Saarberg-Konzern

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Saarberg-Konzern

Triererstrasse 1
Postfach 1030
D-6600 Saarbrücken
Federal Republic of Germany
(681) 40 51
Fax: (681) 405-4205

State-Owned Company
Incorporated: 1957
Employees: 23,200
Sales: DM5.01 billion (US$3.35 billion)

Since its foundation in 1957, the Saarberg-Konzern or Saarberg Group, headed by Saarbergwerke AG has developed from a regional mining company into a diversified energy production, coal conversion, and trading group with subsidiaries outside Germany’s Saar area and abroad. The company is jointly owned, 76% by the German government and 24% by the Saarland. Its headquarters are in Saarbrücken and and the Saar region remains its principal area of activity, the location of its five coal mines, three power stations, and coking plant. Further power stations and a coking plant are operated by partly owned subsidiaries. Saarbergwerke’s original activity of coal mining, along with the production of coke, electricity, and thermal power, accounted for nearly 50% of group turnover in 1989. The fuel and energy product trading division, which came into being in the 1960s, also forms a major component of Saarbergwerke’s operations, representing a further 44% of group turnover. During the 1960s and 1970s, Saarbergwerke diversified into several areas outside its core energy businesses, including oil refining and supply, chemicals, machine tools, and rubber products. After a series of disposals only a handful of non-core subsidiaries remain, the most important of these being the rubber products manufacturing division, accounting for 5% of 1989 sales. The history of this company over the 33 years of its existence has been a difficult one, marked by several changes of fortune and direction, and determined by events and trends in the global energy market.

The Saarland, a region which has come alternately under German and French rule over the last centuries, is the smallest and newest of the west German states. Coal mining has been an important industry in the region for hundreds of years, and since 1751 all mining has been subject to a state monopoly. After World War II the Saar region was initially declared an independent state, with close economic ties to France. Between 1948 and 1953 the coal mines were administered by the French Regie des Mines de la Sarre; after this they were known as the Saarbergwerke and were managed regionally, although a strong French influence persisted. On October 23, 1955, two-thirds of the Saar area’s population voted against a statute preserving the state’s autonomy, and international negotiations resulted in a treaty effecting the region’s integration into the Federal Republic of Germany. Political integration took effect beginning January 1, 1957, and full economic integration followed on July 5, 1959. On September 30, 1957, the ownership of the region’s coal mining operations was transferred to two shareholders—the Federal Republic of Germany (74%) and the Saar region (26%)—and the new company, Saarbergwerke AG, was entered in the trade register at Saarbrücken. The chairman of the management committee was Hubertus Rolshoven.

At the end of 1957 the company had 18 coal mines, 3 coking plants, and 3 power stations; its work force numbered 65,000. During this year it had produced 16.3 million tons of coal, 900,000 tons of coke, and 1.7 billion kilowatt hours of electricity. Accounts drawn up for the first quarter-year to the end of 1957 recorded a loss of Ffrl.4 billion.

The previous administration had projected an expansion of coal production in the region. Plans had been made to establish a new pit at Warndt, and to extend the pits at Jagersfreude, Luisenthal, Göttelborn, and Velsen. Extensions of the power stations at Fenne and St. Barbara had been started, as had construction of a new coking plant at Furstenhausen. A progressive increase in production levels was foreseen, with the aim of reaching 19 million tons by 1965 and 23 million tons by 1975. However, developments in the domestic energy market soon made it clear that a radical revision of these plans would be necessary.

During the company’s first year, wages were raised to meet living costs, in accordance with labor agreements. Even though coal and coke prices also rose, the result was a loss of profitability. Furthermore, sales of coal declined, owing to cheap imports from the United States and Poland, the increasing importance of oil, and the weakness of Saarland industry. Coal stockpiles rose, shifts were canceled, and the company had considerable losses in 1958. After the Suez crisis, oil production in the Middle East increased, and cheap oil was produced in European refineries. In 1959, Saarbergwerke closed its pit at St. Barbara and amalgamated pits at Maybach, Mellin, and St. Ingbert. After the full economic integration of the Saar area, the company produced its first set of results in German currency, for the period from July 6, 1959, to December 31, 1960, recording a loss of DM1.78 million.

