen branches of iron-and steelmaking. But by this time the military authority had passed from the U.S. to the British army, and although some production of specialty hard metal (Widia) and railway material was permitted, on September 8 the British definitively ordered all steelmaking activity to be closed down, and two days later all but one of the directors were arrested. The only exception, Fritz Müller, was in charge of the Krupp mines. On November 16, the British army formally took over the Gussstahlfabrik and the Friedrich-Alfred-Hütte, and E. L. Douglas Fowles began to function as “controller.” On November 22, the Krupp coal mines were also sequestrated.

On November 30, the Friedrich-Alfred-Hütte in Rheinhausen and the locomotive works were given a “permit” to start up production. By December 1945 Fowles was arguing that the Krupp capacity in repairing equipment was desperately needed, and he also argued in favor of a resumption of activity at the Borbeck steel mill. But the Gussstahlfabrik was split into individual activities: the Widia hard metal products, the locomotive workshop, the trucks department, and so on. The Borbeck works were allocated to the Soviet Union, however, as war reparation. Dismantling started in February 1946, and some 75,000 tons of steelmaking equipment were shipped for reassembly as a Soviet factory. In June 1947 the Disarmament Department of the Allied Control Commission ordered the dismantling of twenty-three production halls in the Gussstahlfabrik. That order led to a substantial protest from the Essen population, but the final form of the order produced an even more radical form of dismantling. So as well as the estimated 45 percent of the factory that had been destroyed by bombing, another additional 30 percent was dismantled, and the empty buildings were destroyed.

By contrast with Essen, the Soviet occupation led to a quick resumption of production in Magdeburg, and until the spring of 1948 there were regular contacts between the Gruson works and the Essen directorate.

The trial of Gustav Krupp as one of the twenty-four defendants accused as major war criminals before the International Military Tribunal in Nuremberg turned into a fiasco. Gustav Krupp had clearly deteriorated mentally, but the British Foreign Office was hostile to the idea of substituting his son for him. That seemed too arbitrary, too close to the idea of inherited guilt and the totalitarian practice of arresting relatives in Sippenhaft. Justice Robert Jackson read out a powerful indictment: “Four generations of the Krupp family have owned and operated the great armament and munitions plants which have been the chief source of Germany’s war supplies. For over 130 years this family has been the focus, the symbol, and the beneficiary of the most sinister forces engaged in menacing the peace of Europe. . . . It was at all times however a Krupp family enterprise.” But the senile Krupp was not tried.

Instead, the company was the subject of one of the U.S. successor trials to the major war criminals trial. Case 10, which was heard from November 1947 to July 1948, involved Alfried Krupp and all the Krupp directors with the exception of Fritz Müller. There appears to have been many and in some instances multiple violations of standard judicial practice. Alfried Krupp and his lawyer complained repeatedly that he was deprived of the assistance of his American lawyer, Earl J. Carroll, and indeed of any legal advice until the beginning of the trial. Two-thirds of the witnesses were not heard by the whole court but by commissioners. The case appears to have been argued more on the level of the importance of Krupp as a symbol than on concrete actions. A great deal of the prosecution case focused on the assertion, implausible even at that time, that corporations such as Krupp had put Hitler in power. The peroration of the prosecutor, General Telford Taylor, was based on Gustav Krupp’s words when he received a party “Golden Banner” award for the factory from Rudolf Hess in 1940: “These words accurately epitomize the defendants. Nothing need be added. The tradition of the Krupp firm, and the ‘social-political’ attitude for which it stood, was exactly suited to the moral climate of the Third Reich. There was no crime such a state could commit—whether it was war, plunder, or slavery—in which these men would not participate. Long before the Nazis came to power, Krupp was a ‘National Socialist model plant.’”73

In the end, the Krupp directors were cleared of the charge of aggressive war but convicted for slave labor and for the plunder of occupied Europe. Alfried Krupp, whose involvement in business decisions was never clearly delineated at the trial, was sentenced to twelve years imprisonment and his entire fortune confiscated. He was sent to the military prison in Landsberg am Lech. Ewald Löser, who had left the Krupp directorate in 1943 and was the most obviously anti-Nazi of the Krupp directors, was sentenced to seven years. The Krupp company had undoubtedly been a large beneficiary of the armaments economy, and its treatment of slave workers was vile. But the idea that Krupp had been a driving force behind the high-level making of Nazi policy, rather than a participant in a massive web of ideologically driven immorality, was an absurd fantasy, derived from a preexisting view of the iconic and national character of the enterprise. Now that company was fragmented, its management convicted, and its owner expropriated.