Déjà-vu: DB Schenker in East and South East Europe 9783205793670, 9783205796213

Citation preview

 

Dieter Stiefel

Déjà vu DB Schenker in East and Southeast Europe

2014 Böhl au Ver l ag Wien Köln Weimar

Bibliografische Information der Deutschen Nationalbibliothek: Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. © 2014 by Böhlau Verlag Ges.m.b.H & Co. KG, Wien Köln Weimar Wiesingerstraße 1, A-1010 Wien, www.boehlau-verlag.com Alle Rechte vorbehalten. Dieses Werk ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist unzulässig. Korrektorat: Melanie Mandl, Wien Umschlaggestaltung: Michael Haderer, Wien Satz: Michael Rauscher, Wien Druck und Bindung: Balto Print, Vilnius Gedruckt auf chlor- und säurefrei gebleichtem Papier Printed in the EU ISBN 978-3-205-79621-3

Dear Readers, The book you are holding in your hands is the next volume of a series that provides an in-depth portrayal of the history of the Schenker organization. After “Das Haus Schenker”1, “Grenzenlos”2, and “Go East  !”3 this work describes the development of our network towards Eastern and South-Eastern Europe, from the earlier period of the late 19th century through the time of the Cold War, the fall of the Iron Curtain and then up to the recent history of our company. Gottfried Schenker was a pioneer who managed to rapidly overcome the boundaries of the Austro-Hungarian Empire, both to the west and, more significantly, to the east, into the former Ottoman Empire and beyond. Ultimately, the company he founded was able to provide reliable and attractive solutions to meet the needs of customers from trade and industry in a time of rapid growth – a principle which continues to guide our company to this day. No matter what country or era we turn our sights to, our organization’s focus on customer needs and reliable solutions – even in the most troubled times of the last century – becomes clearly evident. Again and again, there have been entrepreneurs, individuals who with their initiative, commitment, verve and luck drove business development forward and contributed to the growth of the entire organization. This book will give you an insight into the conditions in which these individuals and their teams operated, as well as the political situation they had to contend with. I hope you enjoy the book. Thomas Lieb DB Schenker Logistics Chairman of the Board

5



Early summer 1993  : An American company planning to build a sawmill with an adjacent board factory in the western part of Romania had selected Schenker as its project freight forwarder. In order to negotiate details with project manager Sean Kelly, I had arranged a meeting at the Sofitel Hotel in Bucharest, one of the few hotels with Western standards at that time. In spite of all warnings, I was taken by surprise at the airport by a “false” taxi driver who ushered me and my luggage to the parking lot where his car – an old Dacia, the car body of what we know as Renault 16 – stood waiting. I soon realized this wasn’t an official taxi, but one of the many private drivers hoping to make a few quick dollars – a common phenomenon at the time. My luggage disappeared into the trunk between heaps of junk as I settled into the back of the car. Communication was limited to hand signals as we could not find a common language. All of a sudden I noticed three – not exactly trustworthy-looking – men approaching the rear end of the car. My first thought was  : “Now this is the last of my luggage”. Instead, the men knocked on the trunk and signaled to the driver to release the clutch and put the car in neutral. The Dacia’s ignition wasn’t working and these three men were its live replacement. After being pushed for a short distance in idle, the Dacia finally sputtered out of the airport car park. This is just one example of how people in all Southeastern European countries improvised as they tried to partake in the economic boom of the era. It was like a gold rush  ! The combination of strong old party structures, rapidly emerging new economic elites and quickly spreading global corporations resulted in an interesting mixture of the most diverse business cultures. Over the past 25 years, Southeastern Europe has experienced significant development, both economically and politically. The people in this part of Europe have shown great flexibility and willingness to change. Although the fever has cooled down since the 2009 crisis, these investments – whether in infrastructure or in social areas – must be continued. The global players, especially from the automotive and electronics industries, will be supplying Western Europe with their latest developments from their production sites in the East. And as a consequence, Southeastern Europe will naturally continue to prosper. For DB Schenker, Southeastern Europe, with its large economies such as Turkey and its young Balkan countries, continues to be a highly attractive region. Many 7

countries still need time to develop the necessary stability in their political and economic structures. Meanwhile DB Schenker has built up strong national organizations in the whole region and will continue to engage itself actively in this multiethnic part of the world. This book describes our path back to Southeastern Europe – a path lined with many great challenges, but also many successes. Kurt Leidinger CEO , DB Schenker Logistics Austria and Region Southeast Europe

8

There has been an interesting period of changes in Eastern Europe in the scope of twenty years around the turn of the millennium. At the time of dissolution of the Soviet Union in the beginning of 1990’s a series of economic reforms kicked off which liberated the markets and trade. There was also a lot of privatization going on. Along with private ownership the production substantially declined which decreased the Gross Domestic Product. However, since the economic crisis in the turn of the millennium the GDP has more than doubled. Russia is one of the largest economies of the world and its economic growth is particularly speeded up by the increasing wealth of the middle class as well as the growth of purchasing power in cities. Not only in Russia but also in Eastern Europe the economic development has experienced a variety of changes during the past decades. Ukraine, a former Soviet Union state, has struggled with the challenges of switching from planned economy to market economy. In the initial stages a wide-spread unemployment, super inflation and a rapid growth in income gaps due to privatization have complicated the investments by foreign capital in Ukraine. Especially Estonia of the Baltic countries has succeeded in the era of free markets thanks to their light industry and services. In the early 1990’s the economic growth was fast but ended up in a crash and deep recession by the time of global economic collapse in 2008. Since then the economy has recovered well. Also Latvia like Estonia had a high growth rate in the 1990’s. Although the Latvian economic growth was one of the fastest in the beginning of the 21st century the global recession hit Latvia with a strong impact. The economic collapse and in particular the highest unemployment rates in the EU caused extensive riots. Latvia is still struggling with its market economy. As the examples above show the strongly developing Eastern Europe with its efforts to find new paths is a region of many nationalities and equally many possibilities. Schenker has been involved in building the market economy in this region by offering outstanding possibilities for exports and imports of the countries through its European and international network. Region East of Schenker group has provided the national Schenker companies and their managers a global network to support 9

the growth. In this history book we will shed light on the rebirth of Eastern Europe. That was the time when former Soviet states began to form a part of the global market economy. This era has been most interesting and varied for Schenker as well. I do hope that you will find captivating aspects in our history in regard to East European economic history and Schenker as its constructor. Göran Åberg DB Schenker Logistics CEO , Region Europe North & East

10

Elmar Wieland – Personal Memories

Although the collapse of communism was heralded over a longer period (Goulash Communism4, Solidarność5, Glasnost6, etc.), it came as a surprise when it swept through Europe in the summer and autumn of 1989. Unforgettable are the days and hours before socialist leaders finally decided to allow DDR citizens on holidays in Hungary to enter West Germany via Austria  ; an event closely followed by the fall of the Berlin Wall, the not-so-peaceful breakup of Yugoslavia, the execution of Ceaușescu and many more historical events. Sufficiently memorable also is the Advent season of 1989 in lavishly decorated Vienna, where Eastern European visitors – for whom the city of Vienna had provided free streetcar service – were able to marvel at a vast choice of products that were often far beyond their purchasing power. The Schenker Austria management immediately realized that the oligopolistic or monopolistic markets of the comecon would be reshuffled, leading to unique opportunities to expand their business activities. Also in terms of personal development, participation in this once-in-a-lifetime project would prove to be exciting and advantageous. It was crucial to make the most of existing connections in order to ensure fast and appropriate action. The aim was to build a Schenker organization in both the established and the newly formed countries. To do so, appropriate group-internal coordination and persuasion was required to harmonize the different interests of the Western European companies  ; existing contracts had to be maintained, while the personal feelings of long-term partners and friends had to be respected to avoid rocking the boat. At the same time, extensive contract-based transport services, which had been developed with Eastern forwarders, had to be maintained for lack of alternatives. It was therefore a balancing act to keep partners on track with whom much turnover had been generated, but who were fully aware that new constellations were on the horizon. As the first step, representative offices had to be established, followed by the setting up of independent companies. Of course, the creation of joint companies was intensively discussed with these partners and other forwarders, since they had the infrastructure, staff and crucial contacts with customers, carriers and govern11



ment agencies. However, these would have been quick and “easy” solutions which also had their drawbacks. Privatization processes were often protracted and opaque  ; sometimes sales were made to “shady” investors  ; revenue expectations were excessive (asset values vs. income values), etc. All these arguments, in addition to continuing uncertainties (economic conditions, political situations, legal security, etc.), spoke against such easy solutions. Therefore, only a few joint ventures were established and successfully developed. The only viable option was therefore the rocky road of setting up own businesses in an environment marked by poor infrastructure, often without adequately trained personnel and, due to prevailing uncertainties, even without much capital. Later, after the transition had been established and resulting opportunities organized, Schenker Austria was appointed as Regional Headquarters for Southeast Europe due to its affinity with the East, contacts and commitment. We took up this challenge with great joy and some pride, but also a degree of awe in view of the duties and responsibilities before us. This was followed by lots of back-breaking, grueling work and sand shoveling. For a long time it was very difficult to find suitable handling warehouses for truck groupage services as well as associated customs clearance facilities. With booming imports, good connections to customs were a key success factor as well as careful credit management. For a long time, it was impossible in many countries to rent warehouses with a rail connection and transshipment options. This problem did not abate until the mid-1990s through offers by real estate investors, at least in the major capitals of Eastern Europe – Warsaw, Prague and Budapest. Due to the market mechanisms, conditions were excessive, which later led to real competitive disadvantages (from about 2008) and the need for alternatives. The real estate situation in Budapest was particularly volatile, leading to dramatic reductions in grossly overpriced rents and thus revenue losses in warehouse and logistics operations. Legal uncertainty, lack of land registers, unclear ownership, environmental issues and much more were also arguments against own investments. Another major problem was the recruitment of skilled personnel, which was actually only available in state-owned companies. Many managers were not able to change over because of privatizations, had moved to other industries or simply did not meet Western managerial standards. In this context, it is interesting to observe that some professionals were able go along with the process up to a certain point, and then failed. This led to the posting of Western experts for specific areas, intensive on-the-job-training, and to a wide range of education and training offerings. A positive aspect was the very good language and IT skills of Eastern European personnel, as several generations were “skipped” in one step here. Due to the rapid growth and need for efficient handling, however, a plethora of IT systems proliferated that could later only be corrected with difficulty. 12



Our goal from the start was to build independent Schenker companies that would offer all core products such as land transport, air and sea freight, and warehousing/ logistics as well as any required special services. In principle, these companies were to have a local management and be fully integrated in the global Schenker network. Our aim was market leadership in Schenker core areas or, depending on market conditions, at least to be among the three major players. Another goal was – and still is – to pass on the Schenker corporate culture. These are the values Schenker stands for and which have made it a large and successful company. Essentially, this involves the corporate principles Emil Karpeles summarized as early as 1923 (see “The Schenker Dynasty”7), with the modern-day additions of innovative leadership in services and technology, as well as environmental responsibility and sustainability. The development in the individual countries was – and continues to be – highly divergent. Initially, the focus was, of course, on the big, important and stable markets like the Czech Republic, Hungary, Slovakia, Romania and Bulgaria  ; only later were companies founded in the successor states to Yugoslavia, in line with political developments. In the meantime, Schenker had also taken over BTL , which pursued a similar policy in Eastern Europe, but with a stronger focus on joint ventures in land transport – in Poland, the Czech Republic and Hungary. This takeover raised the question of leadership in the national companies  ; after these issues had been resolved, the units had to be merged. This was not always an easy task, in view of the different business models and players. All in all, these changes were mastered well with the upshot that Schenker today is in a very strong position in these countries. In this phase it became clear that certain markets were either too big for own developments from scratch, such as Romania, or too isolated from the outside world, such as Slovenia. Acquisitions were therefore made in these countries, which were able to thrive on the market after appropriate integration processes. This is also true for Hungary, where a leading market position could be established through a full takeover of existing joint ventures. From the outset, the steady growth, continuous buildup work and enormous investment sums showed positive results as regards earnings generated and market positions achieved. Schenker soon had a nationwide network of branch offices in Eastern and Southeast Europe, which is widely used and rewarded by international and local customers. In this context, export transport services from Eastern Europe, as well as domestic transport systems, were developed and numerous interesting and complex logistics projects (outsourcing) were successfully implemented. The EU accession of the main countries of Eastern and Southeast Europe brought with it profound changes and adaptation requirements. The elimination of the la13



borious, but overall lucrative customs transactions brought about a lasting change to business and personnel structures. With the experiences gained by Austria in its own EU accession, these adjustment processes could be mastered well and successfully, even without support from official circles. The global financial and economic crisis reached this region with some delay, leading to a significant decline in economic growth, which until then had been dynamic. These developments, of course, also had an impact on the freight forwarding industry and Schenker in particular  ; however, all structures could be adapted and development was successfully advanced. Of course, lower margins depressed the results and the dynamics of economic growth were slowed. However, Eastern and Southeast Europe remains a future market with much better prospects than many other regions of the world. In summary it can be said that the reconstruction of the old Schenker domains – an undertaking that also had a nostalgic appeal  – has proved to be worthwhile. Schenker now has strong, successful, comprehensive and modern organizations in all countries of Eastern and Southeast Europe, which are able to meet all the logistical requirements of global supply chains and national and international customers.