Construction of the new pit at Warndt proceeded, and for the time being Saarbergwerke’s activities remained limited to the production and conversion of coal. Nonetheless it was clear that in the medium- to long-term the company would have to develop a new strategy to ensure its survival and to safeguard its significant position in the economy, accounting for around 20% of the work force and total turnover of the Saar region. Unease concerning the future prospects of the industry was a contributory factor in the miners’ strike at Saarbergwerke in May 1962. The week-long strike—the first official strike in the German mining industry since 1955—ended when the Federal government gave its approval to an 8% pay rise, bringing wages for Saar miners into line with those of the Ruhr coal industry. At the same time the government approved a series of measures to help the company undertake the necessary rationalization of its activities. The year 1962 was also to be remembered at Saarbergwerke for the worst postwar mining disaster in Germany, when an explosion and fire at the Luisenthal pit on February 7 claimed 299 lives.

Saarbergwerke’s strategy during the 1960s had two main aims: the rationalization of the company’s coal-producing activities and the replacement of lost jobs and revenue through the development of new activities. This change of direction was given the official seal of approval in 1963, when it was enshrined in the company statutes.

Two General Plans, produced in 1963 and 1968, set out the process by which coal production was to be reduced to levels of 9 million to 9.5 million tons by 1973. Production was to be concentrated on the most efficient sites and the number of pits in operation was to be reduced, by amalgamation and closure, to five by 1970 and to four by 1974. The contraction of this side of the company’s activities was indeed severe; coal production fell from 16 million tons in 1960 to 10.6 million tons in 1970, and the number of miners employed fell from around 50,000 to around 22,000 during the same period. The decade saw a series of pit closures and amalgamations: Heinitz was closed in November 1962, Viktoria in June 1963, Maybach in July 1964, Velsen in August 1965, Kohlwald in March 1966, König in March 1968, and Jägersfreude in July 1968. Yet during the same period the newer Warndt pit was extended by the addition of a new shaft, opening in 1963; productivity levels—in terms of kilograms per man-hour—were increased; and the Saar area’s share of West German coal production remained constant at 11%.

By contrast, Saarbergwerke’s coal conversion activities expanded during the 1960s. Coke production had never been as highly developed in the Saar area as in other German coalfields and the new coking plant at Fürstenhausen, opened in 1959, was doubled in capacity in 1966. Three older coking plants were closed between 1963 and 1972. Coke production rose from 1.5 million tons in 1960 to 1.9 million tons in 1970. In 1959 Saarbergwerke was producing electricity purely for internal consumption. However, the 1960s saw an expansion in capacity at all three power stations, at St. Barbara, Weiher, and Fenne, and in 1970 production exceeded four billion kilowatt hours (kWh) for the first time, more than three-quarters of this for external users. In 1961, the founding of Saarländis-che Fernwärme GmbH, a thermal power generating subsidiary, represented an extension of the company’s energy-related activities. Favorable conditions in the building sector contributed to the rapid growth of this subsidiary, which was operating a network of 19 thermal power plants by the end of 1970. In addition to restructuring its energy production businesses, Saarbergwerke founded and acquired a number of subsidiaries during the 1960s, venturing into new areas, including oil refining and distribution, chemicals, industrial rubber products, and machine tools.

