KSB AG
Address:
Johann-Klein-Str. 9
D-67227 Frankenthal
Germany
Telephone: (49) (6233) 86 29 05
Fax: (49) (6233) 86 34 01
http://www.ksb.com
Statistics:
Public Company
Incorporated: 1871 as Frankenthaler Maschinen-& Armatur-Fabrik Klein, Schanzlin & Becker
Employees: 12,252
Sales: EUR 1.18 billion ($1.47 billion) (2003)
Stock Exchanges: Frankfurt Dusseldorf
Ticker Symbol: KSB
NAIC: 333911 Pump and Pumping Equipment Manufacturing; 332919 Other Metal Valve and Pipe Fitting Manufacturing
Company Perspectives:
KSB products' success stems in large measure from the company's own Research and Development. Specialists there put major emphasis on the continual improvement and automation of pumps and valves, and on the reduction of life cycle costs.
Key Dates:
1871: Three entrepreneurs found the Klein, Schanzlin & Becker.
1909: A presence in London is established.
1924: Production subsidiary is established in Homburg/Saar.
1930: KSB acquires major competitor AMAG in a hostile takeover.
1939: Jacob Klein gains a majority stake in KSB.
1942: Otto Klein-Kühborth becomes Jacob Klein's heir.
1949: French administration of the company ends, and dismantling after World War II is prevented.
1960: Otto Klein-Kühborth transfers his majority stake in the company to the nonprofit foundation KSB Stiftung.
1971: Wolfgang Kühborth takes over as CEO.
1986: KSB acquires a majority share in French pump manufacturer Pompes Guinard S.A.
1988: The company moniker is shortened to KSB AG.
1992: KSB gains a majority stake in Georgia-based GIW Industries Inc.
1995: KSB acquires a majority share in Chinese pump manufacturer Shanghai Pump Works.
2003: The company takes over Dutch pump maker DP industries B.V.
Company History:
KSB AG is Europe's leading manufacturer of pumps, valves, and related control systems for use in construction and housing, the chemical industry, energy generation, public water works, and mining. The company also engineers complete water supply, drainage, and waste water systems for municipal and industrial clients. Headquartered in Frankenthal, Germany, KSB operates 24 production subsidiaries in 19 countries on six continents and maintains sales offices in 35 additional countries. Pumps account for about two-thirds of KSB's total sales, and some 60 percent of the group's revenues derive from Europe. The nonprofit foundation KSB Stiftung, which is controlled by the Kühborth family, owns a 74-percent majority stake in KSB AG.
19th Century Groundwork
Company founder Johannes Klein was born in 1845, the first of seven children on a farm in western Germany. Eschewing both farming and his parents' hope that he become a craftsman, the intelligent young man successfully applied for a stipend to attend the technical school in Munich. After two years in Munich he added another year of studies at the technical school in Karlsruhe. The 20-year-old Klein then worked for two different machine manufacturers, where he gained a special interest in the design of steam boilers. In 1870 he introduced his own design for a boiler feed apparatus which was first installed at a brewery in Frankenthal, a small town 60 miles South of Frankfurt/Main.
The brewery owner, Friedrich Schanzlin, believed that Klein's apparatus had commercial potential and offered Klein help in obtaining funds to start a new enterprise based on his invention. After Klein had received a patent in June 1871, Schanzlin convinced a wealthy friend, Jakob Becker, to invest a significant sum in the new venture. In early August 1871, the new company--called Klein, Schanzlin & Becker--applied for a concession to build a machine building factory, which was granted about a month later. However, the endeavor encountered serious difficulties from the beginning.
As it turned out, Klein's patented novelty was not able to function for long periods of time; he had underestimated the effects of the calcium content in the so-called "pure" water. The growing deposits caused by calcium carbonate, gypsum, iron oxide, and magnesium silicate threatened to interfere with the secure functioning of his invention at a time when water purification technologies were yet to be invented.
Still, two manufacturing halls had already been erected and 12 workers hired for Klein's boiler feed apparatus, so Johannes Klein and his business partners decided to shift to producing specialty plumbing fixtures and installations used in commercial water supply systems. The time for starting such a new venture were far from ideal. The stock market crash in Vienna in May 1873 triggered a wave of bankruptcies throughout Europe. Industrial enterprises in the newly-founded German Empire went out of business. and price levels were dropping constantly for six consecutive years. However, despite these trying times, with a mixture of perseverance, business sense, conservative financing. and vision, Klein managed not only to stay afloat but to grow his business and lay the foundation for long-term future success.
