Sulzer Brothers Limited (Gebrüder Sulzer Aktiengesellschaft)

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Sulzer Brothers Limited (Gebrüder Sulzer Aktiengesellschaft)

CH-8401 Winterthur
Switzerland
(52) 81 11 22
Fax: (52) 23 42 83

Public Company
Incorporated: 1914
Employees: 33,967
Sales: SFr6.38 billion (US$4.14 billion)
Stock Exchange: Zürich

The Swiss technology multinational Gerbrüder Sulzer (known as Sulzer Brothers in English-speaking nations) is perhaps best known for its diesel engines and industrial looms. However, it has even larger interests in the provision of plant and services for the construction industry, as well as a significant involvement in medical technology and several other diverse areas. It owes its growth and profitability to the ingenuity and energy of its founders and their successors, who had the vision to forge links abroad as a means of overcoming the constraints of Switzerland’s small domestic market and limited natural resources. From the earliest days, ideas, expertise, and materials were imported, and Sulzer not only exported its finished products but also quickly established the beginnings of a manufacturing base outside Switzerland. While remaining loyal to its Swiss origins and character, Sulzer has a presence in six continents.

The beginnings of Gebrüder Sulzer must rate among the most picturesque of any multinational company. The story began in a little shed in the dried-up town moat of Winterthur, near Zürich, in northeast Switzerland. The grandfather of the company’s two official founders had been born in Winterthur in 1751. Salomon Sulzer was the son of the landlord of a coaching inn. Legend has it that Salomon Sulzer had studied theology, and was serving as pastor to a parish by the shores of Lake Zürich, when he developed an interest in the growing trade of brass foundry, and that he eventually abandoned his ministry in order to take up an apprenticeship as a brass founder in Schaffhausen. Documentary evidence is not so specific about his early career, but gives the impression that he was gifted, unorthodox, and adventurous, qualities which were to characterize the careers of his descendants and the development of the Sulzer enterprise.

At the age of 23, Sulzer returned to his home town of Winterthur. Realizing the economic potential, in those early days of Europe’s industrial revolution, of a cheaper substitute for copper machinery and tools, he planned to set up his own brass foundry. This intention was opposed by the town council, ostensibly on the grounds that the foundry would constitute a fire hazard, but perhaps, in reality, out of a desire to protect the local coppersmiths from competition.

Eventually, Sulzer was permitted to set up his foundry in the disused moat beyond the town walls. Its early products included fire engines and presses. In the town itself Sulzer opened a turner’s workshop for producing articles made of wood, horn, iron, and brass. A house called the Fig Tree accommodated this shop and, above the shop, a flat in which Sulzer and his family lived. The Fig Tree was located in the town’s disused moat. At first business was good, and in due course Salomon Sulzer’s only son, Johann Jakob Sulzer, born in 1782, began to learn both the foundry and turnery trades. Salomon Sulzer formed social and business contacts with his neighbors, through whom he acquired contacts in the fitting trade and the mining and salt-production industries. He predicted accurately that the future lay in cast iron, which would in its turn be a much cheaper substitute for brass. For the time being, however, the technology for casting iron was not available in Switzerland.

Despite its auspicious start, by the turn of the century Salomon Sulzer’s enterprise was beginning to suffer seriously from the effects of the Napoleonic Wars. From 1798 to 1799 Switzerland had been the scene of the struggle of the Russian and Austrian armies against the French. Troops were billeted in Winterthur and trade was next to impossible. Sulzer was forced to accept work at the Dieuze salt works in Lorraine, a job which he found through the good offices of a neighbor. Johann Jakob Sulzer-Neuffert—it was customary in Switzerland for a man to append his wife’s surname to his own on marriage—took over the management of the family business, such as it was, in 1806. The following year, his father, Salomon Sulzer, died in Lorraine.

Under the management of Johann Jakob Sulzer, the fortunes of the business began to improve. Fire engines for neighboring villages, saucepans, and bells were the staple products. Salt works abroad were also beginning to buy Sulzer pumps. The foundry moved from the moat to a more prestigious site by the Holdertor, one of the town gates.