14

Table of Content

From Schenker & Co. to DB Schenker

17 17

1931 – Acquisition by Deutsche Reichsbahn 1945 – Rebuilding and Internationalization 1989 – Acquisition by Stinnes AG 1997 – Acquisition of BTL 2002 – Reacquisition by Deutsche Bahn 2006 – Merger with BAX 2012 – DB Schenker Logistics

18 22 27 33 41 44 46

Business Strategy in Transformation

49

GDR/East Germany/New Federal Countries

73

Regional Headquarters South East Europe

85 85 97 118 127 144 151 158 163 167 172 177

1872 – Schenker & Co. Wien

Austria Czech Republic Slovakia Hungary Slovenia Croatia Serbia and Montenegro Bosnia and Herzegovina Macedonia Albania Romania

15

Table of Content

Moldova Bulgaria Greece/Turkey

196 196 211

Regional Headquarters Europe East – Europe North/East

213 213 233 244 256 263 278 295 299 300

Finland Estonia Latvia Lithuania Poland Russia Ukraine Belarus Kazakhstan The cold wind of history

301

Interview partners 

305

Notes 307

16

From Schenker & Co. to DB Schenker

1872 – Schenker & Co. Wien10 A company that has successfully navigated the economic, technical, and political changes of the past 140 years must be something special. Of course, “Not one stone here will be left unturned”. Thus, the Schenker freight forwarding company, originally founded in Vienna in 1872, has gone through several changes of ownership in its long history  : • 1872 to 1931  : It was a private company in the possession of the Schenker and Karpeles families. The third founder, Moritz Hirsch, withdrew from the company shortly after and established a furniture factory. • 1931 to 1989  : It was under state ownership as part of the Deutsche Reichsbahn. • 1989 to 2002  : The company underwent privatization and integration into Stinnes AG Group. • 2002  : The company was repurchased by Deutsche Bahn11. It should be pointed out that corporations rarely reach the size Schenker has achieved from internal growth alone. In addition to the acquisition of numerous small and medium-sized freight forwarding companies, three major mergers were of critical importance  : • 1991  : With the freight forwarding arm of Rhenus Weichelt  ; • 1997/1998  : With the Swedish freight forwarder BTL   ; and • 2006  : With BAX Global, USA . But back to the beginning  : The founding of the Schenker & Co. forwarding company on July 16, 1872, was a response to the revolutionary new transport possibilities provided by the rail17

From Schenker & Co. to DB Schenker

ways. Looking back, one might say that the railway was Schenker’s fate until now. Gottfried Schenker, a Swiss-born entrepreneur, was a virtuoso in crafting shipping rates with the various private and state-controlled railways, and returned from every voyage replete with new ideas. It has been said that “the freight forwarder is like a truffle pig”, and Gottfriend Schenker had a nose for sniffing out new business wherever it might appear. Above all, Gottfried Schenker was a pioneer in the field of consolidated freight shipment, in which smaller, individual shipping units are bundled into larger units for shipment, allowing them to be sent more regularly, cheaply, and securely. Starting with just two scheduled freight services, from Vienna to Paris and from Vienna to Berlin, by the end of the nineteenth century groupage freight cars were rolling from the Atlantic coast to the far reaches of the Ottoman Empire. Gottfried Schenker also entered the river-traffic and maritime freight arena, running his own fleet. Were he alive today, there is little doubt that he would also have added an airline to his empire. Under Gottfried Schenker’s dynamic and innovative management, the company grew rapidly, aligning its expansion with the economic interests of the Austro-Hungarian Monarchy12. These were extended into Eastern and Southeastern Europe, extending down the Balkans into what is today Turkey. Of the company’s 1,255 employees in 1913, three-quarters were employed in this region. The company built a comprehensive and extensive organizational structure, with the first office in Vienna soon followed by ones in Budapest, Prague, Belgrade and Sofia. Other branch offices were established at the border crossings to the German Empire, in southern Germany, and in major ports such as Trieste, Rijeka, Hamburg and Rotterdam. 1931 – Acquisition by Deutsche Reichsbahn The Austro-Hungarian Monarchy collapsed in 1918, in consequence of the First World War. Vienna was no longer the nerve center of the second-largest state in Europe with a population of 55 million people, but merely the capital of the Republic of Austria13 and its 6 million inhabitants. This made it an increasing inconvenient headquarters for a freight forwarder of the scale of Schenker, and the focus of the company’s interests shifted increasingly toward Germany. On December 2, 1919, Schenker & Co. Berlin was established under the direction of Marcel Holzer. Originally from Trieste, Holzer had taken German citizenship and cooperated closely with Deutsche Reichsbahn during the war. He was put in charge of the firm’s operations in Germany, with responsibility for the Netherlands, Scandinavia, Poland, Russia and the United States. Regional headquarters in Vienna and Prague handled the remaining locations. Marcel Holzer saw himself not merely as a manager, but as an entrepreneur who wanted to build something great and lasting. Overcoming 18

1931 – Acquisition by Deutsche Reichsbahn

reservations on the part of the owners in Vienna, he expanded Schenker’s network of offices in Germany to such an extent that it forms to this day the organizational backbone of this global corporation. Through the founding of new locations and takeovers of other freight forwarders, the number of Schenker branches rose between 1919 and 1923 from 18 to 126, and total personnel from 297 to 2,300. This was made possible by the inflation which raged in Germany until 1924, making all previous calculations of value useless. However, once the German currency was finally stabilized, it rapidly became clear that Schenker had overextended itself. The company retrenched, drastically pruning its network to 69 branches and 1,865 employees, but it was not enough. Marcel Holzer thus made use of his connections with the Reichsbahn14, in 1925 concluding with it a “marketing agreement” including an information service for European freight traffic. In exchange, the Reichsbahn-owned Verkehrs-Kredit-Bank15 extended Schenker a loan of 15 million DM, providing it much-needed financial breathing room. This loan forged the first organizational link between Schenker and the Deutsche Reichsbahn. The railway faced at this time increasing competition from ever more efficient road transport. It fought back by making use of its political influence, resulting in new legal restrictions on freight shipment by truck. A particular problem concerned drayage, the transportation of freight to and from the rail station depot. Due to the generally fragmented and localized nature of this industry, drayage services were very heterogeneous in terms of quality and cost. Then, the Reichsbahn in 1931 concluded with Schenker the “Transportation Contract”, which granted Schenker a monopoly on such drayage services within the borders of Germany. This provoked significant public resistance, and occasioned emotional debates in the German Reichstag16, eventually forcing the terms of the agreement to be relaxed somewhat. However, it was now Schenker which set the terms under which these services were provided throughout Germany, with other carriers following its lead. In order to ensure the loyalty of this shipping industry giant in the ongoing battle between road and rail, the Reichsbahn on January 29, 1931, approved the purchase of Schenker along with its approximately 4,000 employees. It marked the end of Schenker as a family business, as well as the last great coup of Marcel Holzer, who now assumed direction of the merged enterprise. Without this sale, in the middle of the Great Depression, Schenker would soon have found itself in a difficult position, for the Reichsbahn quickly discovered that Schenker’s losses were significantly higher than initially assumed. In the protective embrace of Deutsche Reichsbahn, Schenker was restructured and once again placed on a sound footing. Upon the Nazi seizure of power, Marcel Holzer was forced to flee Germany, emigrating to the United States. 19

From Schenker & Co. to DB Schenker

Number of Schenker Offices and Employee Totals (Status on June 30, 1930) Business area

Offices

Number of employees

Vienna Austria

3

478

13

219

England

5

133

Hungary

4

97

France

2

96

Yugoslavia

7

84

Switzerland

3

70

Italy

3

38

Greece

1

Romania

Allied companies

6 197

ITGAG

86

Prague Czechoslovakia

28

615

Germany

78

1.361

Poland

11

203

Berlin

Baltic states

6

71

Netherlands

5

65

Danzig

1

57

New York

1

22

Belgium

2

12

Copenhagen

1

9

41

1.503

Entire corporate group Vienna Prague

28

615

Berlin

50

1.800

174

3.918

Total

During the Second World War, Schenker, as a state-owned company, was placed at the service of the wartime economy, expanding outward in the train of German victories and retreating in the wake of defeats. However, Schenker did not participate in “Aryanizations” (of Jewish property), nor, as a freight forwarder, did it engage in any transportation of human beings. After the German invasion of Poland, the entire Schenker organization was blacklisted by the Allies, with subsidiaries in ar20

1931 – Acquisition by Deutsche Reichsbahn

eas subject to Allied control confiscated, placed under administration, or managed by local employees on their own behalf. With the support of the Italian agencies, disguised freight shipments were still carried out by sea, until Italy’s entry into the war blocked that avenue. Even before the United States entered the war, the branch office in New York had been closed due to a lack of business. Many international traffic links had been broken as a result of blockades and military actions on land, at sea and in the air. The bulk of overseas trade had been brought to an abrupt halt, striking the branches in Hamburg and Bremen particularly hard. However, the effective end of overseas shipping was more than compensated for by increased activity in Eastern and Central Europe. New freight routes were established to Warsaw, Łódź, Kraków, Posen, and also in Lviv, which had previously been abandoned in 1931 due to insufficient demand. The goods transport business in Eastern Europe boomed during the war. With its traditionally good relations with Eastern European partners, Schenker was tasked with handling much of this freight transport. Petroleum shipments from Romania were managed by Schenker Berlin, with deliveries from Hungary commencing in 1944. From May 1942, Schenker also began transporting munitions, primarily to Southeastern Europe. Shipments of fish, particularly fresh and salted tuna from Turkey, were carried out on behalf of the Reichsstelle für Fische17 in Berlin or the Nordsee Deutsche Hochseefischerei18 in Wesermünde. Tobacco was imported from Yugoslavia, Bulgaria and Turkey, and Schenker also provided logistics services for a Viennese warehouse of Austria Tabakregie, the Austrian state tobacco monopoly. Deliveries of wine came primarily from Germany’s ally Bulgaria, with a smaller quantity from France. Ore transports primarily comprised rock phosphates transported from France to Czechoslovakia. These shipments were carried out on behalf of the company Rohphosphat GmbH of Hamburg, by arrangement with Schenker Paris. Acting on the orders of Feldkommandantur 5919, Schenker’s branch office in Belgrade established a motor pool which was operating some 100 vehicles by the end of 1941. In the final analysis, however, the war was disastrous for the freight forwarding industry in a material sense even more so than for most other sectors. As most facilities and offices were located near rail yards and stations – primary targets of bombing raids – little remained of this infrastructure. In addition, all German property held abroad was confiscated between 1945 and 1948 as reparations for the damage inflicted by Germany during the war. Schenker’s links to its non-European subsidiaries had already been severed during the war  ; now, however, all of its branches outside Germany were expropriated, including those in neutral countries and even in Austria. A stock-taking from 1946 by Schenker’s “Southern Directorate” in Munich of 1946 drew the following picture  : The individual offices had independently taken the initiative and begun to resume organizing freight shipments. Schenker Athens 21