Klein focused on improving and redesigning specialty plumbing fixtures and installations for steam engines and larger water supply systems, such as specialty faucets, security valves, and pumps. At a time when selling these articles was the hardest part of the business, Klein constantly adjusted his product line to meet the market's needs. Instead of using sales brochures with lots of technical details, he carried with him small models of the fixtures his company made--some attached like charms to his watch chain--to explain their advantages to potential customers. For several years production was sporadic and sometimes chaotic. Still, Klein's workforce had grown to 40 by 1874.
While Klein avoided large experiments and costly development projects, he constantly refined his company's product line, gradually focusing on a variety of pumps. Among Klein's major customers was the coal mining company Saargruben, which he supplied with custom-made water systems, including pipelines.
During this time Klein took two important steps to secure the future growth of his enterprise. First, he established a broad financial basis, restructuring Klein, Schanzlin & Becker as a joint stock company. Then, throughout the 1890s, he expanded the factory grounds more than five-fold by way of land exchanges and purchases. By 1911 the company's real estate holdings had again tripled. The workforce had grown from about 500 in 1893 to 1,200 at the turn of the century.
Leadership through War and Depression
In 1901 Johannes Klein contracted a serious case of the flu and asked his youngest brother Jacob to help him out. At that time Jacob Klein--24 years younger than his brother--was selling the company's products in England. Johannes Klein had financed Jacob's mechanical engineering studies and had named him the company's director in 1894. In practice, however, Johannes Klein still ran every step of the business, and in 1896 had sent Jacob to establish the company's first foreign subsidiary, in England. At the ailing Johannes's request, Jacob returned to Frankenthal to become executive director of Klein, Schanzlin & Becker. Yet, as soon as Johannes had regained his strength, he returned to running his company, a situation that led to conflict between brothers, particularly in the areas of finances and sales. This rivalry did not end until Johannes Klein's death at the age of 72 in 1917. By that time, however, Jacob Klein had already been the company's main driving force for ten years.
When World War I began in 1914, the company--by now known simply as KSB--was suddenly cut off from its export markets, including England and France, and some 1,000 of the company's 1,600 workers were called up for military duty. Under these circumstances Jacob Klein decided to focus exclusively on the manufacture of such war-related products as ammunition, torpedo parts, and pumps and plumbing fixtures for military ships and submarines. As a result, KSB's workforce soon swelled to over 4,000 during the war.
However, heavy taxation consumed most of the company's profits. Left with a workforce consisting primarily of women and prisoners of war and having almost no funds to replace the run-down machinery, Klein and KSB had to look to the future and peacetime production strategies. Moreover, the trouble had just begun. After Germany's defeat in 1918, the country's currency collapsed under the heavy load of war bonds and reparation obligations. In January 1923, when inflation was nearing its peak, French and Belgian troops occupied the western German Ruhr. After German railroad workers went on strike in March, shipping KSB products became almost impossible. The French had already arrested many industrial leaders of the region, but Jacob Klein fled to Mannheim, about ten miles east, on the other side of the river Rhine, where he had moved KSB headquarters in 1921. Due to hyperinflation, wages were paid out daily, while business operations became more and more chaotic and had to be shut down completely at times. In the fall of 1923 a separatist movement demanded the establishment of an independent republic west of the Rhine. The attempt was finally defeated in January 1924. One month later KSB headquarters were moved back to Frankenthal.
In the midst of political and economic turmoil, Jacob Klein pursued his vision of KSB as a network spanning Germany and all of Europe. Klein's vision had several more components: to broaden KSB's product line of specialty pumps without the effort of costly research and development; to enlarge production capacity without investing in costly new buildings in Frankenthal; and to cut costs by acquiring a foundry of its own.
