Gerresheimer Glas AG

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Gerresheimer Glas AG

Mörsenbroicher Weg 191
D-40470 Dusseldorf
Germany
Telephone: (49) (211) 6181-0
Fax: (49) (211) 6181-295
Web site:http://www.gerresheimer.com

Public Company
Incorporated: 1864
Employees: 6,100
Sales: DM 1.47 billion ($750 million) (1999)Stock Exchanges: Frankfurt/Main Dusseldorf Hamburg
Berlin Ticker Symbol: GERG.F NAIC: 327213 Glass Container Manufacturing; 327212
Other Pressed and Blown Glass and Glassware
Manufacturing

Gerresheimer Glas AG, headquartered in Germany, is the leading manufacturer in both Europe and the United States of packaging systems for the pharmaceutical, laboratory, and cosmetic industries. The company’s product range includes high-quality specialty glass, such as small glass containers and glass tubes, as well as plastic packaging products for the medical sector. Gerresheimer Glas operates 19 production companies in seven countries—including the United States, Poland, Belgium, the United Kingdom, France, and Italy. About 73 percent of the total sales of Gerresheimer Glas are Generaled outside Germany. About two-thirds of all Gerresheimer Glas employees work abroad. Formerly owned by German power giant VIAG, Gerresheimer Glas was sold to the investment bank Investcorp in the spring of 2000.

1860s Origins of World’s Largest Glass Bottle Factory

Ferdinand Heye, the founder of Gerresheimer Glas, grew up in a merchant family in Bremen, Germany. Early in the 19th century, his parents bought shares in the Glashütte Schauenstein, a glass factory in Obernkirchen at the river Weser, and later invested in two more glass factories. At the beginning of the 1860s, Ferdinand Heye purchased a property in Gerresheim near Dusseldorf where all the necessary ingredients for glass-making were available: sand, soda ash, limestone, and coal. In 1864, Ferdinand Heye founded his own glass manufacturing business. One year later, the first glassworks started operation with twelve glassblowers. Only two years later, a third glassworks started production in Gerresheim, and in 1871, Ferdinand Heye’s factory operated six altogether. In that same year, the Gerresheimer Glas factory produced 7.8 million bottles, placing it in the top echelons of German glass manufacturers.

In the middle of the 19th century glassmaking technology was still in its early stages. Several hundred kilograms of each raw material were put together in a “harbor,” a huge pot furnace where they were heated and melted together. Glassblowers took small amounts of the fluid glass mass out of the furnace and shaped them into bottles by blowing into their glassmaker’s pipe—an iron pipe that was about 1.2 meters long and about 10 millimeters wide. The glassblowers owned their own pipes, whose length varied depending on the size of the bottle to be made. The fire that heated the furnaces was hard to control so that melting and glassblowing alternated in irregular cycles with many interruptions. A new technology developed by German engineer Friedrich Siemens was introduced in 1874 that made a regular 24-hour production cycle possible. The melting process began at noon and glassmaking started between four and five o’clock in the morning. In 1881, new tank furnaces were introduced at Ferdinand Heye’s factory that allowed a continuous production cycle without interruptions. The glass mixture traveled through three zones inside the oven while melting, and the uninterrupted flow of material was supported by continuously feeding the ovens and removing glass mass.

The fact that Ferdinand Heye set up shop at a railroad station near the river Rhine was crucial to his success in the market. The first major customers of the Gerresheimer Glas factory were vineyards along the Rhine and Mosel rivers who converted their packaging from pitchers and casks to glass bottles. Germany’s economic upswing after the founding of the German empire in 1871 resulted in increased demand for quality wines, sparkling wine, and liquor. Improved technologies for brewing and preserving beer fueled shipments of bottled beer in the 1880s. Another emerging market was the rising number of German bottlers of mineral water who also switched over from clay jugs to glass bottles. Every owner of a mineral water spring used his own bottles with an individual design and the bottler’s identifying mark molded into the glass. In 1875, Ferdinand Heye took a trip to Breslau in East Prussia to speak at a meeting of German mineral spring water owners. He convinced them to use a uniform shaped bottle and stick a paper label on the front with all the necessary information which made it possible for them to reuse any kind of mineral water bottle. As a result the production process for the bottles could be standardized at the Gerresheimer Glas factory.

