UK, Turkish Investors Seal Grundig Deal

It all began with a do-it-yourself radio kit. It might seem like a whimsical business idea today, but back in the days after the Second World War, it was a stroke of genius.

After the war, Germans were forbidden by the Allies from building radios, but not from producing kits with all the parts to put a radio together. And so with the 1946 production of a radio kit called the “Heinzelmann,” Max Grundig laid the foundations for what would become a global empire.

The Grundig brand name is about all that remains of the company that once helped drive Germany’s post-war economic miracle. Insolvency proceedings were opened in July 2003. The company was split up into units such as car radios and office communication equipment. The most lucrative parts quickly found buyers, but Grundig’s core unit, Home Intermedia Systems (TV, HiFi, Video, CD and DVD-players) remained on the block – until now.

Foreign aid

The Turkish television company Beko and the British home electronics group Alba have signed an €80 million ($99 million) purchase agreement for the home electronics business. “That was the last big battle,” said Gerd Lobodda, head of the IG Metall union in Nuremberg, where Grundig is based. “A sad, scandal-heavy chapter has come to a close.”

At its peak in 1979, Grundig had 38,000 employees on its payroll, and operated more than 30 production facilities around the world. But then, the firm’s slow and painful demise began. Grundig got wrapped up in expensive projects, built up debt, and in 1984, was bought up by its Dutch competitor, Philips.

The new owners weren’t able to solve the company’s problems, and in 1997, Philips relinquished management control and sold its stake.

In April of last year, lumped with a pile of debt and pension obligations, Grundig filed for bankruptcy.

Brand name to stay

The former giant of German industry in future will consist of two holding companies. They’ll retain the Grundig name and headquarters in Nuremberg, where the firm was founded in 1946.

“They’re both Nuremberg companies, they have a German director from Nuremberg, namely Hubert Roth, who has a long history with the company,” said Siegfried Beck, Grundig’s insolvency manager.

The two companies will divide up responsibilities, with one handling worldwide service and repairs, and the other doing the traditional business of production, marketing, and development. Of the 400 employees still working for Grundig, roughly half have been promised jobs in the two new companies.

“It’ll probably be more in the end,” said Beck. “The new owners are obliged to create at least 200 jobs. But the new company may also take on a large number of staff currently working in Grundig’s service unit to do accounting, personnel work, research and development and other such things.”

Resignation

Despite the inevitability of some layoffs, the employees took the news well. “They reacted positively, the atmosphere is really quite good,” said Dieter Köstler of Grundig’s workers’ council. “At the start of negotiations, there was talk of only keeping on 50 to 70 people, and now it’s practically three times as many.”

There’s a tendency to accentuate the positive, now that Grundig’s fate has been sealed. “Under the circumstances, we can all be happy with the solution,” said IG Metall head Lobodda. “It could have been a lot worse.”

The new owners, in contrast, are downright cheery. “Every German will again have a reason to be proud of Grundig,” said Ali Sümerval, president of the Turkish television company Beko. “The purchase opens many doors for Beko Electronics to both Europe and the world. Our vision, to be European leaders in 2005, is becoming a reality sooner than expected.”