In collaboration with French chemicals and coal producers, Saarbergwerke established an oil refinery at Klarenthal in 1965, in which it had a 50% share. The project also brought shares in several chemicals subsidiaries established in 1966: a 50% share in Société de l’Oléoduc de la Sarre a.r.l. of Paris, a 40% share in L’ Ammoniac Sarro-Lorrain S. a.r.l. of St. Avold, and 60% of Harnstoffe- und Düngemittelwerk Saar-Lothringen GmbH, Besch, Luxembourg. Saarbergwerke’s investment in the project totaled DM240 million and the group of companies, which began operations in 1967-1968, was expected to reach sales totaling around DM200 million annually. Other investments were also made in the oil and chemicals sector. In 1962 Saarbergwerke acquired Saarkohlenwertstoffe GmbH, a polyurethane products manufacturer, renamed Petrocarbona GmbH in 1963. In 1965, over 50% of the shares of the Frisia Group, a northwest German oil refiner and distributor with a network of 600 petrol stations were acquired. Finally, a 12.5% share in Deutsche Mineralol-Explorationsgesellschaft mbH, a crude oil supplier based in Dusseldorf, was acquired in 1966, completing the chain of the group’s oil interests from supply through refining to chemicals products.

In 1963 the Saarbergwerke Group acquired 50% of the shares of Saar-Gummiwerk GmbH, a manufacturer of rubber products for the shoe and automotive industries, with a work force of 1,500. The following year saw the group’s first move into the machine tools sector, when it purchased a 16% share in Dowidat GmbH of Wermelskirchen and a majority shareholding in this company’s subsidiary Dowidat-Werke Saar GmbH of Hasborn. The foundations of Saarbergwerke’s fuel trading division were laid during the 1960s with the acquisitions of Gebrüder Kiessel GmbH, a coal-trading company in Saarbrücken, in 1962, and of the Caesar-Wollheim-Gruppe of Munich, of which 50% was acquired in 1969, and the remaining 50% in 1971.

By the beginning of the 1970s the composition of the group as a whole had changed significantly. Although coal mining and conversion activities accounted for 80% of the group’s 31,000-strong work force, oil and chemical activities now represented 45% of annual turnover. Drastic reductions in the coal mining sector were partly offset by the creation of around 4,000 new jobs through the group’s diversification. Some of the job losses were accounted for by the departure of workers who had joined the industry after the war when other work was scarce. Nonetheless the impact on the region was a serious one, especially at a time when the iron and steel industries were also facing difficulties. The sales of Saarbergwerke AG grew only moderately during the decade—from DM985 million in 1960 to DM1.22 billion in 1970—and profitability remained elusive. In 1969 Hubertus Rolshoven retired and Werner Hoevels became chairman of the management board.

The process of reduction and rationalization which had dominated the group’s development in the 1960s continued through the early years of the following decade. In 1972-1973 Saarbergwerke reduced its work force by 10,000 through a program of early retirements and redundancies largely funded by government subsidy. At the end of 1973 the number of employees was at its lowest point since the company’s foundation—21,326—and coal production in 1974 reached an all-time low of 8.9 million tons.

The oil crisis of 1973 brought a significant change of direction. Between 1960 and 1970 imported oil had become increasingly important as a primary energy source in West Germany, accounting for 55% of primary energy consumption in 1970, compared to 21% in 1960. During the same period the share of coal—mainly domestic rather than imported—fell from 60% to 29%. The disruption of the oil supply from the Middle East forced the German government to re-assess its energy policy in the light of safeguarding the domestic coal supply. The effect on Saarbergwerke was considerable. It had been planned to reduce coal production to 8 million tons by 1976; now, with the help of government investment, the group aimed to achieve production levels of around 9 million to 9.5 million tons. The mine at Camphausen, which had been marked for closure, was given a reprieve.

However, in the years following this crisis the fortunes of the German coal industry did not change in any great degree. Oil consumption remained high, there was little evidence of a switch to coal as an energy source, and the stockpiles mounted, rising at Saarbergwerke from 1,000 tons in 1974 to 905,000 tons in 1978. Production levels at Saarbergwerke remained stable at around 9.5 million tons throughout the 1970s but improved productivity—owing to the rationalization measures and technological advances—meant that shifts had to be cut to limit production. Higher coal prices did, however, bring some improvement in profitability; Saarbergwerke AG was able to record a small profit in 1976 for the first time in 15 years, although only with the help of government subsidies. In 1972, after the death of Werner Hoevels, Erwin Anderheggen took over as chairman of the management committee; he was succeeded in 1976 by Rudolf Lenhartz.

