EuroStahl Automobilgruppe AG (ESAG AG)
EuroStahl Automobilgruppe AG (ESAG AG) is a German-Luxembourgish EuroKombinat founded in 1991 after the merger of the German Mercedes Vauxhall AG with the Luxembourgish heavy industrial giant ARBED headquartered in the Rhine-Ruhr MegaKomplex, Federal Republic of Germany. Described in the business press of the time as a merger of equals, the maneuver created perhaps the first true inter-European Community business venture. ESAG operates in a variety of sectors from car manufacturing (it controls famous brands like Mercedes-Benz which creates a large family of vehicles which includes both personal transport as well as heavier trucks, the electric car pioneer VoltWagen, Aston Martin, Valkyrie, a consolidation of several luxury brands like Rolls-Royce, Jaguar and Bentley, Maybach) to shipbuilding in Belgium and the Netherlands, an aerospace branch, financial services, leasing services and several joint ventures with foreign companies.
History
i)Parallel development
The first half of what would become ESAG AG, Mercedes-Vauxhall would be created through a document known as ‘The Agreement of Mutual Interest’ signed on 1 May 1924 between the companies known as Benz & Cie. and Daimler Motoren Gesellschaft. The agreement would lead to an official merger two years later under the official name Daimler-Benz AG and the brand name of "Mercedes-Benz". The inclusion of the name Mercedes in the new brand name honored the most important model series of DMG automobiles, the Mercedes series, which were designed and built by Wilhelm Maybach.
Across the border, the other half of ESAG, Aciéries Réunies de Burbach-Eich-Dudelange better known by its acronym ARBED was created in 1911 after the merger of three smaller steel-producing companies of various controlling interests, both German (at the time Prussian) and Luxembourgish as the two countries had maintained close cross-border economic relations at least since the 1850s. A variety of companies with shared interests as well as joint executive personnel would be formed and the increasingly complicated nature of the international steel trade would lead to the need for a merger which took place in 1911.
During World War II, Daimler-Benz AG was quite active in the German War Effort. It was responsible for producing a notable series of engines for German aircraft, tanks, and submarines. Its cars became the first choice of many Nazi, Fascist Italian, and Japanese officials including Hermann Göring, Adolf Hitler, Benito Mussolini and Hirohito, who most notably used the Mercedes-Benz 770 luxury car. Daimler-Benz facilities were also given contracts to produce parts for German weapons, most notably barrels for Mauser Kar98k rifles. The company was also a “beneficiary” of the concentration camp system, utilizing close over 60.000 concentration camp prisoners and other forced laborers.
After the War, Daimler-Benz AG had several of its facilities seized by Allied Powers however after the admission of its links with the regime and the payment of some reparations, most of the facilities were returned to working order. The post-War management divested some of its defense-related assets to focus more closely on its key center of profit. During the aftermath of the Crash of ‘56, Daimler-Benz had reconstituted itself enough to be able to participate in the acquisition of several British automobile brands with additional funding provided by the Deutsche Bank. Historic British automobile brands like Vauxhall, Rolls-Royce, Aston Martin, Bentley and Jaguar came under its control. Due to the acquisition Daimler-Benz was transformed into Mercedes-Vauxhall AG to denote its more expanded reach while the acquisition of Rolls-Royce allowed the company to expand into the aerospace industry although it would remain solely interested in the creation of airplane engines and several internal electronics, selling components to other larger manufacturers.
Under the Mercedes-Vauxhall brand, the corporation would expand its worldwide operations into several industrializing countries in Asia like Malaysia, South Korea (in cooperation with Hyundai), Vietnam, Taiwan, India (in cooperation with Tata Industries) Indonesia, in Africa mainly in Egypt, Algeria and South Africa and countries like Brazil and Colombia, taking advantage of the favorable labor laws and work ethic of the local populations in order to produce vast amount of commercial products and some of the heavier and less technologically sensitive vehicles while their more sensitive and technologically complex models are constructed in the Federal Republic of Germany, Denmark, the United Kingdom and more recently Spain after the acquisition of the local SEAT brand.
At the same time, ARBED would operate close to thirty blast and electric furnaces and several other steelmaking plants and rolling mills, reaching close to 830000 tonnes of steel production. While World War I would bring production to a halt, the following decades proved to be very successful as ARBED expanded internationally through the acquisition of several companies in Belgium and Germany (which became especially important after the stipulations of the Versaille Treaty) in the 1920s. Further expansion into South America and the transport sector would follow through the 30s. The company would be commandeered by the Germans after the fall of Luxembourg in 1940 and would use several hundred forced laborers and prisoners of war from the Soviet Union, France, Belgium, Poland, and Italy with the forced labor camp at the sheet metal rolling mill in Burbach as it worked under Nazi management.