From Schenker & Co. to DB Schenker

was by far the most important freight forwarder in Greece and had resumed full operation  ; the same was true of Schenker’s Turkish branches in Istanbul and Smyrna. The Swiss subsidiary had entered voluntary liquidation, while no news at all was available from Belgium. In Denmark, the company continued to operate under its old name, run by Schenker’s former employees. The situation in England was completely opaque  : Schenker London had been acquired by the forwarding company “LEP Transport Ltd.”, which had previously purchased the New York branch. The Norwegian subsidiary had been dissolved, its former employees now running two separate firms. In France, Schenker Paris was now under state administration, with a former company officer functioning as commercial director. Schenker Paris attempted to reestablish contact with the German Schenker organization through the French military government in Freiburg. Schenker Romania had been taken over by the Soviet-Romanian Juschnewtrans transport agency. In Czechoslovakia, all branches had initially resumed operation, even establishing a scheduled truck freight transport route to Rotterdam. In Bulgaria, most of the company’s staff had been discharged, and two arrested by the Soviets. Fifteen employees remained, who continued to work under Communist direction. In 1948, Schenker Berlin drew up a list of the locations in Eastern and Southeastern Europe where – on paper – the company continued to maintain a presence. It was a litany of loss  : Bulgaria  : Sofia, Plovdiv, Sistov Yugoslavia  : Belgrade, Zagreb, Ljubljana, Rijeka, Split, Šibenik, Slavonsky Brod, Skopje, Novi Sad Poland  : Warsaw, Elbląg, Bydgoszcz, Gdańsk, Gdynia, Gliwice, Jelenia Góra, Katowice, Kraków, Łódź, Poznań, Szczecin, Wrocław, Zebrzydowice Romania  : Bucharest, Arad, Brăila, Constanţa, Craiova, Giurgiu, Iași, Orșova, Oradea, Ploiești, Sibiu Czechoslovakia  : Prague, Bratislava, Aš, Bor u Ceské Lípy, Devínska Nová Ves, Decin, Brno, Hradec Králové, Chomutov, Jablonec, Kamenický Šenov, Karlovy Vary, Liberec, Novy Bohumín, Olomouc, Podmokly, Teplice Šanov, Ústí nad Labem, Varnsdorf, Krnov, České Budějovice, Znojmo Hungary  : Budapest, Hegyeshalom, Miskolc Baltic Countries  : Reval20, Riga 1945 – Rebuilding and Internationalization It was fortunate in 1945 that Schenker was owned by the national railway, for a private owner would have faced major problems in rebuilding such a large enterprise. 22

1945 – Rebuilding and Internationalization

However, as a state-owned firm, there was never any doubt that the company would continue in operation, and so Schenker rapidly resumed its position as a major player in the German freight forwarding sector. The reconstruction of the foreign network, however – albeit minus the Communist countries – took decades. For better control, a holding company, Transkontinent AG , was established in the Swiss city of Wil, with ownership of most overseas and some European national Schenker subsidiaries and shareholdings. By the late 1980s, an impressive international network had been built up, one which would be crucial to the further development of the company. Transkontinent Holding AG (TKH), Wil/Switzerland  ; Capitalization  : 30 million CHF; Holdings in 1989  : Company

Shareholding in %

Headquarters

Schenker Argentina SA

100

Buenos Aires

Schenker & Co (Australia) Pty Ltd

100

Sydney

Schenker & Co (N. Z.) Ltd

100

Auckland

Transglobal P. V. B. A.

100

Menen-Rekkemb

Schenker-Panamericana (Bolivia) Ltd

100

La Paz

Schenker & Co (Botswana) (Pty) Ltd

100

Gaborone

Schenker do Brasil Transportes Int. Ltds.

100

São Paulo

Unipack Internacional Embalagens e ­Mudancas

100

São Paulo

Schenker & Co A/S International Spedition

100

Copenhagen

Schenker & Co Hellenische Transport AG

100

Athens

Karpeles Schenker & Co Ltd

100

London

Sea Cargo International (UK) Ltd

100

London

Schenker’s Ltd

50

London

Schenker Panamericana (Centro America) Ltda

100

Guatemala City

Schenker (H. K.) Ltd

100

Hongkong

Schenker Italiana S. p. A.

100

Milan

Schenker & Co S. a. r. I.

99.4

Trieste

Schenker of Canada Ltd

100

Toronto

Schenker & Co Luxemburg GmbH

100

Luxemburg

Schenker Panamericana (Mexico)

100

Mexico City

Schenker Panamericana (Panamá)

100

Panama

Schenker & Co’s internat. Expeditie B. V.

100

Rotterdam

Spedinvest A/S

100

Oslo

Einar Sundbye A/S

100

Oslo

23

From Schenker & Co. to DB Schenker

Company

Shareholding in %

Headquarters

Sundbye Transport & Spedisjon A/S

100

Oslo

Schenker (Portugal) Lta

100

Porto

Schenker Transport AB

100

Stockholm

WITAG Weltifurrer Internationale ­Transport AG

100

Zürich

Schenker Transport AG

100

St. Gallen

Bodanwaggon AG

100

Chur

Neowaggon AG

100

Zug

Trakowaggon AG

100

Zug

Schenker Singapore (Pte) Ltd

100

Singapore

Schenker S. A. E.

100

Barcelona

Schenker & Co (SA) (Pty) Ltd

100

Johannesburg

Schenker (Thai) Ltd

100

Bangkok

Newbalt Inc.

100

New York

Schenkers International Forwarders, Inc.

100

New York

Schenker & Co AG Schenker & Co N. V.

75 66.5

Vienna Antwerp

WITAG-Schenker Jet Cargo AG

51

Kloten

Medtrans International SA

50

Marseille

Herkules AG

50

Thessaloniki

Japan Schenker Co Ltd

50

Tokyo

Schenker (Malaysia) Sdn. Bhd.

49

Kuala Lumpur

Karl Biermann Lds

36

Lisbon

FERTRANS AG Medtrans Air Transit International SA ENTRA Engelberg Transportes Internacionales CA

30.6

Buchs

26.19

Roissy

19

Caracas

Direct subsidiaries of Schenker Frankfurt : Schenker & Co (East Africa) Ltd

100

Nairobi

Schenker of Ethiopia P. L. C.

99.9

Addis Abeba

Schenker Finance B. V.

100

Amsterdam

From the 1960s onward, Schenker developed de facto from a company whose activities were largely confined to Continental Europe into a network that spanned the globe from its German focal point, because the growth of the Schenker overseas organization paralleled that of German foreign trade. The chairman of the board, J. A. Hering, noted as early as 1966 that Schenker owed its own expansion to those German industrial and trading enterprises which had supported Schenker with a 24

1945 – Rebuilding and Internationalization

steady stream of shipping contracts and enabled it to build up a global organization. Companies such as the Otto Versand and Quelle mail order houses purchased goods from suppliers around the world, and the German capital goods industry, represented by firms such as Siemens and Bosch, needed a reliable partner for their overseas projects. Schenker followed its German customers into foreign markets, using TKH as a vehicle to obtain greater operational independence for the “foreign organization”, at that time named “AO”21, from its parent, Deutsche Bahn. The foreign organization was run as a holding company, intentionally kept at arm’s length from its Deutsche Bahn parent. Swiss company law permitted the earnings of one subsidiary to be offset against the losses of another, so negative results did not have to be publicly disclosed. Profits could be retained and invested in the development of the foreign organization  ; this was vital, as Deutsche Bahn did not have the resources to spare. The headquarters in Frankfurt was under the direction of Günter Müller, who was supported in air and sea freight by Joachim Linke, Hans Kleffmann, Wolfgang Gruber and Siegfried Lukat. The latter two were the driving force behind the development of the foreign organization, always guided by customers’ demands. Even though no additional investment capital was available, the support in terms of personnel, know-how, sales trips and product development was of crucial importance. The establishment of a local presence generally followed a certain pattern, one which made it possible to enter the new market while minimizing risks. A representative office would be opened first, putting a German sales representative on the ground who would work together with local freight forwarders. These were the true pioneers of Schenker’s foreign organization. If business developed positively Schenker would then launch a joint venture with a local partner, which was also often a legal necessity, and made it easier to serve the local market. Regardless of the level of ownership, these joint ventures operated with the full know-how of a Schenker company. The Schenker representative on the management board of these joint ventures functioned indeed as the managing director. As laws restricting foreign investment were liberalized in many of these countries, Schenker generally parted company with its joint venture partners or bought them outright, establishing a fully-owned national subsidiary instead. Some foreign subsidiaries reported directly to Schenker Headquarters Frankfurt and some to Transkontinent Holding AG in Switzerland, but there was no practical difference in terms of overall management. As was common at the time, the management structure of the headquarters in Frankfurt had simply grown, and was not organized according to a master plan. It consisted of divisions for land, air and maritime freight, overseen by the members of the management board in addition to their other functions. There were also coordinating offices with responsibility for Schenker’s operations in a certain geographic sphere, reflecting Schenker’s historical expansion  : 25

From Schenker & Co. to DB Schenker

• • • •

Hamburg office  : Far East, Australia, Iran Bremen office  : USA , Canada, Latin America, South Africa Frankfurt office  : Near and Middle East, Southeastern Europe Braunschweig office  : Russia

The offices in the great cosmopolitan port cities of Hamburg and Bremen played a key role in the internationalization of Schenker. Here blew the wind of the big, wide world. As air freight volumes increased, the cargo consignment center at the Frankfurt airport also grew in importance. Other offices, such as those in Düsseldorf and Braunschweig, had special expertise in operating in particular countries. In order to better reflect actual market trends and conditions, Schenker in 1981 grouped its foreign organizations into four regional divisions  : • • • •

A Europe B North, Central and South America (the Americas) and Australia C Africa and Asia N Middle East

By this time, Schenker was already confronted with the challenge of managing an extensive global network. One must bear in mind the more limited means of communication available until well into the 1980s, the period in which most of the organization was built. Mail service was slow, telephoning was a hassle, the telex system was expensive, and air travel was troublesome and costly. Accordingly, the foreign subsidiaries largely managed themselves, and the responsible local managing director functioned essentially as a local entrepreneur with the advantage of a large organization behind him. This may have arisen from the organizational rules of 1989, in which Schenker underlined the importance of decentralization for the company. The local offices were to be responsible for all tasks other than higher-level centralized functions. The headquarters in Frankfurt determined the corporate policy, investments and a uniform product policy  ; it coordinated existing businesses and planned future activities, was responsible for personnel, legal matters, data processing and monitoring the company’s business practices and also assumed responsibility for other specified matters. The relevant coordinating office, or office with which a shipping contract had been signed, handled the actual contract execution. The coordinating office was to be consulted before submitting offers for hotly contested shipping contracts, while approval from headquarters was needed for logistics contracts. This requirement ensured that different Schenker branches would not underbid one another on the same contract. The term “profit center” is perhaps a bit exaggerated for this early period, but the regional managers had at least to avoid taking losses. In some countries, however, it was expected that a longer period of losses would 26

1989 – Acquisition by Stinnes AG

be unavoidable before the company had established a solid foothold in the market. It is important to note that as long as Schenker had been in existence as a freight forwarder, it had operated under the principle that the network as a whole had to be profitable and that some parts were still of importance to the company despite limited earnings potential. As early as 1923, a bulletin sent out by the headquarters in Vienna reminded  : “Work together, not against one another  !” and “Sincerity, goodwill, and eschewing transient individual successes are the roots of our strength  !” 1989 – Acquisition by Stinnes AG In the 1980s, Schenker’s dense foreign network awakened the interest of Stinnes AG . In corporate management, as in other areas of life, there is also a spirit of the time. The watchword of the 1970s was diversification, with companies involving themselves in a wide range of business activities in order to reduce their exposure to sectorial risk. Stinnes AG , a subsidiary of the company VEBA , had taken diversification to an extreme. The company’s 12 business sectors covered the building materials market, DIY stores, the steel market, the coal and petroleum market, the tire market, chemical distribution, and also the warehousing and transport areas. It was obvious, however, that the patchwork structure that had developed over time was not suited for the long term. Thus, from the mid-1980s on, the company worked out a new strategy, concentrating on core business areas with strong potential for the future. If Stinnes was to play a major international role in a particular sector, resources would have to be concentrated on the most promising opportunities for growth. In the areas of home improvement and tires, Stinnes was clearly an also-ran  ; it had missed its chance to assume market leadership of these markets some time earlier. Trading was also declining in importance  ; the coal producers, multinational oil companies and large-scale buyers such as power companies were increasingly consolidating, increasingly obviating the need for middlemen. Stinnes had long maintained a strong presence in the chemical distribution sector, however, and enjoyed a good starting position in the area of transport. It was on this basis, then, that Stinnes commenced its restructuring project, selling off its divisions and building a war chest for acquisitions of its own. Stinnes’s existing assets in the transport sector were Rhenus AG , which had a strong position in bulk goods carriage, inland waterway transport, and warehousing, and its subsidiary Weichelt, a medium-sized truck company from Coburg, the “area adjacent to the Soviet Zone”22, with a presence throughout Germany. Rhenus Weichelt ran a considerable air freight business in Germany, but no real international network. For Stinnes to become a significant player in the international transport sector, it would have to join forces with a suitable partner. Building an own foreign 27