Coke production remained stable at around 1.3 million to 1.4 million tons throughout the 1970s. Production of electricity showed an overall decline, from 4.1 billion kWh in 1970 to 3.9 billion kWh in 1980. A new 707-megawatt (MW) power station, Weiher III, was constructed at Quierschied and began operation in 1976. Two collaborative projects in this sector were also planned: a 750-MW power station at Bexbach—a joint venture with three south German energy companies, which began operation in 1983—and a 230-MW power station at Volklingen, intended as a model of modern power-station technology, completed in 1982 and 70%-owned by Saarbergwerke. The plans for these power stations frequently encountered vigorous resistance from local inhabitants and Saarbergwerke, like others in the industry, was forced increasingly to pay attention to environmental concerns.

The group’s fuel trading division was further developed during this period. The 1971 acquisition of the Winschermann group from Salzgitter AG brought Saarbergwerke a nationwide network of subsidiaries. However, organizational difficulties resulting from the integration of this group with existing businesses, along with a recession in the building industry, meant that this division experienced losses throughout the 1970s.

The group’s renewed emphasis on its core energy activities was accompanied by a series of disposals, reversing the diversification process of the previous decade. Frisia, the oil refining and trading group purchased in 1965, suffered the effects of a petrol price war in 1969 and made substantial losses; it was sold to the Gulf Oil Corporation of Pittsburgh in 1970. Saarbergwerke’s investments in the chemicals sector also proved unsuccessful: the ammonia factory at St. Avold and the uric acid factory at Besch were sold to CdF-Chimie of France, one of the original partners, in 1972. The divestment of Petrocarbona GmbH, the polyurethane-products manufacturer at Bexbach, followed in 1976. MABAG Maschinen- und Apparatebau GmbH, a manufacturer of air conditioning systems at Sulzbach, was purchased in 1971; this company too was dogged by organizational difficulties and poor profitability and was sold in 1979.

However, the machine tools sector was expanded by a series of acquisitions: the Belzer group, a machine tools and assembly plant, in 1970; Wilhelm Fette GmbH, a precision tools manufacturer, 1971; GEMA Gesellschaft fur Maschinen- und Apparatebau mbH, a machine tools manufacturer, in 1975; Sitzmann & Heinlein GmbH, a market leader in hard-metal machine tools, in 1978; and R. Stock AG, a boring-machines manufacturer in 1976. The acquisition of Thermoplast und Apparatebau GmbH in 1972 added to the group’s rubber products sector. At the end of the 1970s machine tools and rubber products accounted for 10% of group turnover.

The oil crisis of 1973 had not led to any substantial changes in energy consumption patterns in Germany. The oil crisis of 1979, caused by the revolution in Iran and a steep rise in world demand, again highlighted Germany’s dangerous dependence on foreign energy sources: Iran at this stage accounted for 17% of Germany’s crude oil supply. The cost of the federal republic’s oil imports rose from DM29 billion in 1978 to DM65 billion in 1981, even though by the latter date import levels had fallen. Once again the prospects for Germany’s domestic coal industry seemed favorable, and Saarbergwerke started the new decade in optimistic mood. Production reached 10.8 million in 1981, and investments of around DM70 million to DM90 million in 1980-1981 were anticipated to raise levels further to 11.5 million tons by 1984.

Again the optimistic assumptions were proved wrong. It soon became clear that coal sales would not rise as much or as quickly as had been anticipated. An economic downturn meant that industrial consumers concentrated on reducing their energy requirements rather than simply turning to a different source. From 1981 onwards the government emphasized that cheaper imported coal was an important source as well as the domestic supply. Saarbergwerke found itself in a difficult position, with increasing production, decreasing sales, and the prospect of declining government subsidies; government injections of capital had been at the level of around DM68 million per year between 1972 and 1982.