However, the dynamic growth of production capacity at Gerresheim called for an expansion into new markets. In 1882, the first glass bottles made in Gerresheim were shipped overseas. Only five years later half of the factory’s total output was shipped up the Rhine river to other countries. Continuous expansion and modernization fueled the company’s further growth. Only twenty years after it was founded, the Gerresheimer Glas factory was the world’s biggest manufacturer of glass bottles. In 1886 the factory’s output amounted to 45 million bottles a year.

A Nomadic Profession Settles in Gerresheim in the 1880s

Because of the factory’s dynamic growth, Ferdinand Heye was under pressure to find enough skilled glassblowers to meet demand. At that time, being a glassblower meant living the life of a nomad, following the glassworks around the country. Glassworks depended on charcoal for melting the glass ingredients, so they moved from one forest to the next until they ran out of wood again. Experienced glassblowers were sought after and well-paid professionals because the level of their skill determined the quantity and quality of the bottles they made. Always in search of better opportunities, these workers did not maintain a high degree of loyalty to single employers.

The first glassblowers for Heye’s factory came from the area around the river Weser and later from other German glass-making centers such as Thuringia and Prussia. However, the introduction of the new glass melting tubs in 1881 increased the demand for more glassblowers significantly, and Heye had to turn eastward to find them. To attract glassblowers from far away places such as East Prussia, Poland, the Baltic States, the Netherlands, and even Russia to his factory, Heye offered them free housing. To accommodate his work force the entrepreneur invested in several apartment buildings which soon developed into a small suburb. The apartments had special features such as soundproof bedrooms without windows to make it as easy as possible for the workers to sleep at any given time. This was important because the work regimen was dictated by the factory’s production cycles. Whenever a batch of glass in a furnace was ready for blowing, messengers were sent to the workers to wake them up for their next ten-hour shift. After two ten-hour shifts, work at the melting tub was interrupted for four hours.

To keep his glassblowers happy Heye expanded their benefits package far beyond anything that was common at that time. Known for their interest in music, socializing, sports, and education, Heye provided his glassblowers with a huge “Volksgarten,” including a music pavilion. A gymnasium, a swimming pool, and several rooms that could be used for educational events were added later. As early as 1867, Ferdinand Heye had a health insurance program for his workers. In 1882 he added a pension fund and accident insurance. The glassblowers’ wives and daughters were also offered jobs at the glass factory, such as making bottle caps, as well as work that could be done either in their own homes, such as sewing sacks for packaging bottles, or at a nearby textile factory. Tuition for school children of employees of the Gerresheimer Glas factory was also paid by the company.

As a consequence of the glass factory’s dynamic growth, the population of Gerresheim grew sevenfold between 1864 and 1900. The number of workers at Ferdinand Heye’s company more than tripled within ten years, from about 500 in 1880 to 1,700 a decade later. During that same period of time, the factory’s output also increased more than threefold, from 14 million to over 47 million. Around 1900, about half of the 11,500 Gerresheim inhabitants were directly or indirectly connected with Ferdinand Heye’s glass factory. To secure future growth, Ferdinand Heye transformed the family business into a stock company in 1888. It was now called the Actien-Gesell-schaft der Gerresheimer Glashüttenwerke, vorm. Ferd. Heye. The founder retained 80 percent of the share capital. Only seven months later, on July 26, 1889, Ferdinand Heye died.

A Single Machine Changes Everything in 1907

After Ferdinand Heye’s death, Hermann Heye, at age 23 the oldest of the founder’s five sons, took over the family business. He had learned glassmaking from scratch and was well prepared for his new responsibilities. Within a short period of time Hermann Heye earned a reputation in Germany and abroad.

