Bankruptcy Throws Shadow on Grundig's History of Innovation

Monday was a sad day for all those who could remember the boom times for German electronics company Grundig AG when the company filed for bankruptcy after reporting losses for two straight years. The company, one of the biggest European manufacturers of video cameras, DVD players and high-quality television sets, joins a high-profile list of German corporate collapses, headed last year by the Kirch media empire, construction company Phillip Holzmann, aircraft manufacturer Fairchild Dornier and airship developer Cargolifter.

The ominous final straw for Grundig came after possible investors Beko, a Turkish electronics company and Taiwan's Sampo decided against a stake in the firm. The company posted losses of €150 million ($161.8 million) in 2001, and is expected to post losses of €75 million in 2002. Analysts say there's still hope Grundig can turn its fortunes around under bankruptcy administrator Eberhard Braun. Braun is expected to take up talks with Beko again this week, according to a report in the Financial Times Deutschland.

If Grundig does indeed go under this time, it will be the end of a company that represented the resolve of the German people after the end of World War Two and the healing of a war-torn economy that currently faces dark times.

Founded by Bavarian radio dealer Max Grundig in 1945, the Nuremberg-based company began as a radio repair and testing business. It soared to new heights during the time of post-war growth in Germany. Grundig's radio repair equipment proved popular in keeping precious pre-war radios going at a time when production remained impossible.

Radio innovation helped economic recovery

Grundig's reputation for innovation began to grow when he cleverly concocted a tubeless radio to evade restrictions imposed by occupying Allied authorities. His pretext was that a receiver without tubes didn’t count as a radio. The Grundig company then went on to make its name by producing build-it-yourself "Heinzelmann" radio kits for the recovering German population.

As Germany’s economy continued to revive, Grundig scored a hugely marketable hit with one of the first portable consumer radios, the "Grundig Boy", in 1949. According to his biographer, Christa Bronnenmeyer, Max Grundig's dream was to make "a radio for every man, at a price every man could afford."

A radio for everybody

"Max Grundig awoke the consumer dreams of an entire generation, and to a large extent was able to fulfill those dreams," said Bronnenmeyer in the book Max Grundig: Made in Germany. By the beginning of the next decade, the company was the largest producer of radio sets in Europe. And in 1952, with the advent of television, Grundig changed tack, entering the market by making Germany's first high-quality television sets.

As Germans became more affluent throughout the 1950s, Grundig's decision to follow the new technology paid off and propelled the company towards further growth. The company also expanded into other areas of the consumer electronics market, developing tape recorders, record players and short-wave radios.

One of first color television makers

Grundig then became one of the first companies to build color television sets in the late 1960s and, at its zenith in 1979, Grundig employed around 38,000 staff at 30 different factories all around the world. By the 1980s, it had sales offices in France, Italy, Portugal, Spain, Sweden and Taiwan. However, by then, it was also feeling pressure from Japanese companies who had been catching up in the technology market by churning out competitive products at lower prices. Grundig soon began to lose market share to these low-cost rivals from Asia and slipped into the red in 1980, slashing thousands of jobs.

In a bid to keep the company's head above water, Grundig negotiated an investment deal with Dutch electronics giant, Philips in the 1990s. But the partnership ended badly with Grundig resisting pressure from Philips to cut costs. Recognizing that it had no future as an independent company, Grundig began courting potential buyers. But these attempts to save the company foundered when potential buyers began digging through Grundig's red-ink-stained books.

End of tech boom innovator?

From being one of the icons of the early technology upsurge, riding Germany’s post-World War II boom, and the family-owned business that sold many Germans their first television set, Grundig seems to have finally bowed to pressure from global giants such as the Sony Corporation and Samsung Electronics. Some analysts predict that the company could be broken up, as its brand name and sales network still have value, but it appears to be the end of the line for the one-time driving force in innovative technology.