From Schenker & Co. to DB Schenker

network from scratch would have taken too long, so Stinnes began eyeing possible candidates for a takeover. The management consultants hired to advise the company included Schenker in their evaluation, though it seemed somewhat pointless given that Schenker remained in the ownership of the state and was not for sale. However, the outcome was a surprise for Stinnes  : Schenker, with its extensive international network, almost perfectly complemented Rhenus and Weichelt. At this point, the currents of German politics came to the aid of Stinnes. The 1980s brought the vogue-word “privatizations” (of state-owned enterprises), up to the motto “The government could not operate economically.” Already in 1982, the existing Christian/Liberal coalition of the CDU (Christian Democratic Union), the CSU (Christian Social Union) and the FDP (Liberal Democratic Party) had agreed that it would sell off some state-owned assets. Finally, at the urging of the FDP, in 1989 the German federal government voted for an extensive program of privatization, which also directly affected Schenker. As was not unusual in such matters, this decision was realized at a glacial pace. The state wanted the involvement of private industry, yet wished to retain control. Accordingly, Deutsche Bahn would surrender only a minority interest in Schenker, and so in August of 1989, Stinnes AG , of Mülheim an der Ruhr, acquired 22.5 % of Schenker & Co. GmbH of Frankfurt. It was obvious from the start, however, that a large investor would not be satisfied in the long run with such a minority stake. As the next step, the international freight forwarding activities of Schenker and Rhenus Transport International AG , were combined as of January 1, 1991. Schenker took over the German air and maritime freight operations of Rhenus. For the foreign subsidiaries, a 50  :50 joint venture was established as a limited liability corporation later renamed into Schenker International GmbH and capitalized at 80 million DM , doing business under the name TKH International. This company then acquired from Transkontinent Holding AG of Wil in Switzerland its holdings in Schenker’s freight forwarding subsidiaries, and from Rhenus its own overseas holdings and maritime freight operations. Schenker thus contributed to these merger holdings in 42 countries employing 6,881 people at 284 separate sites, and Rhenus its stakes in 10 companies with 360 employees working from 26 locations. As Stinnes, in addition to its direct 22.5 % stake in Schenker & Co. GmbH Frankfurt, now also owned 50 % of the joint venture in which the foreign subsidiaries were bundled, it now held a majority of 61 %. The new company assumed the corresponding operations under the umbrella of Rhenus Transport International AG , Dortmund, which ran the business activities of Rhenus AG . Whether the European holdings would be transferred to Schenker International or remain with Schenker would be decided later. Deutsche Bahn initially wished to retain a stake in Schenker, as it hoped to realize synergies. As it turned out, their joint business remained rather modest, and so in 28

1989 – Acquisition by Stinnes AG

1991, the railway agreed to sell a majority (80 %) of its shares in Schenker through Stinnes, with the remaining 20 % following in 1993. For Schenker began once again a private business sector period – after the earlier period from 1872 to 1931. With the acquisition, Stinnes in 1992 had a freight forwarding division with 20,000 employees and a turnover of 11 billion DM . At this time, Schenker was not particularly profitable  – to put it kindly. Thus, in addition to restructuring land transport operations, the new organization also had to integrate the activities of Schenker and Rhenus Weichelt. In terms of both structure and character, however, the two companies were very different. • Schenker had a dense branch network in Germany, and had an extensive global presence through its national subsidiaries. As a state-owned enterprise, its profitability was low, and it faced little pressure from Deutsche Bahn to improve its margin. Thus, the takeover by Stinnes provided both a shock and an opportunity. • Rhenus specialized in bulk goods carriage, inland ports, inland waterway transport, warehousing, and disposal of waste and contract logistics. • A medium-sized freight forwarder, Weichelt was a pioneer in Germany for handling break bulk cargo, scheduled freight routes, and vehicle fleet management, located in Coburg, at the area adjacent to the Soviet Zone. Integrating these firms thus represented a major task, one managed by Stinnes through quality standards, ambitious budget targets, and personal responsibility on the part of its executives. After the restructuring, the following business divisions emerged  : • Rhenus Weichelt, Schenker Eurocargo, German and European land transports • Rhenus Transport International AG , air and maritime freight, both headquartered in Frankfurt/Main • Rhenus AG , together with Rhenus Lager und Umschlag AG , Dortmund, and Stinnes Reederei & Co., inland waterway transports from Partnership AG & Co in Duisburg On January 1, 1996, Stinnes again reorganized its transport operations under Schenker-Rhenus AG , established from the merger of Schenker & Co AG and Rhenus AG as follows  : • Schenker Eurocargo – land transports • Schenker International – air and maritime freight • Rhenus – logistics and waste disposal solutions 29

From Schenker & Co. to DB Schenker

The new CEO was Bernd Malmström, who was a member of the Stinnes AG Executive Board from 1988 through 2000 and CEO of Schenker Rhenus AG (later Schenker AG) from 1996 until 2000, and from 2000 until 2005 on the Executive Board of Deutsche Bahn AG , with responsibility for transport and logistics. The other board members were Hans J. Queins, Jürgen Roth, Günter Müller, Friedrich-Wilhelm Weitholz and Wolfgang Monning. Hans-Jörg Hager, Director of Schenker Eurocargo’s Stuttgart office, was named a deputy member of the Executive Board of Schenker Eurocargo (Germany) AG . Stinnes initially planned to dissolve the Schenker head office in Frankfurt. For the moment, the head office was merely replaced by a small central administrative coordination office of Schenker/Rhenus AG . Marketing, human resources, financial control and other functions were assumed by Stinnes itself. It was also intended that Schenker International would move to the Stinnes building in Mülheim an der Ruhr  ; this met with resistance from Günter Müller, who did not consider Mülheim a suitable seat for a globally operating freight forwarder. Some central functions, such as the international maritime and air freight business, thus continued to be run by Schenker International AG , while European land transport was managed by Schenker Eurocargo AG , both still located in Frankfurt and staffed by employees from the former Schenker head office. For a time, then, central management and administrative functions were scattered across five separate locations  : at Stinnes headquarters in Mülheim/Ruhr, at Rhenus in Dortmund (legal affairs, finance and logistics), and at Schenker Deutschland AG (the former Weichelt) in Coburg (domestic land transport), as well as in Frankfurt at the operational management companies Schenker Eurocargo AG (European land transport) and at Schenker International AG (internal maritime and air freight). With Bernd Malmström, a new Schenker headquarters was then set up in Essen. For a time, Dortmund, the headquarters of Rhenus, was also under consideration  ; however, Malmström opposed the selection of Dortmund or Mülheim an der Ruhr, feeling that a move to Essen would symbolize a fresh start for Schenker-Rhenus. Stinnes sold the Rhenus Group to Rethmann AG & Co. effect retroactively to January 1, 1998. Schenker/Rhenus AG became simply Schenker AG , with the Rhenus brand dropped after July 1, 1999. Thus, on January 1, 1998, the new structure of Schenker AG was as follows  : • Schenker Logistics – complex logistical services • Schenker International – air and maritime freight • Schenker Eurocargo – European land transport Günter Müller was named Chairman of the three-person Executive Board of Schenker International AG . He was one of the few survivors of the old Schenker 30

1989 – Acquisition by Stinnes AG

management team who had retained an executive position after the sale to Stinnes. He joined the board of Schenker Rhenus AG in 1991, and became Chairman of Schenker International AG ’s Executive Board that same year. He was appointed a director of Stinnes AG in 1992, and a member of the Schenker AG Executive Board in 1998. He retired in 2001, after 48 years of service to Schenker. In additional to its regional responsibilities, the Board of Schenker International AG in 1991 had other functions to fulfill. The CEO Günter Müller was responsible for the regions of Europe, the Near and Middle East, Africa, Australia, and New Zealand  ; Siegfried Lukat for Asia and for product management  ; and Jürgen Kley for the Americas, along with financial matters. At the end of 1995, Günter Müller continued to serve as Chairman for Europe  ; Siegfried Lukat managed product development, marketing, and the regions of Africa, the Americas, and the Near and Middle East, while the Asia/Pacific region reported to new board member Ulrich Villinger. Schenker International in 1993   Turnover

Employees

Europe

58 %

48 %

Asia/Pacific

12 %

19 %

Americas

23 %

22 %

7 %

11 %

Others

Schenker employees worldwide, 1995 BRD Schenker Eurocargo

6,140

BRD Schenker International

1,120

Austria

1,385

Italy

385

Sweden

365

Netherlands

335

United Kingdom

220

Schenker-Witag AG

95

Greece

150

Spain

135

Turkey

120

Prague

95

Denmark

55

Hungary

50

Norway

45

31

From Schenker & Co. to DB Schenker

America USA

735

Canada

520

Brasil

235

Argentina

35

Mexico

30 Australia

Australia

165

New Zealand

35 Asia

Hongkong

485

Thailand

245

Singapur

210

Malaysia

150

Indonesia

95

Japan

85 Africa

South Africa Kenya Total

205 65 13,990

On November 1, 1998, Thomas C. Lieb moved from his position as a Managing Director of Schenker International Deutschland GmbH in Kelsterbach to the head office in Essen, where he assumed the newly created position of Regional Manager for Air and Sea Freight for Europe, Africa and the Middle East. He was named to the Executive Board in 2001, with responsibility for air and maritime operations and logistics. (In 2003, logistics was again split off and placed under its own manager.) Since the summer of 2008, Thomas C. Lieb has served as CEO and Chairman of the Executive Board of Schenker AG . From 1991 to 1996, Stinnes invested some 100 million DM a year in the restructuring, integration and modernization of the transport operations of Schenker/ Rhenus. The new structure of this area was thus rapidly built. While the previous owner, Deutsche Bahn, had seemingly placed little importance on Schenker’s profitability, its new owner had vastly higher expectations. VEBA , as a publicly listed company, expected a rate of return far above the norm for the transport sector. In the five-year plan drawn up Schenker/Rhenus, the financial targets for the following year were fairly realistic, but of necessity always projected an upward movement. 32

1997 – Acquisition of BTL

These initial expectations thus had to be repeatedly lowered  ; only at the end of the 1990s did these high-level ambitions meet their targets. 1997 – Acquisition of BTL Schenker has a long history in Sweden. The company opened its first branch in 1921, reestablishing a subsidiary in 1953 after a forced interruption by the Second World War. Schenker Sweden in 1990 had a turnover of 925 million Swedish kronor, with 400 employees in 13 separate offices. However, the company’s presence in Scandinavia still left something to be desired  ; it was with this in mind that Stinnes’s gaze turned to BTL . BTL (Bilspedition Transport & Logistics) had a long and storied history in Sweden. Fallenius & Lefflers AB was founded in Göteborg in 1891 as a freight forwarder and ship brokerage firm, maintaining extensive coastal traffic between Göteborg, Stockholm and the ports of northern Sweden. At the end of the 1920s, the company began providing long-distance road transport services, soon ceasing its maritime operations. Fallenius was the first company in Sweden to move groupage freight by truck. In 1936, long-distance transport was devolved to a subsidiary company, Fallenius Godstrafik AB , which would form the core of the later BTL group. The company was renamed AB Godstrafik & Bilspedition in 1944, before becoming simply Bilspedition AB in 1977. Until the 1950s, the company concentrated on the development of the long-haul trucking market within Sweden. Total turnover in 1950 amounted to 10 million Swedish kronor. In the 1960s, the company turned to building up its foreign business. Cross-border transport was assigned to the auto transit subsidiary, which in turn established subsidiaries in Denmark and Norway and began regular service to the United Kingdom. By 1961, the corporation’s total turnover reached 100 million Swedish kronor. The 1970s saw large investments made in goods terminals and warehouses in Sweden. The company continued to expand, acquiring the cold storage chain Cold Stores and achieving a turnover of 1 billion Swedish kronor by 1974 and 3 billion by 1982. 1983 brought the purchase of the Wilson Group  ; in 1984, Bilspedition was listed on the Stockholm Stock Exchange, with its shares trading on the exchanges in Copenhagen and Oslo by 1985. AB Scansped was taken over in 1985, followed in 1990 by the Finnish forwarding group Speditor. Further acquisitions soon followed in Norway, Poland, Italy and Germany, while Bilspedition solidified its position in Finland with its purchase of local market leader Huolintakeskus. But the ambitious expansion also reached out into other areas. Major investments were made by the company in the maritime sector in the 1980s, making it the largest shipowner in the country. Also, a 50 % stake in the domestic airline, operated by SAS , 33