Company Perspectives:

Wherever You May Be. The Gerresheimer group is a worldwide network with 19 production facilities. We are expanding our international activities and pursue single-mindedly the “global approach.” We are never far away and are prepared to meet your demands —oriented towards quality, service and efficiency.

At the beginning of the 1890s, Gerresheimer Glas bottles were shipped to every continent, including England and the United States, the bases of the company’s main competitors. After the end of the Spanish-American War, Gerresheimer Glas bottles were exported again to Latin America, mainly Havana and Puerto Rico. By the end of the century, Gerresheimer glass bottles were even being shipped to West India to be filled with rum. After the turn of the century, a wave of consolidation transformed the European glassmaking industry. Smaller glassworks lost ground because of their lower productivity. Glass-blowers left them and went to work for the bigger factories, which in turn were taken over by the market leaders. Its new company structure served Gerresheimer Glas well because provided the necessary capital to secure its leading position in the market. Between 1894 and 1904, Gerresheimer Glas acquired ten additional glass factories. In 1904, Gerresheimer Glas started the production of wired glass, which became popular in construction as translucent building material for railroad stations and halls.

Hermann Heye also played a major role in the introduction of a breakthrough technology to his company. As early as 1902, the production cycle at Gerresheimer Glas had been changed to three shifts. In 1907 Heye traveled to a trade show in Manchester, England, where the Owens machine, an American invention, was being shown in Europe for the first time. The new machine was able to produce 16,000 glass bottles a day—as much as 75 glassblowers were able to make in a day’s work. Realizing the potential for his industry Heye, acquired an option for a license on the patent for the European market. However, he was not able to finance this endeavor on his own. To raise the money he had to win other European glass container makers over to his idea. His efforts resulted in the founding of an industry association of European glass bottle manufacturers—the Europäischer Verband der Flaschenfabriken. The new organization led by Heye was finally able to acquire the patent. In May 1908 the first Owens machine in Europe started production at Gerresheimer Glas.

To avoid extensive layoffs, Heye negotiated with Owens, by that time the world market leader of glass containers, to introduce the new machines only gradually into Europe. Even during World War I, Owens kept the agreement although it was encouraged by England to breach it. By 1925, all glass bottles at Gerresheimer Glas were made by Owens machines.

A New Era of Expansion Begins in 1932

Gerresheimer Glas survived the hard times of World War I and the economic depression of the 1920s. In 1932 Gerresheimer Glas took over Glashätte Achern, another German glass manufacturer which was located near the vineyards of southern Germany. Another acquisition followed in 1940 when Gerresheimer Glas bought a 50-percent share in Glashätte Budenheim, located near Mainz, another center of German wine country. One year later, another company was bought in Bavarian Amberg, not far from the large number of Bavarian breweries.

Hermann Heye died in the same year World War II broke out. Production came to a complete halt at the end of the war, but Gerresheimer Glas started making flat glass and glass containers again at the end of 1945. New technical manager Leo Breuer launched a modernization program in 1946, resulting, among other things, in the introduction of new gob-forming machines and the erection of two new furnaces with a melting area of 1,650 square feet and a batch house where the glass mass could be mixed, weighed, and handled automatically. By 1958 the Owens machines had been replaced by the new rotating R7-machines and IS-multiple-section-machines. In the same year a new plant was built in Oldenburg in northern Germany. Altogether by 1958, the Gerresheimer Glas group operated six glass production facilities.

1959 marked the year when Gerresheimer Glas lost its independence. In that year one of the company’s main competitors, American company Owens-Illinois, Inc., acquired 50.1 percent of the capital of Gerresheimer Glas, which was upgraded to 75.7 percent three years later. In 1960 a technical assistance agreement was signed with the parent company which gave Gerresheimer Glas access to Owen’s technical know-how. To meet the ever-growing goals for glass output, Gerresheimer Glas began hiring workers from abroad once again. By 1971, 27 percent of the company’s work force came from outside Germany.