Between 1924 and 1934 KSB established and acquired several new production subsidiaries. Scouting a location in the French-occupied Saar to revive export business with France, Klein decided to set up another production plant, the Pumpen-AG, in the small town of Homburg. In mid-October 1929, just before the onset of the Great Depression, KSB acquired machine manufacturer Maschinenfabrik Oddesse GmbH in Oschersleben, west of the city Magdeburg. One year later, in a hostile takeover, the company gained a majority stake in Nuremberg-based Armaturen- und Maschinenfabrik, vormals S.A. Hilpert (AMAG), a major competitor roughly the size of KSB and founded in 1854. Now more than doubled in size, the KSB group bought its own iron and steel foundry, Leipzig-based Eisen- und Stahlgiesserei Max. Jahn, in 1930. Four years later the company acquired another manufacturer of pumps based in the northern German city Bremen, L.W. Bestenbostel & Sohn GmbH. The various KSB subsidiaries started specializing in certain types of pumps. Jacob Klein's vision had become reality. In 1931, at age 62, he stepped down as KSB's executive director and handed the leading position over to his chosen successor and long-time right-hand man Otto Kühborth.
1930s-60s: Building an International Presence
Shortly after the 25-year-old business and law school graduate Otto Kühborth had joined KSB in 1921, Jakob Klein asked him to move from a technical position into the bookkeeping department. Three years later Klein made Kühborth responsible for the management of the newly established KSB subsidiary in Homburg in the Saar. Soon Kühborth, who married Klein's grandniece, became the man who set Klein's ideas and visions into practice. He helped acquire the majority share in AMAG before anyone even took notice. When Kühborth took over as CEO in 1931, the Great Depression was nearing its peak in Germany. KSB's workforce had shrunk to 749, about of half of 1927's workforce. Two years after Adolf Hitler's National Socialist Party came to power, the people in the Saarland voted to join the German Empire, and KSB's plant in Homburg became a domestic subsidiary. To counteract the increasing isolation of Germany in Europe, KSB focused on exports overseas and invested significantly in new product development in areas such as shipbuilding and fuel production. Jacob Klein celebrated his 70th birthday on July 3, 1939, three months before the outbreak of World War II; he was KSB's majority shareholder.
Without hesitation Otto Kühborth followed the call to military duty in fall 1939. However, he remained the company's leading executive and used his leave to deal with business matters. Once again KSB started making war goods, including fuel system parts for V2 rockets, which were produced in Frankenthal under high secrecy, the workers themselves not knowing what the parts they were making would be used for. During the war the company maintained its pump production, which continued to account for most of the output in Frankenthal. KSB employees who were drafted in the military were kept informed about the latest developments at KSB through a special newsletter; more and more of the work was being performed by women.
Two years into the war, Jacob Klein began to ponder the fate of his enterprise after his death. Unmarried and childless like his older brother Johannes before him, he decided to formally adopt Otto Kühborth and make him the sole heir of his company. Kühborth agreed and became Klein's adopted son in January 1942, changing his name to Otto Klein-Kühborth. During the heavy bombings by the Allied Forces between 1942 and 1944, KSB's plants in Bremen and Nuremberg were completely destroyed. After the Frankenthal plant was hit in the fall of 1943, manufacturing operations were split up and distributed among 39 towns across the Palatinate region. In May 1944 Otto Klein-Kühborth returned to Frankenthal and took over KSB's management again. In March 1945, when American troops occupied the region, Jacob Klein was killed in an accident. During the last weeks of the war, Klein-Kühborth transferred his inherited majority share in KSB to Kleinschanzlin Pumpen AG in Homburg (a former subsidiary which he had sold to a friend in the Saar when Jacob Klein was still alive). This step was meant to protect KSB from a takeover by the French who--the two men correctly anticipated--would treat enterprises based in the Saar less strictly than companies in the Palatinate.
In mid-June 1945 the American military administration allowed the Kleinschanzlin Pumpen AG to resume operations. Despite the fact that the plant in Frankenthal never received such an official permit, workers there began to take on repair work and later started making hand-pumps which became so popular that they were used as a barter currency. KSB's two production plants in central Germany were seized by the Russian authorities and later expropriated. In 1947 KSB came under the administration of the French occupation forces. A trustee from outside the firm was appointed as chief executive officer, and he submitted every decision the company made to the French authorities for approval. In addition KSB found itself on a list of companies to be dismantled as a war reparation. In a long, tough, bureaucratic fight, the dismantling was prevented. By the time the foreign administration ended in February 1949, KSB had shrunk to three production plants.