Katherina Neuffert, Sulzer’s wife, set the tone of the enterprise’s treatment of its employees. She wrote that, if her vision of the company’s future came true, “the workers will be looked after better here than anywhere else.” The Sulzers had two sons, Johann Jakob, born in 1806 and named after his father, and Salomon, born in 1809 and named after his grandfather.

Johann Jakob Sulzer-Neuffert agreed with his father’s views about the importance of cast iron. The industrial revolution brought an ever-increasing demand for iron, especially in the form of machinery for cotton mills and the associated machine tools. Already iron foundries had sprung up in France, Germany, and—in particular—England; obviously these were not over-keen to share their expertise with possible competitors, but the Sulzer family connections opened doors.

After the two Sulzer-Neuffert sons had served their apprenticeships in the family firm, they set off, one after the other, to complete their engineering training with a period of travel abroad. Their travels were designed to give them the opportunity to discover all they could about iron, and also about mechanical engineering. Johann Jakob Sulzer Jr. spent several semesters at the Paris Ecole des Arts et Métiers (School of Applied Arts and Crafts), as well as working at the important English-run iron foundry at Chaillot, France. Salomon Sulzer worked in a foundry in Munich.

In the meantime, Johann Jakob Sulzer made his own experiments with iron foundry. He was keen to be among the first Swiss manufacturers of cast iron. In Zürich, a competitor, Escher Wyss, had already stolen a march on him. When the two sons returned, the family felt confident enough to embark on the construction of an iron foundry. Overcoming the difficulties of finding investors prepared to risk their capital in a new type of venture, they opened their iron foundry on a new site in the Zürichstrasse in 1834. That is regarded as the year of the founding of the company, known thereafter as Gebrüder Sulzer (Sulzer Brothers) after young Johann Jakob and Salomon Sulzer.

The sons knew that to make a success of cast-iron manufacture they needed a new type of furnace, the so-called cupola. Their father was reluctant to make the additional investment, so the sons ordered it without his knowledge. After initial disapproval, the older man was forced to recognize the value of the acquisition in terms of both quality and productivity. Subsequent expansions followed a similar pattern, with the elder Johann Jakob being carried along in the wake of his more adventurous sons.

Also at this time there began a tradition of staff training which has persisted at Sulzer. The first workers were foreigners, mostly from Bavaria, but the Sulzer brothers realized that it would be more effective as well as more patriotic to use Swiss engineers. Accordingly, from 1834 onwards Sulzer provided training courses for young apprentices. The system was later formalized, and in 1870, by which time there were as many as 95 apprentices, a works training college was founded. This institution continued to operate under Sulzer management until 1989, when it was handed over for management by the canton, though Sulzer still maintains a supervisory interest.

In 1836, the firm was expanding. In its first two years of trading it had acquired 12 skilled journeymen, all of whom lodged with the young Johann Jakob Sulzer-Hirzel and were provided with meals by his wife, Marie Louise Hirzel, in the forerunner of the works canteen which soon followed. The mortgage on the foundry site had already been repaid. In 1839 a new, larger foundry was built, and the original 1834 building, still in use to this day, became a workshop. The brothers continued to supervise the work in person and the company gained a reputation for quality cast-iron goods. Output grew from 400,000 pounds in 1837 to over 1.6 million pounds after the new foundry began production, to 5 million pounds in 1884.

Johann Jakob Sulzer-Hirzel was always searching for new products, and during this period the company began to make boilers and stoves. A boiler made in 1841 for heating the Winterthur grammar school enhanced the company’s reputation for quality and reliability; it remained in service for a century. Sulzer-Hirzel also tried to use the latest production techniques, and in at least one case a novel piece of equipment suggested a new product line. In 1839 the foundry acquired its first steam engine, four horsepower, to replace the two horses that formerly turned the capstan working the bellows. A steam engine was then such a novelty that the citizens of Winterthur paid to come and look at it. Soon it was to become one of Sulzer’s main products.