During the 1960s, Gerresheimer Glas increased its core market and expanded into new fields. New glass containers were introduced for baby food and instant products. Gerresheimer Glas also expanded into plastic container and corrugated carton boxes through its new subsidiaries Gerro Plastik and Gerro Karton, expanding its scope to become a packaging materials group. In the 1970s and 1980s Gerresheimer Glas secured a leading position in the market for glass containers. In 1971, the company took over Lohr-based Spessarter Hohlglaswerke, a firm that specialized in small containers; it also took over pipe-glass manufacturer Bänder Glas GmbH in 1987 and glass container maker Glashättenwerke Holzminden GmbH & Co., and glass tubes producer Fritz GmbH & Co. in 1989.

Coping with Globalization in the 1990s

At the beginning of the 1990s Gerresheimer Glas changed owners. The company was taken over by German energy conglomerate VIAG, which bought 51 percent of its shares. During the 1990s Gerresheimer Glas focused on its core business and set its sights on international expansion. In 1991, the company acquired the German leader in the specialty glass market—Tettauer Glashättenwerke AG. Two years later the plastic and carton manufacturing subsidiaries were sold. In 1995 Gerresheimer Glas acquired Gebruder Stoevesandt AG, another leading German glass container manufacturer specializing in products for the beverage and food industry.

Key Dates:

1864:: Ferdinand Heye starts his own business with 12 glassblowers.
1886:: Ferdinand Heye is the world’s largest glass bottle maker.
1907:: First contacts with world market leader Owens and the operation of the first Owens glassblowing machine in Europe.
1959:: Owens-Illinois, Inc. acquires 50.1 percent of Gerresheimer Glas shares.
1987:: Gerresheimer Glas buys glass tubes makers in Germany, Italy, and the United Kingdom.
1990:: German VIAG concern becomes majority shareholder of Gerresheimer Glas.
1994:: The company acquires American glassmaker 01 Kimble FTS Inc.
2000:: Investment bank Investcorp agrees to take over Gerresheimer Glas in a $200 million deal.

International expansion began in 1994 with the acquisition of OI Kimble FTS Inc., an American manufacturer of glass tubes. Three years later Gerresheimer Glas bought a 60-percent share in Belgian glassworks Nouvelles Verreries de Momignies S.A., a manufacturer of glass containers for perfume and cosmetics. Another acquisition that year was a 61.53-percent share in Polish glass and plastic container manufacturer Boleslawiek Fabryka Materalow Medycznych Polfa Spolka Akcyjna, a company that specialized in packaging solutions for pharmaceuticals and other health care products. Through American company Kimble USA Inc., Gerresheimer Glas was also involved in Enbosa, a joint venture with Mexican Vitro S.A., to set up a new subsidiary for making glass containers for the pharmaceutical industry in Argentina.

In August 1999 Gerresheimer Glas took another major strategic step. In order to be able to completely focus on the fast growing markets for pharmaceutical, laboratory, and cosmetics packaging systems, the company sold its standard glass container business for the food and beverage industry. When German power conglomerates VIAG and VEBA decided to merge in 1999 to form Germany’s largest energy supplier, Gerresheimer Glas went on sale again. In spring 2000, the investment bank Investcorp based in Bahrain signed an agreement with VIAG to take over a 72.96 percent-stake for $206 million. Based on the booming global pharmaceutical industry, Investcorp expected Gerresheimer Glas to grow further.

Principal Subsidiaries

Spessart Glas GmbH; Gerro Plast GmbH Kunststoffartikel; Tettauer Glashättenwerke AG; Bunder Glas GmbH; Fritz GmbH & Co. KG; Nouvelles Verreries de Momignies S.A. (Belgium; 60%); FBG Trident Ltd. (United Kingdom); Kimble Italiana S.p.A. (Italy); Verretubex S.A. (France); The Anchor Glass Company Ltd. (United Kingdom); Kimble USA Inc.; Boleslawiek Fabryka Materialow Medycznych “Polfa” S.A. (Poland, 99.8%).