Following the end of World War II, ARBED played a key role in the development of the Luxembourg economy as it would find itself the beneficiary of political changes (the shift towards European Economic integration) and the demands of the Global and European Markets for the steel to reconstruct and expand. During this period, the company would come to represent close to 30% of the total sum of added value in the national Luxembourg economy. ARBED would also move to expand in the rest of the Low Countries, acquiring maritime steel production facilities in Ghent, creating joint production facilities in the Republic of Korea and partnering with the Dutch shipbuilding concern Damen however the situation seemed to take a turn for the worst in the early 1980s as the global market seemed to stabilize and have a decrease in its inexorable need for steel.
ii)The War Years and the Post-War World
During the Third World War both companies would be involved in the Allied War Effort in various departments. Mercedes-Vauxhall had several lines of vehicles already created for military use and serving in various armies around the world while ARBED steel was widely traded and used through Europe and the World while various ships created in their Dutch and Belgian shipyards served in smaller Allied Navies.
Mercedes-Vauxhall lost a few facilities, mainly in the Austrian states of the Federal Republic, however its overseas plants were able to pick up the shortfall and would acquire several new plants "liberated" by the Bundeswehr in Thuringia and the former communist Austria. ARBED recovered from its brief rough patch in the early 80s when the steel market was expected to stall as renewed increased demand during and after the Third World War and remained one of the most productive in the world, providing a record 8% of steel in the American market.
iii)The Merger
The merger between the two industrial giants is rumored to have been initially proposed in 1987 during the war years at a war time production conference in Paris. Mercedes Vauxhall CEO Dr. Wolfgang Richter had been chosen as the head of a group of investors within the corporation who admired his cold and calculating approach. The members of the Bonn Gruppe were mostly older members of Mercedes Vauxhall, some of them from the Second World War years, who had been irked by what they perceived as the dismissive attitude towards Mercedes Vauxhall as mere ‘car-mongers’ by the larger Krupp-Rheinmetall and Siemens executives. Dr. Richter correctly identified that ARBED provided the perfect set of interests to contest the aforementioned corporations.
His counterpart at ARBED, Jean Claude Kleinberg was more interested in getting the best deal for his shareholders as well as a definitive leg in the German Steel Market, long contested by Krupp-Rheinmetall as well as several medium sized companies. After long negotiations and corporate maneuvers which which were concluded in 1991 and saw the inclusion of French and Luxembourgish state involvement and considerable investment by partners of the two corporations, EuroStahl Automobilgruppe AG or ESAG AG was created. The move was inaugurated with the acquisition of steelworks in the liberated Thuringia and the rebuilding of plants around Bremen. These moves found most of its detractors within Germany itself as the unity of purpose within the halls of the Council seemed to waver, a sign that the old “Kameraden” were replaced by a new breed of businessman, less interested in ideology and more focused on the pure hunt of profit.
Main Products and Services
-Automotive Manufacturing
Automotive manufacturing is one of the key profit centers of ESAG. The company provides some of the best automobiles in the world through a variety of brands such as Mercedes-Benz which produces commercial vehicles for personal use, Daimler Truck which produces heavier trucks, buses and large transports including those for military applications, VoltWagen which released Electra in 1992, the first practical electric car model, Vauxhall which produces cheaper types of vehicles for the working class, Aston Martin, Valkyrie whose series of limousines are highly sought after by heads of state and VIPs and Maybach.
To achieve that, the ESAG and its predecessor has invested heavily in design, safety measures, electronics' suites and emerging technologies like built-in Dedicated Intelligent Controllers (Weak AI).
While on average more expensive than an American car, ESAG’s vehicles are considered a much safer, more comfortable and stylish option. The company holds several safety awards from global institutions while their most advanced designs like Valkyrie’s Brunhilde limousine, in use as the personal vehicle of the West German Chancellery combines style with an impressive suite of features including but not limited to heavy armor, self-driving capabilities in the case of driver loss, hidden weapon mounts, run-flat tires, an interior that can be completely sealed to protect the occupants in the event of a chemical attack, night vision optics, a tear gas cannon, onboard oxygen tanks, an armored fuel tank filled with foam to prevent explosion and a small arms container.
-Steel Production and adjacent research and development
ESAG facilities produced 85 million tonnes of steel in 1992 of various grades and makes. Beyond servicing global demand, this sector aligns well with ESAG’s own in-house interests as its automotive steel is considered one-third stronger than other available types for car making. Production facilities are concentrated in Belgium, Luxembourg, several areas in France, Algeria, the Federal Republic of Germany, Italy with major facilities outside of Europe located in Algeria, Brazil, India and recently Argentina.
-Mining
ESAG operates various mines around the world in order to support its Steel Production.
-Shipbuilding
ESAG’s shipbuilding is centered around facilities in Antwerp which are supplied by the Ghent Maritime Steel Facility and Gorinchem in the Netherlands. ESAG’s shipbuilding produces both military and civilian vessels.
-Aerospace
ESAG has inherited Mercedes-Vauxhall’s aerospace branch which is responsible for the production of engines and electronics for aircraft. Strategic partners for ESAG are smaller German manufacturers like Dornier and the Dutch Fokker.