From Schenker & Co. to DB Schenker

was purchased. Hakan Larsson’s predecessor as CEO , Martin Lundberg, invested additionally heavily in real estate and financial assets, intending to turn a quick profit and reinvest the additional capital in the core freight forwarding business. Focusing his attention on these activities, he tapped Larsson to oversee the freight business. However, the plan went awry. European financial markets plunged in 1991, eventually taking the real estate sector with them. Business activity also declined, and the shipping lines hemorrhaged money in 1991 and 1992. • The freight forwarding business continued to tick along, but could not hope to earn enough to compensate for the losses incurred by the other divisions. • The ambitious attempt to diversify Bilspedition’s business activities thus resulted in a heavy debt load, and nearly brought the company to its knees. • In 1986, a 50 % stake was acquired in the financial firm Infina, which later merged with Independent. • That same year, Bilspedition and the Philipson car dealership chain established the real estate firm Fastighets AB Coronado. • 1987 saw the purchase of the refrigerated shipping line Cool Carriers, the start of a series of investments in maritime transport. • Transatlantic and Gorthon Lines were taken over in 1989. • In 1989, the remaining 67 % of the shares of the Atlantic Container Line (ACL) were acquired, the other 33 % of which were already owned by the Transatlantic subsidiary. • A significant stake in Uddevalle Shipping was also bought that year  ; the company was later renamed Frontline. • In 1990, Bilspedition acquired a 50 % stake in Linjefyg, and sold Gorthon Lines. As this spate of acquisitions was largely financed by borrowed capital, the banks increasingly began to question the continued creditworthiness of the company, and eventually forced the resignation of Martin Lundberg  ; Hakan Larsson, who had been with Bilspedition since 1971, took over the management of the company in 1992. He was pushed to concentrate on the core business that was, in any case, his strength  : the maritime operations and real estate investments were sold soon after. Bilspedition still ran at a considerable loss in 1993, but as 1994 turned into 1995, the company was once more in the black. • The shareholdings in Coronado, Independent and Linjefyg were divested in 1992. • Svenske Orient Linen, belonging to Transatlantic, was sold in 1993, and the winding up of Transatlantic’s remaining activities began. • ACL was floated on the Oslo Stock Exchange in 1994, and Bilspedition’s stake reduced to 15 %. 34

1997 – Acquisition of BTL

• In 1995, the holdings in Cool Carriers were liquidated. • By 1996/7, the company’s maritime interests had largely been sold off or shut down. • Reflecting the renewed focus on the group’s core business, the name of the parent company was changed in early 1996 from Bilspedition AB to Bilspedition Transport & Logistics (BTL). • The strategy of reverting from a diversified conglomerate to a focused and well-organized core business was accompanied by a needed recapitalization. Profit/Loss after Taxes, in million SEK 1992

−1.679

1993

−237

1995

46

1996

−41

1997

370

1998

399

Despite its troubles, BTL by 1997 was one of the largest transport and logistics firms in Europe, with 11,000 employees, 500 offices in 32 countries, and a transport volume of 20 million tonnes. Turnover was 18 billion Swedish kronor, 71 % of which came from land transport, 21 % from maritime freight and air transport through its Wilson subsidiary, and 8 % from the Specialist Division. Geographically, 74 % of turnover was generated within Scandinavia, 16 % in Western Europe, 2 % in Central and Eastern Europe, and 8 % in the rest of the world. The land transport division, with its 8,700 employees, maintained 120 offices, 10 logistics centers and 10 cold storage depots in Sweden alone. The European network consisted of 30 branches with 270 offices in 19 countries, including 13 logistics centers in 11 countries. The division also provided domestic freight services in Finland, Norway and Poland. BTL Employees in 1997 BTL parent company

79

Subsidiary companies Sweden

5,247

Norway

350

Denmark

524

35

From Schenker & Co. to DB Schenker

Finland

1,965

Germany

432

Netherlands

496

France

112

Belgium

273

United Kingdom

326

Poland

306

Czech Republic Estonia Latvia Lithuania Russia Ukraine Switzerland Australia

59 127 25 6 100 4 70 124

Hong Kong/China

73

New Zealand

10

Singapore

33

Thailand

28

USA

186

Total

10,955

At this time, Schenker employed 27,000 workers in 1,000 offices around the world, had an annual turnover of 10 billion DM and was a leader in the European land transport sector, in addition to its significant presence in the international maritime and air freight business. In 1996, once the most immediate financial concerns had been addressed, BTL began to consider appropriate strategies for the future, intending specifically to continue expanding its international operations. It was clear to BTL that the rapidly changing European market demanded a company of a certain size and scale in order to meet the expectations of customers and shareholders. The company was well established in a few countries, but it remained a primarily Scandinavian network, with a relatively weak presence in Western Europe. The new demands of the transport market forced the company to consider how it might achieve a critical mass outside Scandinavia and lay a broader foundation for growth in its land transport business. The question came up whether BTL take over one of its competitors, cooperate with one or attempt to accelerate its own development, which would take at least a decade. A task force was set up to vet possible candidates. Several medium-sized 36

1997 – Acquisition of BTL

German firms offered themselves for acquisition, none particularly attractive. Talks were held, among others, with Switzerland’s Kühne + Nagel, which expressed considerable interest for the idea, but the two companies’ business philosophies didn’t really mesh. Thus, in 1996, Hakan Larsson wrote to the CEO of Schenker, Bernd Malmström. A meeting ensued, and an exchange of information. On paper, at least, the two firms appeared to complement one another well. After investigating a few other possibilities, the conclusion was reached that cooperation with Schenker was the best available option. The companies followed the principle of developing their own networks, with the requisite infrastructure and IT networks. The two networks complemented one another and the managers of the two firms saw eye to eye on the matter of future customer needs. “1997 was a year when the winds of change were felt throughout BTL”, Hakan Larsson thus wrote in the annual report. A strategic decision had been reached to coordinate European land transport activities with Schenker Eurocargo. A three-stage plan was then drawn up, envisioning first an alliance, then the integration of the national subsidiaries of BTL /Scansped and Schenker in countries where both were represented, and finally the integration of all land transport activities in a single organization as the final objective. In this way, a truly pan-European network with corresponding synergies would be created. In this network, to be in place by June 1998, BTL would have operational responsibility in 12 to 14 countries and Schenker in a similar number, collectively comprising the largest freight forwarding network in Europe. A steering committee was set up, consisting of Hakan Larsson as CEO of BTL , Eddie Sterner as Managing Director of Scansped, and Knut Heymann as Chief Executive of Schenker Eurocargo. Working groups were organized to coordinate the merger in each country. In the background, however, moves were afoot which BTL could not have anticipated. A key role was played by Hans-Jürgen Knauer, the CEO of Stinnes AG , who had previously overseen the purchase of Schenker by Deutsche Bahn. The Schenker Corporation had had with Railship a shipping line, which was merged into Poseidon Schifffahrt AG in the course of the restructuring by Stinnes. The shipping line Poseidon operated as part of a shipping pool with Finnlines, bringing in annual earnings of approximately 35 million DM . The pool agreement specified a 60 %  : 40 % split of profits between Finnlines and Poseidon, but was scheduled to expire in four years. Antti Lagerroos, CEO of Finnlines, thus made Hans-Jürgen Knauer an offer  : a swap of Poseidon for BTL . Stinnes agreed, subject to the requirements of a controlling stake in BTL and that the value of the holding corresponded to that of Poseidon. Lagerroos then went to work. In 1995, he approached BTL’s manager in Finland and offered him the Huolintakeskus freight forwarder, a subsidiary of Finnlines. Hakan Larsson then met Lagerroos in Stockholm, who explained to him that 37

From Schenker & Co. to DB Schenker

Houlintakeskus needed more professional management and integration into a larger organization. Larsson saw Lagerroos’s point, and, in 1996, BTL acquired Oy Huolintakeskus from the shipping company Finnlines AG for a purchase price of 300 million Finnish markkaa, solidifying its position in Finland, the Baltic States, and Russia. The purchase was financed by the issuing of 18.6 million new shares in BTL , making Finnlines BTL’s largest shareholder. Lagerroos then succeeded in acquiring the shares of other shareholders, and was appointed to head BTL’s supervisory board in 1996. Houlintakeskus had served as something of a Trojan horse, enabling Lagerroos to assume a dominant position in BTL . At a meeting in November 1997, BTL’s supervisory board approved the start of serious negotiations with Schenker. Lagerroos then revealed that Finnlines had sold its stake in BTL . In December 1997, Stinnes acquired 35 % of the shares with 49.9 % of the voting rights in BTL in exchange for the Poseidon Schifffahrt AG ferry line. “The 1997 financial year was also not made any less dramatic or eventful by BTL’s former main owner, Finnlines, first increasing its shareholding to a marked degree and then deciding to sell all the shares in a strategic deal with the German Stinnes Group, the owner of Schenker”, as Hakan Larsson observed in the 1997 annual report. At this time, BTL had a share capital of 1.4 billion Swedish kronor and 25,000 shareholders, including 6,000 foreign shareholders. 40 % of them were Class A shares with one vote apiece, while 60 % were Class B shares, each with one-fifth of a vote. Shareholdings in BTL (%) Voting rights

Share capital

December 1996 Finnlines

45.8

31.6

December 1997 Stinnes

49.9

35.0

February 1999 Stinnes

64.0

62.5

April 1999 Stinnes

98.4

97.5

BTL wanted to cooperate with Schenker  ; suddenly, however, it was no longer an equal partner, but found itself across the negotiating table from its largest shareholder. Under the circumstances, though, it was broadly recognized that speed was of the essence, as the fusion would be accompanied by loss of BTL’s agents. With Stinnes established as BTL’s largest single shareholder, BTL and Schenker concluded an agreement on long-term cooperation in the European land transport sector. It marked the beginning of the consolidation of the companies’ European land transport subsidiaries. The conjoined Schenker Eurocargo and BTL Scansped, operating under the name Schenker-BTL , offered comprehensive logistical service 38

1997 – Acquisition of BTL

network in cooperation with Schenker International and Schenker Logistics. Both renounced their business relationships with other partners and agents in the various countries in which they operated in order to focus on their joint business. In 1998, a cooperative agreement was reached for the fusion of the companies at the national level. A steering committee consisting of Thomas Held, Knut Heymann, Wolfgang Monning, Harlad Silander and Eddie Sterner and led by Hakan Larsson made the decision for the individual countries. The European countries were thus divided into Schenker territories or BTL territories. BTL acquired the Schenker companies in “its” countries and vice versa  ; often, the director came from Schenker and his deputy from BTL , and vice versa. Schenker took over the assets and business of BTL’s land organizations in Germany, France, Switzerland and the Czech Republic, while BTL took over the same of Schenker’s in Sweden, Denmark, Norway, Finland, the Baltic states, Poland, Belgium, the Netherlands, the United Kingdom and Ireland, for the sum of 300 million Swedish kronor. Scansped North’s Lübeck operations remained with BTL , while the Specialoist Division was sold in early 1998. In order to make it clear that they now formed part of a common network, the national subsidiaries operating in the European land transport sector uniformly adopted the name Schenker-BTL in January 1999. The Schenker organization presented itself under the brand name Schenker for land, air and sea transport. BTL’s land transport operations had previously been run under the Scansped, Bilspedition, ColdSped, Huolintakeskus or Kiitolinja names, while Wilson was used for air and maritime transport. There were only a handful of exceptions to this rebranding, such as Casteletti in Italy, Masped-Trias in Hungary and Spedpol in Poland, in all of which BTL owned significant minority stakes. A full merger in these countries came later. The corporate name for the Swedish land transport firm, BTL Sweden AG , was also replaced with Schenker-BTL AB in October 1998. The BTL’s parent company, BTL AB , and other subsidiaries such as Wilson and Scandinavian Rail Cargo (SRC) were not affected. By the end of 1998, the joint organization had been put in place in 17 countries. However, these changes – as well as the economic crisis gripping Russia – resulted in a drop in freight volume and the loss of several agents. However, the Europe-wide division into Schenker and BTL companies brought certain problems of coordination. For investments and in certain other major matters, it was more efficient to act as a single organization. In September 1998, Hakan Larsson thus met with Bernd Malmström in London to discuss the possibility of a full merger. Schenker was facing particular pressure  : Stinnes was on the verge of going public, but the investment bank had drawn attention to certain irregularities with Schenker that could have negative effects. While Stinnes owned a majority of Schenker, company shares had been transferred also to BTL , and Stinnes retained ownership of company shares but not of 100 %. In order to establish a clear own39