Ten years later, Sulzer-Hirzel went on a trip to England where the manufacture of steam engines was at a more advanced stage. He brought back with him, together with his notebooks of research findings, a British steam engineer by the name of Charles Brown, who, as chief engineer, became the first Sulzer employee to hold a managerial position. Sulzer Brothers, now recognizably an industrial concern rather than a group of craftsmen, began to manufacture its own steam engines, most of them destined to power ships. Soon the engines became the mainstay of the enterprise, and Sulzer also went on to build some of the ships themselves. Steam railways were an obvious progression, and in 1871 Charles Brown went on to found the Swiss Locomotive and Machine Works (SLM) as a parallel enterprise. Among its products was the steam railway on Mount Snowdon in Wales, completed in 1894 and still running. In years to come SLM was to become part of Sulzer, which would also have dealings with Brown Boveri, a company which Brown’s son founded in Baden.

As the original brothers withdrew from the day-to-day running of Sulzer, retiring in 1860 and 1872, their sons Albert, Heinrich, and Edward Sulzer took over. They demonstrated the same spirit of innovation. In 1872 the company put on show a new steam engine, the first to incorporate valves, at the Vienna World Fair. After a slow start, due to the economic difficulties that beset Switzerland during the 1870s, this valve-based steam engine led to a period of dramatic growth for Sulzer. Between 1880 and 1895 the number of employees rose from 1,240 to 3,200. Despite the success of the latest engine, the quest for new products did not cease. In 1876 a patent was obtained for a rock-drilling device. From 1877 metal piping and tanks went into production, together with refrigeration equipment.

The first plant outside Winterthur was opened in 1885, at Ludwigshafen, Rhineland-Palatinate, Germany. The chief motivation for this new departure was the desire to circumvent import duties, but it was to be only the first of many foreign installations for Sulzer. The year after its opening, a new heating and ventilation division was added to the German works.

The company continued to flourish through the early years of the 20th century. In 1909, the 75th anniversary of the company’s founding, Winterthur and Ludwigshafen between them could boast a work force of 5,500. A new plant had been built at Upper Winterthur. Output of heating systems had increased by a factor of six over the preceding quarter century. Overseas expansion was beginning in earnest; by 1914, sales offices had opened in Milan, Paris, London, Cairo, Moscow, Bucharest, and Kobe, Japan.

New products continued to appear. The company had been working for some years to realize the ideas of Rudolf Diesel, who had taken out patents in 1892 and 1893. Although Sulzer was not the first to build a diesel engine, it had spotted the marine applications of this form of propulsion before any one else. The first diesel-powered oceangoing ship had been launched as far back as 1900, and the first diesel locomotive was to make its maiden run out of Winterthur in 1913; both had Sulzer engines. Sulzer also put the world’s first reversible two-cycle marine diesel engine on the market in 1906.

Despite these technical triumphs, some challenging business problems faced the original brothers’ grandchildren, who had assumed control during the first decade of the 20th century. Sales of the large steam engine, hitherto the firm’s best-selling product, were suffering from the advent of the steam turbine and the electric motor. This threat to the company was mitigated by using the spare capacity arising from the dwindling demand for steam engines to step up output of the profitable new diesel engines.

Sulzer’s management, however, felt that considerable capital investment was needed before the company’s newer products could become as commercially viable as the old ones had been. In any case, the company was outgrowing its original structure—there were now eight partners. Consequently, on the eve of World War I Gebrüder Sulzer was incorporated and became a limited company, able to raise share capital. Its name appeared on the public register of companies for the first time in June 1914.

During World War I, demand for diesel engines soared. Diesels became the chosen power source for submarines, because of their fuel efficiency and the comparative safety of diesel fuel in storage. Sulzer supplied diesel engines for the submarines of the U.S. Navy, and in 1917 the company granted a license to the Japanese Navy allowing it to upgrade its diesels in accordance with design improvements developed at Winterthur.

All this time, the policy of staff care and training that went back to the days of Katherina Neuffert was sustained, in spite of the fact that employees now numbered over 6,000. Canteens and recreational facilities were provided, and in 1918 a hostel for invalid employees was opened in the mountains. The following year saw Sulzer launch Switzerland’s first regular house newspaper.