-Financial Services
ESAG has a small branch centered around insurance services for automobiles and maritime vessels.
-Software development
ESAG has inherited Mercedes-Vauxhall’s software branch and has expanded it considerably after the merger, seeking to improve the self-driving capabilities of their cars as well as creating their own proprietary maps navigation system for installation in their vehicles.
Ownership and Subsidiaries
i)Ownership
Ownership of ESAG AG is divided as such:
- Bonn Gruppe KGaA: 25.25%
- Institutional Investors in the Federal Republic of Germany: 15%
- Hong Yoon-hyung, Hyundai Executive through a London-based Holding Company: 9.69%
- Smaller EC based investors: 9.02%
- Agence des participations de l'État, French Republic: 5%
- Grand Principality of Luxembourg: 5%
- EuroBank, European Community Central Bank: 5%
- Kuwait Investment Authority: 2.3%
The remaining 28.74% is freely traded outside of the listed entities.
ii)Subsidiaries
ESAG AG has several subsidiaries with the most significant being:
- ESAG Group AG - Serves as the central body and owner of the subsidiaries
- Mercedes-Benz AG
- Vauxhall
- Aston Martin
- Valkyrie
- Maybach
- ESAG India (joint venture with Tata Motors, headquarters in Bombay)
- ESAG Asia (Headquartered in Hong Kong, handles wider Asian affairs)
- ESAG Korea (Headquartered in Busan, handles steel, shipbuilding and automotive operations in the Republic of Korea, joint venture with Hyundai Group)
- ESAG Africa (Headquartered in Alexandria with a smaller compound in Cape City)
- ESAG South America (Headquartered in Panama City)
- ESAG-DASA AG (Aerospace division, headquartered in Stuttgart, FRG)
- ESAG Financial
Public
Perception
ESAG itself is too recent of a development to have a definitive brand in the global zeitgeist however its parts have been around long enough to have an impact. While Mercedes and its more luxurious brands have become a sign of wealth and conspicuous consumption, ARBED has less of a stellar reputation abroad as its facilities have been caught up in several environmental breaches, most recently in Brazil where the town of Volta Redonda suffered from a streak of black rain caused by the emissions of a large steelworks installation operated by ESAG. Reparations have usually been awarded in the European side of the pond however with increased tensions between the EC and the AFN, ESAG might find itself on the path of several compliance lawsuits.
Notable members
-Dr. Wolfgang "the Cold Surgeon" Richter, CEO of ESAG AG, Chairman of Bonn Gruppe KGaA
Wolfgang Richter was born in Munich, Germany in 1944 to a middle-class family. His father was a skilled engineer who instilled in him a strong work ethic and a passion for precision and efficiency. From a young age, Richter showed exceptional intelligence and determination, earning a scholarship by Mercedes-Vauxhall which sent him to study at the Karlsruhe Institute of Technology where he earned a degree as a mechanical engineer. While entering the company as an engineer, his social skills quickly moved him on an executive and managerial track. He developed a reputation for being a disciplined and focused individual who consistently delivered results which earned him the nickname "the Cold Surgeon" within corporate circles.
In 1983 was appointed as the Chairman of the Bonn Gruppe, a conglomeration of investors that controlled close to 18% of Mercedes Vauxhall and tasked him with finding a way to enhance the position of the corporation vis-à-vis the other German conglomerates. As luck would have it, Richter had been working on a solution on his own volition and presented them with a plan of merging with the Luxembourgish conglomerate ARBED. The first step would require an internal reorganization as the Bonn Gruppe would increase its percentage holding to oust rivals to the merger, a slow process which was followed by merger negotiations which several members of the West German industrial elite tried to thwart and reverse which necessitated further maneuvers and even culminated in an assassination attempt against Richter which was only thwarted by the defensive measures of his Valkyrie Executive Limousine which was able to intercept three RPG rockets while tanking the hits from two more before the perpetrators withdrew.
While his nickname would suggest a drab and uninteresting man, Richter has been noted as charming, polish and bon viveur. He is considered one of the Corporate world's most eligible bachelors, a reputation he shares with Jonathan Reynolds, the co-CEO of Ameroil with both men being frequently featured in tabloid magazine coverage. While the more brass American CEO welcomes the attention, Richter is more protective of his personal life and has engaged in several legal battles with various news outlets.
Key Locations
-ESAG Towers, ESAG HQ, Rhine-Ruhr MegaKomplex
The ESAG Headquarters in the Rhine-Ruhr MegaKomplex is built in keeping with its cutting edge image. It is composed of four linked towers named Daimler, Benz, Maybach and Luxembourg all surfaced in gleaming, mirrored glass. Currently two out of four towers are complete with their construction finished in 1991 and 1992 respectively with the other two still under construction, having being brought down during the Battle of the Rhine-Ruhr MegaKomplex in 1986.
Author's notes:
-One of the Corporations that is featured in my current
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