From Schenker & Co. to DB Schenker

ership structure before taking the company public, it made sense to acquire BTL in full. In February 1999, Stinnes made a takeover offer to all outside shareholders of BTL . By the expiration date of April 20, Stinnes owned 97.5 % of the shares and 98.4 % of the voting rights in BTL . Under Swedish law, it would be possible to quickly acquire the remaining shares. Thereby, a purchase of around 1 billion DM was completed. It placed the BTL Group in a difficult position, and there was some distress and heated discussion within the company. Some large shareholders did not want to sell, and finally agreed to the transaction in April only after Larsson’s direct intervention. Some independent members of the supervisory board were also opposed to the sale, and sharp words passed between them and Bernd Malmström, forcing Hakan Larsson to step in and attempt to smooth things over. Finally, by April/May, the matter was settled  : Stinnes acquired 100 % of the shares, paying a premium of 35 %, which was considered a reasonable price. In May 1999, Hakan Larsson, Managing Director of BTL , became a member of Schenker AG ’s management board (and CEO in the year 2000), with full responsibility for European land transport operations. One problem remained  : BTL’s holdings in Wilson. This BTL subsidiary, responsible for the entirety of the group’s air and maritime transport activities, had a turnover in 1997 of 830 million DM with 1,454 employees, and was the Scandinavian market leader in its field with 90 offices in 15 countries. Antti Lagerroos, during his time presiding over the supervisory board of BTL , had previously pushed for Wilson to be sold – much to the confusion of Hakan Larsson, as Wilson made up the air and sea components of the company’s freight network, and was therefore indispensable. BTL was now projecting that the partnership with Schenker would produce no positive synergies for Wilson, which worked primarily with agents in foreign countries. This structure would not be compatible with Schenker, which operated its own foreign subsidiaries or purchased stakes in local firms. Wilson and Schenker simply didn’t fit together  ; Wilson’s management had been opposed to the merger, and the price was also not really attractive. Instead, the company was sold in 1999 to a Scandinavian investment firm, Nordic Capital Stockholm. In this context, Schenker had undertaken not to operate air and sea freight in Scandinavia for several years, an obligation that would prove to be a problem. What’s more – for whatever reasons – the merger of the Italian BTL subsidiary Casteletti failed miserably. No merger proceeds entirely without some friction, despite the initial rhetoric of partnership. It also became obvious to BTL that there were significant differences between the two companies. The two firms had quite different corporate cultures in terms of organization, systems and decision making. BTL was tightly controlled, while the Schenker organization was more decentralized, with individual national subsidiaries given significant leeway. BTL was a Scandinavian company with a pres40

2002 – Reacquisition by Deutsche Bahn

ence in Eastern Europe, a far cry from Schenker’s global structure. BTL was focused on Sweden and thought as a Scandinavian company, just as Schenker was German at its core. It appeared that BTL had assumed that, at least in the European land transport market, it would hold the reins  ; however, Stinnes had acquired BTL , not the other way around, and the future corporate philosophy also for BTL would be worked out by Schenker – a fact which the Swedes took some time to accept. The land transport activities of Schenker and BTL in the European market were then fused. At the start of 1999, companies in some 30 European countries were operating under the joint Schenker-BTL name. The complete takeover of BTL had made Schenker the leading transport logistics firm in Europe. Turnover from land transport operations in Europe had doubled to 6.6 billion DM . Through ongoing expansion, Schenker-BTL now possessed a European logistics network with 600 offices. This broad market presence allowed the company to provide many of its services entirely within its own network. The European land transport operations comprised by far the largest share of the group’s activities, employing 19,700 people. In air and maritime transport, Schenker maintained 340 offices worldwide with 6,500 employees. In 1998, the number of shipments carried by air exceeded 2 million for the first time. The third pillar of the Schenker Group was the logistics division, responsible for all warehousing and value-added services. The division had a turnover of around 500 million DM in 1998, concentrating primarily on the automotive, aerospace, consumer goods and electronics sectors. Schenker Automotive Logistics was one of the leading providers of system logistics for the international automobile and component supplier industry. 2002 – Reacquisition by Deutsche Bahn   Stinnes had the less-than-modest ambition of always being number one in its own area of operations. Stinnes was not the type of investor to purchase companies and then quickly sell them off at a profit (also known as a “locust”). Instead, it was an investor that intended to launch a worldwide leader in the freight forwarding business. By 2002, with a turnover of EUR 6 billion and 32,000 employees at approximately 1,000 locations in over 100 countries, Schenker had become a highly profitable logistics service provider. Therefore Stinnes AG had changed the company in a lasting way. Not only did the parent company provide a considerable amount of investment (capital), it also merged three forwarding companies into one. It placed a great emphasis on a private-sector philosophy and decision-making structures, and brought additional dynamism and growth in size to the company. For Schenker, Stinnes functioned as something of a “private fitness program” whose effects remain tangible to the present day. 41

From Schenker & Co. to DB Schenker

The business policy of the parent company changed, however, towards the late 1990s. Stinnes AG was itself a subsidiary of VEBA , originally a holding company for state industrial holdings which became a publicly traded company following privatization. Although VEBA had interests in a number of different sectors, it began to focus on its core business in the 1990s. On September 27, 1999, VEBA merged with VIAG to become E.ON 23, thus becoming the world’s largest private energy provider. For VEBA , focusing on its core business meant separating from Stinnes AG and, with it, the transport sector. In 1999, Stinnes became public, and Veba AG disposed of 34.5 % of its shares and declared an intention to undergo a two- to three-phase complete separation from Stinnes. The year 2002 saw the majority takeover of Stinnes AG by Deutsche Bahn. The decision by the Annual General Meeting of Stinnes AG on February 17, 2003, to transfer the shares of the minority shareholders to the majority shareholder, DB Sechste Vermögensverwaltungs-gesellschaft mbH (a 100 % subsidiary of Deutsche Bahn AG) was entered into the Commercial Register on May 9, 2003. Stinnes AG was delisted from the stock market  ; Stinnes was now part of Deutsche Bahn. On October 15, 2002, Bernd Malmström, Member of the Board of Deutsche Bahn AG , took on the position of Chairman at Stinnes AG . The former subsidiaries, Schenker and the forwarding activities division of Deutsche Bahn, were merged under the Stinnes umbrella. The reacquisition of Schenker by Deutsche Bahn was a surprising development, as the latter had separated from its forwarding entity only ten years prior. However, not only was Schenker a much more efficient company now, but the German railway had changed as well. In terms of policy, DB had received an ambitious privatization mandate with the ultimate goal of an IPO 24. Joining forces with a global freight forwarding company was intended to facilitate and strengthen the private-sector orientation. In order to acquire the forwarding company, Deutsche Bahn had to take over Stinnes in its entirety, including a division of secondary importance, the Chemical Distribution Company Brenntag. There, too, Stinnes had invested heavily and become the global market leader. Deutsche Bahn paid EUR 2.5 billion for Stinnes (plus the company’s existing debt) and received EUR 1.2 billion for the resale of Brenntag  ; thus the cost to Schenker was EUR 1.3 billion. With the integration of Stinnes and Schenker, Deutsche Bahn AG became not only a leading provider of European rail transport, but a leader in transportation and logistics as well. Market entry took place with Schenker, Railion and Stinnes. Schenker had a leading position in European land transport as well as in worldwide air and sea freight, while Railion was Europe’s leading rail freight provider. With 39,000 employees at 1,100 locations, Schenker commanded a position as the leading worldwide logistics service provider. Bernd Malmström practically bought Schenker twice  : once for Stinnes and once for DB . Perceptions of the sale of Schenker to Deutsche Bahn varied greatly, however. 42

2002 – Reacquisition by Deutsche Bahn

Those at Stinnes would have preferred to go public, but because the economy would not accommodate this desire, VEBA was able to achieve a better price with Deutsche Bahn. Others would have at least wished for a different buyer, one with a more international presence  ; as it happened, however, Schenker was to remain a German company. Moreover, it was feared that as a railway company, DB would have limited understanding of an international freight forwarder whose financial needs could not have priority over the acquisition of locomotives or train station expansion. Acquisition by DB would mean an end to major investments, so went the thinking, and therefore ownership by DB was perceived as problematic. Bernd Malmström himself had a vision in mind and saw the possibilities that opened up with the integration of Schenker into Deutsche Bahn. Ownership changes and mergers always cause a certain amount of unrest within the companies that undergo them. Deeply familiar work processes are modified, different corporate cultures collide, management positions are redistributed and “synergy” often serves as a friendly euphemism for downsizing. Such was the case in 1989 with the acquisition of Schenker by Stinnes, but also in 2002 when Deutsche Bahn reacquired the forwarding company, which had by now grown to a significantly larger size. Uncertainties and fears abounded  : would they fall back into the old bureaucratic mentality that reigned at the earlier incarnation of the Federal Railway  ? But DB was no longer comparable to the railway company of old. With the liberalization of rail transport, an additional international part was required, and therein laid synergies in sales and utilization of the trains. The anxieties were put to rest  : Schenker rebuilt the railway company through acquisitions in France, Spain, and Romania and in particular with the acquisition of BAX   ; and, with the necessary investments made, scarcely a request was rejected. More investments were made during the time of Deutsche Bahn than ever before at Stinnes. Deutsche Bahn, too, had changed during the decade of leadership by Hartmut Mehdorn, beginning to more closely resemble private-sector structures due to his vision of privatization. Despite some criticism to the effect that DB should invest more in local infrastructure and expansion of railway stations, the railway company instead expanded its subsidiary Schenker through acquisitions and investments. After all, for the planned IPO , track improvements alone were not enough to be convincing. What was needed was a vision of a global logistics company. As early as 2000, Schenker partnered with DB Cargo AG to found the joint venture Railog for railway-related logistics service providers. This new company was active in Germany, Holland and Denmark, organizing logistics services that were conducted over long distances by rail and that used public roadways for pre- and post-carriage services. In 2004, Schenker took 100 % ownership of Railog. With 30 employees at five locations, Railog achieved a turnover of EUR 40 million and was incorporated into the German Hub System. 43

From Schenker & Co. to DB Schenker

Starting September 1, 2003, the Transport & Logistics Division of Deutsche Bahn AG was managed under Stinnes AG from the new company headquarters in Berlin. Stinnes owned Railion AG in Mainz and Schenker AG in Essen. The rail freight distribution units became incorporated into Stinnes Holding in Berlin under the name Stinnes Freight Logistics and Stinnes Intermodal. As of January 1, 2003, the name Eurocargo was replaced with Schenker and, beginning in 2005, the brand DB Logistics was introduced for all business segments of Deutsche Bahn’s logistics activities. The Schenker logo therefore received the subtitle Schenker DB Logistics. Schenker worldwide in 2004 Total turnover in Million EUR

Employees

Locations

Land transport

3,867

22,100

700

Air and sea freight

3,129

10,500

800

Logistics

1,046

6,400

400

Total

8,042

39,000

1,100

(Locations column includes redundancies due to use for multiple applications.) 2006 – Merger with BAX Even before the Deutsche Bahn takeover, Schenker had been working toward a major acquisition in the United States with the goal of significantly expanding its network there. This acquisition was now in position to take place, but uncertainty reigned as to whether Deutsche Bahn would provide capital for this type of foreign investment. Finally, on January 1, 2006, Deutsche Bahn acquired BAX Global Inc. from the Brink’s Company for USD 1.1 billion. In addition to the logistics sector, the Brink’s Company was active in the coal, mining and security industries, but sought to restructure into a pure security company. Once the integration of Schenker and BAX was complete, the resulting logistics company had 55,000 employees at 1,500 locations in 150 countries. Behind these figures was the ambition to become the leading global provider of integrated logistics services. In fact, by 2006, this new company was already • Number 1 in European land transport • Number 2 in worldwide air transportation • Number 3 in global maritime transportation 44

2006 – Merger with BA X

• Number 6 in global contract logistics • Number 3 in U.S.-integrated heavy transport