The acquisition in 1981 of a 25% stake in Ashland Coal, a U.S. mining company, was a reaction to these market trends. Not only was Saarbergwerke seeking to respond to the German demand for imported coal, but it was also hoping that the new subsidiary would underpin company revenues and reduce the dependence on state subsidies. The stake was reduced to 14% in 1988. On the domestic scene, coal production levels at Saarbergwerke remained stable at around 9.5 million-10.5 million tons per year throughout the 1980s. At the beginning of 1990 the mines at Reden and Camphausen were amalgamated, reducing the number of mines in operation to five. Coke production levels at the Fürstenhausen plant have remained stable at around 1.4 million, although a progressive 25% reduction in capacity is planned. In 1982 Saarbergwerke founded a new coking plant, the Zentralkokerei Saar at Dillingen, in collaboration with the Saar steel industry. Saarbergwerke has a 49% share in the plant, which produced 1.4 million tons of coke and sales of DM375 million in 1989. In the electricity sector, apart from completing projects planned in the 1970s, the group has concentrated on improvements to existing power stations, notably the construction of a DM200 million desulphurization unit at Bexbach. In 1989, electricity produced by power stations fully or partly owned by Saarbergwerke totaled 9.3 billion kWh. Energy production accounted for 49% of group turnover in 1989, divided as follows among the different activities: coal mining 26%, coke 6%, electricity 13%, thermal power 2%, and other activities 2%.

Otherwise disposals were the main feature of Saarbergwerke’s strategy during the 1980s. The machine tools division was sold off through a series of separate deals: Sitzmann & Heinlein was sold in 1986 and Wilhelm Fette as well as Belzer Dowidat in 1988. Saarberg’s oil supply and refining interests, grouped together as Saarberg Ül und Handel, were sold to Veba Oel AG in 1989. Despite these measures, Saarbergwerke has continued to struggle with profitability. In 1988 the group reported a loss of DM481 million, and the improved situation in 1989—losses of DM14 million—was attributable to proceeds from the sale of the oil subsidiaries as well as a DM220 million cash injection from the shareholders.

Since its foundation, Saarbergwerke AG has had to contend with the declining importance of coal, with competition from cheaper imports, with changes of government policy, and with uncertainty in the global energy market. It has been kept alive by government subsidy, because of its importance to the regional economy and in order to safeguard the continued existence of a domestic coal industry in a country which relies upon imports for over 60% of its primary energy requirements. At the beginning of the 1990s Saarbergwerke’s future prospects were still uncertain. Although the government has guaranteed its support—in terms of subsidies and price guarantees—until the end of the century, the European Commission has ruled that subsidy levels must be reduced and has ordered plans for the restructuring of the mining industry. The present chairman of Saarbergwerke’s management board, Hans-Reiner Biehl, has recently spoken out against the suggested amalgamation of Germany’s coal fields into a single national group. Not only does Saarbergwerke face the rigors of a deregulated European market, but national government subsidies which compensate for differences in prices and transport costs between the Ruhr coal fields and other mining areas are also in doubt. In the face of these unpromising circumstances Saarbergwerke embarked on another phase of restructuring and rationalization, aiming to reduce the number of mines operated to three and to cut the work force to 17,500 by 1995.

Principal Subsidiaries

Saarländische Kraftwerksgesellschaft mbH; Saarberg-Fernwarme GmbH; GfK Gesellschaft fur Kohleverflussigung mbH; Saar-Gummiwerk GmbH; Saarberg Handel GmbH; UNISPED Spedition-und Transportgesells-chaft mbH; Kohlbecher & Co.; Industrie-Ring Sach -und Versicherungs-Vermittlungsgesellschaft mbH; Saarberg-Interplan GmbH; TUB Gesellschaft fur technische überwa-chung im Bergbau; Saarberg Oekotechnik GmbH; Ferramentas Belzer do Brasil; Modellkraftwerk Völklingen GmbH; (70%); Saarberg-Holter Umwelttechnik (50%); Zen-tralkokerei Saar GmbH(49%); Bomin Solar GmbH & Co. KG (50%).