Some of Sulzer’s research and development at this time was aimed at improving compression technology, essential to the diesel but also relevant to industrial evaporation processes. Sulzer installed the world’s first thermo-compression plant for industrial evaporation in 1917. Innovations between the wars related not only to diesels and compressors but also to such diverse fields as turbines, funicular railways, and ship propellers.

The company was hit badly by the worldwide Depression of the 1930s. Sulzer’s management implemented rigorous cost-saving measures and managed to reduce spending by around 22.5% in the three years from 1936. Staff numbers dropped back to 4,000. In spite of the cost-cutting measures, some assets also had to be sold. The Ludwigshafen works was sold off in 1940, though Sulzer was able to retain its heating and ventilation divisions.

Despite the Depression technical innovations and improvements continued. Industrial weaving machines and gas turbines were among the new products added to the range during this period. The firm also strengthened its overseas capacity, adding manufacturing plants in France and England, and a marketing operation in Argentina. The war years saw further overseas expansion, with the opening of offices in New York and Madrid.

The company’s perseverance in the face of the adversity of the Depression and war stood it in good stead during the postwar boom. Subsidiaries were created in Brazil, Johannesburg, Vienna and Norway, during the 1940s and 1950s. During the 1950s, the work force, already back to pre-Depression levels, grew from 6,200 to 10,400. In 1959 Sulzer celebrated its 125th anniversary with the opening of a new foundry at Winterthur, where its site now occupied an area of 330 kilometres square, three times as much as it had 25 years before.

The jubilee year of 1959 also saw the death of Hans Sulzer, who had been a cabinet minister, like his brother Carl Sulzer and uncle Edward Sulzer, as well as the chairman of Gebrüder Sulzer. He was succeeded by a new generation: Hans’s son Georg Sulzer became chairman, and Hans’s nephew Henry Sulzer also joined the board, along with Herbert Wolfer and Alfred Schaffner. Their aggressive approach to marketing and product development was rewarded in 1963, when Sulzer became worldwide market leader for the low-speed marine diesel engine. By 1966 Sulzer was providing one-third of engine capacity for newly launched oceangoing vessels, representing almost 2.5 million horsepower in total.

The 1960s saw Sulzer strengthening its competitive position through the acquisition of other Swiss firms operating in the same or similar markets. Notable examples included the acquisition in 1961 of the Swiss Locomotive and Machine Works of Winterthur, founded by Charles Brown 90 years previously, and—following the purchase three years earlier of a 50% share—the takeover in 1969 of the Zürich-based engineering firm of Escher Wyss. A temporary joint venture with Brown Boveri of Baden for the manufacture of turbo engines during the 1960s and 1970s ended when the two parent companies divided up the enterprise, with Sulzer retaining the capacity to manufacture the smaller turbines. By 1968 Sulzer had 32,500 workers and a turnover of SFr1.68 billion. The large corporation known today was taking shape.

Although the company was hit by the 1973 oil crisis, its vigorous worldwide growth continued into the 1980s. Weaving machine plants were built in Japan and in the United States, while domestic output of these machines also grew. Also in Japan, a fruitful and enduring joint venture with Toyoda Automatic Loom Works was established in the 1970s. Plants for pump manufacture in the Netherlands, West Germany, Brazil, and South Africa enabled Sulzer to meet local requirements better.

The Sulzer family had been quick to realize the importance of computerization and was building the foundations for its current electronics division as early as 1962. In 1969 it acquired an interest in ELMA Electronic, now a wholly owned subsidiary of Sulzer. Industrial automation was the focus of its early work, although it now makes electronic components as well as robotic systems, both for its own use and for sale to customers. A corporate computer center opened to serve the company’s administrative functions in 1972.

Both in its product lines and in its production methods, Sulzer has continued to innovate—its research-and-development budget was SFr228 million in 1989. The company claims to have the most advanced foundry in Europe. Today the forge is robotically controlled and casting too is computerized. The machine shop boasts the world’s largest longitudinal milling machine.