BAX Global Inc., with headquarters in Irvine, California, was founded in 1972 as Burlington Northern Air Freight Inc. The company grew rapidly, reaching 820 employees after just five years. In 1986 it changed its name to Burlington Air Express Inc. and, in 1997  – the year of its 25th anniversary  – to BAX Global, in order to emphasize the international orientation it had begun to adopt in 1994. The company achieved a turnover of USD 2.9 billion in 2005. In addition to domestic transportation in the United States, BAX Global was represented in global aviation, sea transport and supply chain management. It had large-scale customers, particularly in electronics and consumer goods, and was among the top 20 names in U.S. heavy transport. BAX described itself as a “supply chain management and transportation solutions company” providing “multi-modal logistics management for business-to-business shipments” across a global network consisting of some 500 offices in 136 countries with 12,000 employees. Joey Carnes, CEO of BAX Global, now joined the Executive Managing Board at Schenker Essen, and Thomas C. Lieb entered the Board of Management of BAX Global. The vision for the merger was “To be the world’s leading integrated logistics provider.” At the time, Schenker was number 5 in sea transportation and number 6 or 7 in air freight. These were areas where economies of scale played a role. Companies unable to play in the proverbial “big leagues” ran the risk of dropping off the market. Schenker would have to either sell its global air and sea freight division, because it was too small, or be willing to truly invest – which is in fact what happened. BAX boosted Schenker’s worldwide market position in air freight from seventh to second place, and from fifth to third place in sea freight. Significant developments were also seen in contract logistics thanks to BAX . Schenker had been represented in the United States since 1912, but had been unable to achieve a magnitude commensurate with the duration of its presence there. BAX was expected to make this breakthrough a reality. Since BAX also had a strong position in Asia, it was hoped that trans-Pacific transport would be raised to a new level as well. The companies complemented one another in many ways, as Thomas Lieb, Chairman of Air and Sea Transport and in charge of integrating Bax Global into Schenker, pointed out  : “With BAX we will significantly expand our position in air and sea freight, which are particularly important for the global supply chains that are constantly growing in demand. At the same time, we will substantially enhance our presence on the North American market and particularly in Asia. In contract logistics, the business of the future, we will also be able to position ourselves even more effectively.” When it came to IT, a new central system was developed to address the challenges inherent in sharing a common system across 60 countries. 45

From Schenker & Co. to DB Schenker

Of course, the task at hand had now taken on a completely new dimension. A merger of two units of this size with different corporate cultures and mindsets  – one predominantly German, and one American – brought with it not only opportunities for connection, but points of fracture as well. In Europe, BAX was only represented in Great Britain, Ireland, Czechoslovakia, Portugal, Spain, Italy, France, Belgium, the Netherlands, Denmark, Germany, Switzerland, Austria and Sweden. In these countries, as well as in the USA , Asia and in the Pacific, teams from both companies worked extremely hard over a long period of time to coordinate systems and work procedures, and to plan and implement the legal merger of both companies in those countries with double structures. Although BAX had little representation in Europe, teams from both companies in the U.S. and Asia/Pacific spent a long time working extremely hard to coordinate systems and ways of working. A guiding principle of the acquisition was that this was not a takeover, but a merger of two equals, both assuming a leading role in their respective markets, BAX in the U.S. and Schenker in Europe. Accordingly, it was a condition of the seller that every employee had to be offered a position in the new combined company, a philosophy that corresponded quite well to the culture of Deutsche Bahn. The result was that in those countries where BAX was also represented, Schenker had a surplus of managers, since BAX management had to be taken into account as well. 2012 – DB Schenker Logistics In 2008, the German federal government decided to partially privatize the railways. Up to 24.9 % of the newly formed DB Mobility Logistics AG , which included passenger transport, freight transport and service companies, was to be introduced to the capital market. The rail network and train stations were to remain under state ownership. According to the CEO of DB , this was intended to be a step on the way to becoming the world’s leading mobility and logistics company. The global financial crisis, however, prevented this from happening. That same year, the brand name changed from Schenker DB Logistics to DB Schenker. This change took place in accordance with a new Deutsche Bahn brand strategy whereby DB Mobility, Networks  ; Logistics became subdivided into the segments DB Railways, DB Networks and DB Schenker. Throughout the long, eventful process, the name Schenker asserted itself again and again across all mergers and organizational changes. The Schenker brand is memorable, and has worldwide recognition. DB Schenker consists of the business areas DB Schenker Rail and DB Schenker Logistics. Today it stands for the entirety of transport and logistics activities of Deutsche Bahn and is one of the world’s largest transportation and logistics service providers. In the fiscal year 2012, DB Schenker achieved a turnover of around EUR 46

2012 – DB Schenker Logistics

20.3 billion  – and with it, a share of around 52 % in the entire DB Group. With 96,000 employees at 2,000 locations in all major economic regions of the world, Schenker represents a global network in approximately 130 countries. It provides seamless transport chains across all modes of transport – rail, truck, ship or plane – combined with additional complex logistical services to industries such as automotive, consumer goods and high-tech. At the time of the 1989 takeover by Stinnes, Schenker had 12,781 employees. In 2012, about two decades later, DB Schenker Logistics had 64,200 employees and a turnover of EUR 15.39 billion, making it the global industry leader. With its three business areas of European land transport, worldwide air and sea freight, as well as logistics solutions and global supply chain management, it occupies top positions in the fields of automotive, high tech, consumer goods and trade fair forwarding, special transportation, and services for major sporting events. These networks have been systematically expanded in recent years through both acquisitions and extensive investments in logistics centers and IT infrastructure. It offers integrated logistics services for global flows of goods by land transport and air and sea freight, along with all the associated logistics services. DB Schenker develops integrated solutions and links modules from the entire range of services into complex value chains in order to guarantee a reliable flow of goods and information. With its Transportation and Logistics Division, DB thus offers developed expertise for all modes of transport  : • As a specialist in land transport in Europe, it connects the European economic regions in a dense network of scheduled services. With around 25,000 employees at over 720 locations, DB Schenker Logistics is the number 1 in European land transport. • Its position as number 2 in air freight and number 3 in sea freight makes it one of the leading suppliers worldwide. Its offerings include the full range of services in global air and sea freight. Approximately 22,000 employees are active in air freight at 700 locations, and in sea freight at 600 locations. • In the contract logistics arena, DB Schenker Logistics has 16,300 employees at over 600 locations and offers logistics solutions for industry and commerce on all continents. DB Schenker ranks among the top 6 global players in contract logistics.

DB Schenker Rail is the division affiliated with the freight railways of Deutsche Bahn. With a turnover of EUR 4.92 billion and 31,800 employees, it is one of the leading suppliers in European rail freight. DB Schenker Rail operates its own companies, subsidiaries, associates and joint ventures in 15 European countries. Especially in Southeastern Europe, DB Schenker Rail offers together with Schenker 47

From Schenker & Co. to DB Schenker

Logistics cross-border transport services in full-train and single-car systems as well as groupage services. Its priority market sectors are mining, chemicals and petroleum, building materials, industrial and consumer products, intermodal, and automotive. DB Schenker Rail operates approximately 5,000 freight trains on a daily basis. In the year 2012, forwarding output totaled 106 billion ton-kilometers, with the total weight of transported goods amounting to 398.7 million tons. With approximately 109,000 freight cars and 3,587 locomotives – including a high proportion of cross-border deployable multisystem locomotives – DB Schenker Rail has the largest fleet in Europe. Today, nearly 60 % of freight trains cross at least one border.

48

Business Strategy in Transformation

With the start of the Cold War in 1948, Europe was divided in two economically, into a free market “West” and a planned-economy “East”. The trade between these regions that had remained brisk into the interwar era faced increasing barriers. The Communist “East” established state-owned monopolies in all significant economic sectors and attempted to pursue a policy of autarky – of independence from the capitalistic “West”. In the immediate aftermath of the war, in the 1945 some countries, such as Czechoslovakia, attempted to pursue a “third way” between capitalism and communism. Businesses were nationalized, assets confiscated and attempts made to institute a planned economy, but contacts with Western trading partners began to normalize, to the extent such normalization was possible in the postwar turmoil. This phase ended in 1948 with the Communist takeover of power. Now the attempt was made to move to close off completely from the capitalist world, a development accelerated in the West by the advent of the Marshall Plan. Each country receiving aid under the European Recovery Program, as it was known, had to agree to U.S. restrictions on the export of militarily relevant products (which could mean almost anything). The Communist countries were thus cut off from transfers of Western capital, technology and know-how. As a response to the Marshall Plan, several of the countries established the COMECON 25 in 1949, attempting to achieve a socialist division of labor with its own currency of account and a specialization of individual countries in particular industrial sectors. For example, Hungary was to build buses only, while Romania would concentrate on locomotives. The success of this plan was limited, as the economic structure in each country was similar and all tended to focus on the export of machinery. The state assumed responsibility for the central planning of all economic activity through strictly hierarchical structures. Decisions were made at the top and passed down, while information flowed toward the top. The highest national authorities 49

Business Strategy in Transformation

issued production targets in the form of multi-year “plans”, which were then broken down by region and sector to the level of individual factories. On the basis of these assigned production quantities, the factories specified the investments, number of employees and raw materials that would be required to fulfill the quota. These requests were then bundled and presented to the planners at the top, modified as thought appropriate, and approved. It was clear to many, including the planners, that this was the Achilles heel of the system  ; enterprises usually underestimated feasible production targets and overestimated the resources required, in order to ensure that the assigned production quota could safely be met. In addition, planning was based solely on quantities, not on prices. Most producers had no idea of their actual production costs. Enterprises in the planned economies thus tended to be run by engineers, not financial managers, as in Western companies. This was illustrated by the practice with capital investments  : the provision of resources for an investment was requested by a company from the state administration, but, once the investment was approved, no effort was made to check whether it proved to be a profitable or efficient one. The managers of enterprises were selected from above according to political criteria. Their social and material position depended on their position in the Party26. The only objective within the enterprise was fulfillment of the production quota  : failure to meet the quota could result in significant sanctions, but overproducing was also risky, as it would simply result in a higher quota being imposed the following year. Any innovation or change was thus suspect, as increasing the risk of failure. Furthermore, the scope for entrepreneurial activity was limited. As the central objective and accomplishment of the planned economy was job security and an egalitarian distribution of income, it was essentially impossible to close factories, fire workers or pay them according to productivity. A particularly zealous worker was more likely to receive an award than any sort of material benefit. The countries with planned economies had not always had planned economies. Until the 1940s (or 1917, in the case of the Soviet Union), their industrialization had proceeded under market conditions. Their initial conditions thus varied significantly in terms of existing levels of development, skill levels of the population and available natural resources. With its size, rich natural resources and superpower status, the Soviet Union was sui generis, and the other states largely copied the economic model it provided. Policies on contact with the West varied somewhat from country to country  : some placed draconian restrictions on travel, yet still faced a brain drain as citizens chose to emigrate, as in the German Democratic Republic  ; on the other hand Hungary and Yugoslavia encouraged tourism, which of necessity resulted in greater contact with the West. Hungary also permitted privately owned family businesses, while citizens of Yugoslavia could work abroad as “guest workers”27, primarily in Germany. These workers were thus familiarized with “Western” 50

Business Strategy in Transformation

habits of work and consumption, while their remittances home eased their country’s chronic balance-of-payment problems. Following the lead of the Soviet Union, the planned-economy countries pursued a policy of forced industrialization in a bid to catch up with the West, giving priority to heavy industry, machinery and military production. The successes of this strategy were evident at least into the 1960s, most notably in terms of military technology and certain other matters of national prestige (notably the aerospace industry). Neglected to varying degrees, however, were agriculture, infrastructure and especially the production of consumer goods, which also suffered from a policy of broad standardization, resulting in very restricted consumer choices. While – for example – shoes were available for purchase, there were only two or three models to choose from. The system was particularly hard on individual tradesmen and small and medium-sized businesses. The drawbacks of central planning became particularly apparent with the rise of information technology  ; creativity cannot be imposed from above, only developed in a decentralized manner. By the late 1960s, even the socialistic centrally planned countries were forced to acknowledge this weakness, and several countries undertook reforms to provide their enterprises greater decision-making freedoms. However, all such attempts failed in the face of the one-party state, which was unwilling to permit the growth of decentralized decision-making structures beyond its direct control. Real GDP per capita Average annual growth rates (%) 1950–73

1973–92

Austria

4.9

2.2

Germany

5.0

2.1

Czechoslovakia

3.1

–1.4

Hungary

3.6

0.0

Poland

3.4

–0.6

USSR

3.4

–1.4

Bulgaria

5.2

–1.4

Yugoslavia

4.4

–0.5

Romania

4.8

–1.6

Source  : Angus Maddison, Monitoring the World Economy 1820–1992, OECD Development Center Studies, Paris 1995, page 47