After the death of one of the three surviving members of KSB's advisory board, Otto Klein-Kühborth became the board's president in 1949 and led the company through the postwar reconstruction period. The company profited from the conversion of big parts of the German economy from coal as a major fuel to mineral oil and natural gas, a transition which created an increasing demand for pipeline installations, including pumps and related fixtures. However, Klein-Kühborth's major focus was on KSB's international expansion. In 1947 a small subsidiary was established in Luxembourg, through which the company expanded into Belgium and the Netherlands. Between then and 1959 KSB sales offices sprung up in France, Italy, England, Switzerland, Austria, Greece and Spain. In the 1950s and 1960s KSB expanded its reach overseas. Sales offices and production plants were established in Pakistan, India, Argentina, Brazil and South Africa and a joint venture was set up in Japan.
Meanwhile, KSB's German subsidiaries were merged into Klein, Schanzlin & Becker AG in 1959. Five years later Otto Klein-Kühborth transferred his majority stake in the company to the nonprofit foundation KSB Stiftung which had been founded earlier by Jacob Klein. In 1971 he was succeeded as CEO by his son Wolfgang Kühborth.
1970s-90s: Dynamic Growth
The early 1970s were a period of dynamic growth for KSB with sales increasing by more than 12 percent annually. By 1970 KSB's export business accounted for 37 percent of the company's total sales of DM 385 million. Its foreign subsidiaries contributed an additional DM 110 million to the group's revenues. With 16 production subsidiaries, four of them in Germany and seven overseas, the company had again become a considerable presence.
Wolfgang Kühborth had been a member of KSB's executive management team for 12 years when he took over as CEO in 1971. He combined the technical knowledge of a machine tool engineer with his Swiss business school know-how. At KSB he oversaw the Frankenthal production plant in the late 1950s, took over responsibility for the company's foreign subsidiaries in 1962, and became KSB's Executive Technical Director one year later. After his father's death in 1976, Wolfgang Kühborth became president of the company's advisory board. However, when an economic downturn resulted in a severe crisis for KSB in the early 1980s, he resumed the responsibilities of CEO and led the company through a five-year period of cost consolidation and rationalization.
Under Wolfgang Kühborth's leadership the KSB group of companies developed from an export-oriented German enterprise into a truly global player. The number of foreign production subsidiaries, as well as the company's international distribution network, were considerably strengthened. The main event that marked this transformation was KSB's acquisition of the French market leader for industrial pumps, Ets. Pompes Guinard S.A., which was founded in 1919. The close contacts Otto Klein-Kühborth had established with the company's founding family were further developed by Wolfgang Kühborth who had a personal interest in France. Beginning in 1983, the two companies mutually supplemented their product ranges to compete against other pump manufacturers from overseas. Three years later KSB acquired a majority stake in the French company with four domestic production plants and 1,450 employees. Pompes Guinard was also the market leader in Africa. In the years following the acquisition, the French and German KSB branches were integrated, as were two other French manufacturers with about 800 employees that the company had acquired. French became the company's second language, and two of the five global business divisions created in 1989 were headed by French managers. In the late 1980s KSB group also ventured into the United States, focusing on waste water systems and power generation for industrial clients. In 1992 KSB acquired a majority stake in Georgia-based GIW Industries Inc., the world market leader for heavy duty pumps used in mining and for dredging pumps. In the late 1980s to mid-1990s joint ventures were set up in Turkey, Saudi Arabia, Thailand, Indonesia, and China. After entering into a joint venture with Shanghai Pump Works, one of China's leading industrial pump manufacturers, in 1992, KSB acquired a majority share in the Chinese partner firm three years later and renamed it KSB-Shanghai Pumps Co.