In 1988 Sulzer undertook a radical review of its business situation and strategy. Despite its valuable asset base the company recognized the need to improve profitability. Three options were considered: reorganization, further diversification, or focusing on the strongest areas of the business. This third option was adopted, as the one with the greatest long-term potential.

Accordingly, Sulzer began a period of reshaping, during which it began developing what it calls its pillar businesses, those in which profitability and market share are outstanding and where the company is highly regarded by its business partners. These pillar businesses consist of construction services, such as air conditioning and refrigeration—represented by the building and construction service group with 1989 turnover of SFrl.5 billion; weaving machines—led by the Sulzer Rüti Group, whose 1989 turnover was SFrl.l billion; and medical engineering—Sulzermedica, with SFr600 million in 1989 turnover. The area of medical engineering, with products such as pacemakers, defibrillators, and artificial heart valves and hip joints, is being expanded through acquisition; 1989 saw three important purchases in this field—Intermedies in the United States, and in Switzerland Allo Pro and a majority shareholding in Protek. Apart from the three existing pillar businesses, Sulzer planned to nurture certain promising divisions, largely through internal growth, during the 1990s. These potential pillar businesses include chemical engineering, paper machinery, and surface technology.

Less profitable areas are under scrutiny and will be sold off if they cannot be made profitable within a time limit. Gas turbines, knitting machines, and the historic diesel engines are among the areas in which disinvestment has taken place. The pumps, refrigeration, and turbo compressor divisions have begun to show signs of improving profitability, however.

This focus on profitable business areas is only one of five key objectives in Sulzer’s strategy for the 1990s, as summarized by Fritz Fahrni—since 1988 president of corporate executive management. Other objectives are: improvement of the quality of the end product; a motivated work force, both technical and managerial; satisfied share-holders, a corollary of a profitable portfolio; and a dynamic response to the requirements of a changing marketplace.

Sulzer believes that its key objectives will be best achieved through a decentralized company structure, which will encourage a spirit of entrepreneurship. Business units will be strategically independent, but will receive support from the central organization in terms of the management of human and financial resources, research-and-development services, and international marketing.

Georg Sulzer retired as chairman in 1981; since the retirement of Peter Sulzer in 1989 there have been no Sulzers on the board. Although no longer family run, Gebrüder Sulzer continues to bear the hallmark of the Sulzer family, maintaining its position not only by research to ensure that it is at the leading edge of technology, but also by shrewdly assessing and quickly adapting to the changing marketplace, entering into alliances with other firms when necessary.

A demonstration of this policy came in July 1990 when Sulzer, as the world’s second-largest diesel manufacturer, announced the formation of New Sulzer Diesel, a cooperative venture with other companies from West and East Europe to safeguard the European diesel industry against competition from the Far East. The chairman of the board and executive president of this company is Peter Sulzer. By maintaining its traditions of nurturing and developing staff, and ensuring that its products measure up to the Swiss reputation for quality workmanship, Sulzer should ensure that it enters the 21st century in good shape.

Prinicpal Subsidiaries

Swiss Locomotive and Machine Works (99.6%); Sulzer-Escher Wyss Ltd. (99.9%); Bell Engineering Works Ltd. (78.9%); Sulzer-Burckhardt Engineering Works Ltd.; Plasma-Tecknik AG; Gebrüder Sulzer Holding GmbH (Germany); Compagnie de Construction Mécanique Sulzer (France, 99.9%); Chauffage et Climatisation Sulzer S.A. (France, 99.9%); De Pretto-Escher Wyss s.r.l. (Italy); Sulzer Italia S.p.A. (Italy); Sulzer (UK) Holdings Ltd.; Sulzer España, S.A. (Spain); Sulzer Bros. Inc. (U.S.A.); Sulzer do Brasil S.A. (Brazil); Sulzer Bombas e Compressores S.A. (Brazil); Toyoda-Sulzer Sales Ltd. (Japan, 51%); Toyoda-Sulzer Manufacturing Ltd. (Japan, 49%).