At the beginning of the 1990s KSB was Europe's largest pump manufacturer with over DM 2 billion in sales. However, growing pressure on prices from an increasing number of global competitors, stagnating markets in Western Europe, and economic crises in Latin America presented the company with new challenges. After the two German states were reunited in 1990, KSB acquired the pump manufacturing unit of eastern German VEB Kombinat Pumpen und Verdichter in February 1991. However, after West Germany's strong currency replaced the East German Mark, the Eastern European customers of the Halle-based company were no longer able to afford its products. The company slipped deeply into the red, and KSB decided to move its environmental engineering unit from Pregnitz to Halle. At the same time, shrinking markets in Germany and France and cheaper competition from overseas began to threaten KSB's core business with industrial pumps. In 1993 the company's French and Mexican subsidiaries produced losses. A major problem was that the company had taken on too many large projects in the energy sector which were financed by loans and did not cover all the cost. In 1995--the year of the company's 125th anniversary--KSB found itself on the verge of bankruptcy.
Retooling for a New Century
In February 1996, 71-year-old Wolfgang Kühborth was back in the trenches as president of the company's board of directors. KSB's management team was replaced, and the company launched a rigorous cost-cutting and restructuring program. The pump business was split into three divisions for standard, serial, and customized pumps, while the production of plumbing fixtures, the foundry, and the repair and service operations were spun off into independent subsidiaries. Between 1995 and 2002 KSB cut its workforce by roughly one-fifth, mainly in Germany and France. The foundry in Frankenthal was closed down, and the Bremen subsidiary was transformed into a service center. Production facilities in Europe were downsized, while the ones overseas--especially in India, Pakistan, Brazil and China--were expanded. Although the company was back in the black by 1997, KSB's sales were negatively affected by the economic crises of the late 1990s in Asia, Russia, and Latin America.
Since 1993, Wolfgang Kühborth's two sons, Klaus and Gerd, had headed Klein-Pumpen GmbH, the financial holding company for the KSB group. After Gerd Kühborth died in 2003, Klaus Kühborth--as a member of KSB's advisory board--was the last family member actively involved in the company.
Looking toward the future of KSB, CEO Josef Gerstner set his sights on new geographic markets, such as Poland and the United States, as well as new product markets such as technology for the desalinization of sea water. The company was planning to launch new products, such as the leak-free pump for chemical plants and high speed trains. Long-term contracts with major clients such as water utility companies Vivendi and Lyonnaise des Eaux were seen as future assets for KSB. Another path the company intended to pursue was to add value by designing, building, and running complete pumping stations for water works.
Principal Subsidiaries: KSB S.A.S. (France); PAB Pumpen- und Armaturen-Beteiligungsgesellschaft mbH (Germany; 51%); KSB Pumps Limited (India; 40.54%); KSB Bombas Hidráulicas S.A. (Brazil); KSB Pumps (S.A.) (Pty.) Ltd. (South Africa; 50%); GIW Industries Inc. (United States); KSB Inc. (United States); KSB Chile S.A. (Chile); KSB Italia S.p.A. (Italy); AMRI Inc. (United States; 89.97%); KSB-Pompa, Armatür Sanayi ve Ticaret A.S. (Turkey; 76.48 %); KSB Finanz S.A. (Luxembourg); N.V. KSB Belgium S.A. (Belgium); KSB America Corporation (United States); KSB Pompy I Armatura Sp. z o.o. (Poland); KSB LIMITED (United Kingdom); Rotary Equipment Services Ltd. (United Kingdom); AMVI S.A. (Spain; 99.8%); KSB Österreich Ges. mbH (Austria); KSB Shanghai Pump Co. Ltd. (China; 51%); Techni Pompe Service S.A. (France); KSB-AMVI S.A. (Spain); MIL Controls Limited (India; 51%); KSB Nederland B.V. (Netherlands); KSB Pumps Co. Ltd. (Pakistan; 58.89%); KSB Moerck AB (Sweden; 55%); KSB Comp. Sudamericana (Argentina); KSB de Mexico, S.A.; Canadian Kay Pump Ltd. (Canada); KSB Zürich AG (Switzerland); Hydroskepi GmbH (Greece); KSB A/S (Denmark).
Principal Competitors: Ebara Corporation; IMI plc; ITT Industries, Inc.
Further Reading:
- "KSB: Schlechtestes Ergebnis der Unternehmensgeschichte," Frankfurter Allgemeine Zeitung, April 30, 1996, p. 24.
- Schiele, Otto H. (ed.), Die Goldene Mitte II, Frankenthal, Ger.: Klein, Schanzlin & Becker Aktiengesellschaft, 1996, 287 S.
Source: International Directory of Company Histories, Vol.62. St. James Press, 2004.