51

Business Strategy in Transformation

Growth rates in the planned-economy countries began to drop off significantly from the late 1960s onward. By this point, the failure of the planned economy was evident  : 25 years after the end of the Second World War, it was still unable to meet the material needs of the population. The 1970s were also a period of global economic crisis, with the collapse of the Bretton Woods system and several oil price shocks, providing both sides with an incentive to loosen their trade restrictions. Western countries were looking increasingly toward new export markets, and some Eastern Bloc countries began to allow foreign investment in the form of joint ventures and undertook contract manufacturing work for Western companies. From the 1970s onward, the planned-economy countries moved from transacting foreign trade in transfer rubles to using convertible currencies, thus opening themselves at least partially to global market forces. This resulted in balance-of-payment problems and a severe shortage of foreign exchange. From 1960 to 1980, exports from Eastern Europe increased 13-fold, imports 15-fold and the trade deficit by a factor of 290. In general, indebtedness grew dramatically in the planned-economy countries, increasing from USD 5.1 billion in 1960 to more than USD 100 billion by 1989. As these loans were often secured by guarantees extended by Western governments, the repayment risk was also borne by Western taxpayers. The indebtedness enabled survival of the planned economies, but it was an increasingly heavy burden. Their legacy was an unbalanced economic structure which languished far behind that of the capitalist West. The transition from a market economy to a planned economy in the late 1940s was simplified by the existing state structures. In addition, all countries evolved central planning methods during the Second World War, which could now be maintained and extended. There was no established model for a transition from a planned to a market economy, however, and Western advisors and consultants  – primarily from the United States – offered no panacea. The immediate consequence, then, was a chaos. Existing state enterprises couldn’t simply be shut down en masse with the shift to a market economy and thus continued to operate – often piling up larger and larger losses, kept afloat either by government subsidies or by loans extended by state-owned lenders. As many countries did not want to see these enterprises fall into the hands of foreign investors, and no domestic investors had the capital resources required to purchase and modernize them, privatization was often carried out by means of vouchers distributed to employees or the general public, or through management buyouts. Both approaches failed to solve the problem of undercapitalization, making Western investment or complete takeovers unavoidable. In addition, a functioning market economy relies on a certain legal foundation, particularly in terms of property and contract law – a foundation that had yet to be introduced in the newly opened economies. Thus, the arrival of market economics in these countries brought with it a severe economic crisis with a significant decline 52

Business Strategy in Transformation

in economic output, a drop in real income, mass unemployment and high inflation. The people had been sorely tried – asked to sacrifice in the name of building Communism, then burdened again with the challenges of creating a market economy. It is remarkable how little social and political unrest followed the transition. Responses were generally on a more individual level, with many citizens choosing to seek work abroad or emigrate permanently. Annual per capita change in real GNP (%) Eastern Europe

Former USSR

1988

0.7

1.3

1989

–1.6

1.0

1990

–7.9

–3.1

1991

–11.1

–6.8

1992

–5.2

–15.0

1993

–1.4

–10.1

1994

4.2

–14.2

1995

6.0

–5.5

1996

4.0

–3.1

1997

2.7

2.2

Decrease in real GNP since 1989 (%) Country

Through

Decrease from peak

Yugoslavia

1993

–47

USSR

1996

–45

Romania

1992

–28

Bulgaria

1997

–26

Hungary

1993

–20

Czechoslovakia

1993

–18

Poland

1991

–17

Source  : Angus Maddison, The World Economy  : Historical Statistics, OECD Development Centre Studies, Paris 2003, page 237

53

Business Strategy in Transformation

Population – in 1,000s Year

1990

2011

Czech Republic

10,363

10,497

Slovakia

5,298

5,398

Hungary

10,374

9,974

Slovenia

1,998

2,053

Croatia

4,778

4,403

Serbia

7,568

7,259

613

620

Bosnia and Herzegovina

3,660

3,840

Macedonia

2,028

2,059

Montenegro

Albania

3,182

2,832

Romania

23,207

18,991

Bulgaria Southeastern Europe Russia Ukraine

8,718

7,348

81,787

75,274

147,913

142,961

51,892

45,706

Belarus

10,177

9,672

Poland

38,119

38,530

Estonia

1,569

1,296

Latvia

2,663

2,059

3,698

3,029

Eastern Europe

Lithuania

256,031

243,253

Total

337,818

318,527

Population in comparison to 1990  : Serbia 1998, Montenegro 2000, Bosnia and Herzegovina 1995, Belarus 1995.

In 20 years, the population of the region declined by more than 19 million people, a drop of some 6 %. Not all countries were affected equally  ; Hungary, Croatia, Serbia, Romania, Bulgaria and the former USSR were hardest hit. Despite the crises and hardships, however, economic performance was impressive. Per capita GNP had doubled or even tripled, with the exception of certain states of the former Yugoslavia and the USSR . However, these high rates of growth were largely the consequence of favorable starting conditions, as in Slovenia, Czechoslovakia and Hungary, or of an extremely low initial level of development, as in the case of Romania. 54

Business Strategy in Transformation

GNP per capita in 2011 (EUR) Increase until 2011, 1990 = 100 Slovenia

21,300

Poland

352

Czech Republic

20,200

Romania

314

Slovakia

18,600

Slovakia

290

Hungary

16,400

Estonia

286

Lithuania

16,600

Bulgaria

243

Poland

16,200

Hungary

241

Estonia

15,700

Latvia

206

Croatia

15,100

Slovenia

239

Latvia

14,800

Lithuania

231

Romania

13,800

Czech Republic

215

Russia

13,200

Belarus

210

Bulgaria

11,400

Macedonia

209

Montenegro

10,500

Serbia

191

9,200

Croatia

189

Serbia

8,800

Montenegro

188

Bosnia and Herzegovina

6,800

Russia

174

Ukraine

5,700

Bosnia and Herzegovina

174

Belarus

4,200

Ukraine

119

Albania

2,900

Macedonia

BNP per capita in 2011 (EUR), EU 27 = 100 Austria

129

Germany

121

Finland

115

Slovenia

84

Czech Republic

81

Slovakia

73

Estonia

67

Poland

66

Hungary

66

Lithuania

66

Croatia

59

55

Business Strategy in Transformation

Latvia

58

Romania

47

Bulgaria

46

Macedonia

35

Serbia

35

Montenegro

42

Albania

30

Real GDP  : Change in comparison to preceding year 1990 Czech Republic

–1

1991 –12

1992

1993

–1

0

1994

1995

2

6

1996

1997

1998

1999

5

–1

0

2

Slovakia

–3

–15

–7

–4

6

6

7

4

4

0

Hungary

–4

–12

–3

–1

3

2

0

3

4

3

Slovenia

–5

–9

–6

3

5

4

4

5

4

5

Croatia

–7

–21

–12

–8

6

7

6

7

2

–1

Poland

–12

–7

3

4

5

7

6

7

5

5

Romania

–6

–13

–9

2

4

7

3

–5

–2

–1

Bulgaria

–8

–12

–7

–2

2

3

–9

–2

5

2

Russia

–3

–5

–15

–9

–13

–4 –

4

1

–5

6

Ukraine

–4

–9

–10

–14

–23

–12

–10

–3

–2

0

Estonia

–8

–14

–14

–9

–2

5

6

12

7

0

Latvia

–3

–13

–32

–11

2

1

4

9

6

3

Lithuania

–3

–6

–21

–16

–10

3

5

8

8

–1

Inflation  : Change in consumer prices (%) in compilation to preceding year 1991

1992

1993

1994

1995

1996

1997

1998

1999

Czech Republic

10

57

11

21

10

9

9

9

11

2

Slovakia

10

61

10

23

13

10

6

6

7

11

Hungary

29

35

23

23

19

28

24

18

14

10

Slovenia

552

115

207

33

21

14

10

8

8

6

Poland

586

70

43

35

32

28

20

15

12

7

Croatia

610

123

666

1,518

98

2

4

4

6

4

Romania

5

170

210

256

137

32

39

155

59

46

Bulgaria

29

339

91

73

96

62

122

1,058

19

3

5

93

1,527

874

307

198

48

15

28

86

91

1,211

4,735

891

377

11

23

Russia Ukraine

56

1990

5

80

16

Business Strategy in Transformation

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Estonia

23

202

1,076

90

48

29

23

11

8

3

Latvia

–

172

951

109

36

25

18

8

5

2

225

1,020

411

72

40

25

9

5

1

Lithuania

8

Average annual unemployment (%) 1990

1991

1992

1993

1994

1995

1996

1997

Czech Republic

–

4

3

4

4

4

4

5

1998 7

1999 9

Slovakia

–

12

10

14

14

13

11

12

13

16

Hungary

–

8

10

12

11

10

10

9

8

–

Slovenia

–

10

13

9

9

7

7

7

8

14

Croatia

–

15

15

15

15

10

10

11

14

–

Poland

–

12

14

14

14

13

12

11

11

14

Romania

–

3

8

10

11

10

7

6

6

7

Bulgaria

–

11

15

21

20

17

14

14

14

16

Russia

–

–

5

6

8

9

10

12

13

13

Ukraine

–

–

–

–

–

6

8

9

11

12

Estonia

1

2

4

7

8

10

10

10

10

12

Latvia

–

–

–

–

–

19

20

15

14

14

Lithuania

–

–

–

–

17

18

16

14

13

15

With the collapse of the Eastern Bloc in 1989, Schenker also had to ask itself whether it wanted to be active in the region again. The problems here were daunting  : • • • • • •

Dramatic scale of inflation Declining industrial production Rising unemployment Desolate infrastructure in roads, communications, banking, etc. Unresolved restitution claims about the acquisition of property Corruption and problematic jurisdiction

Despite the anticipated difficulties, however, a market of hundreds of millions of potential customers with a significant pent-up demand for freight forwarding services could not simply be ignored. Furthermore, this had once been Schenker’s traditional home market  ; as far back as 1930, it was operating 96 offices in the region. However, Schenker had not filed any claims for the return of its former properties in these countries  ; while some of them had been in central locations, such as in Prague, most 57

Business Strategy in Transformation

had been located near railway stations, some no longer extant, and were generally ill-suited to modern business requirements. In 1989, the Western countries were at first very optimistic about the future of Eastern trade in the region, but the gold-rush mentality of the early days soon gave way to a more realistic view of the situation. It was clear to Elmar Wieland that these countries would have a long way to go before they could create economic structures comparable to those in the West. It certainly could not be done without help from the West. That offered a chance for an ambitious, risk-taking company willing to take a leading role in the reconstruction phase and potentially reap a strong market position in the future. More and more Western European companies began to move production to Eastern Europe, where labor costs were much lower, leading to an increasing demand for goods transport. Some of the former Eastern Europe countries were in a good position to catch up economically with the West, while others fell behind. In 1997, Stinnes AG ’s corporate planners saw the countries of Southeastern Europe accordingly in the following different terms  : • Pioneers  : Slovenia, Hungary, Czech Republic • Latecomers  : Croatia, Romania, Slovakia • Tail-end  : Bulgaria Elmar Wieland agreed with these assessments in his presentation of Southeastern Europe in 1996 and 2000. The countries of the region showed extremely varied levels of development. Some met the criteria for accession to the EU, including Poland, the Czech Republic, Slovenia and Hungary. Others lagged far behind and were to define emerging market countries, such as Romania, Bulgaria, and the countries of the CIS . The situation in Russia was particularly opaque. This was not only a legacy of central planning  ; some countries had simply not been able to put in place the framework for a functioning market economy. Political conditions in these countries also varied widely, and were in some cases more problematic, particularly in crisis-hit areas such as in the remaining republics of Yugoslavia (Serbia and Montenegro)28, Bosnia and Herzegovina, Macedonia and Albania. On the other hand, the diversity of languages, cultures, and social changes presented an interesting challenge, one which would require a high level of sensitivity and understanding. In the transportation sector, each country had maintained a state-owned monopoly for each mode of transport, as well as one for the foreign business. These firms were characterized by their large size as well as by their poor quality of service and absence of willingness to perform. Not surprisingly, the state monopolists had acquired a poor reputation among their unwilling customers, and were now threatened with liquidation. They were lacking in adequately trained personnel and functioning 58

Business Strategy in Transformation

accounting systems, and gave little thought to customer satisfaction or improving performance. Some companies, such as Deutrans29, rapidly vanished from the market, while others continued in existence, struggling with strategic and economic problems. Only a handful was able to position themselves effectively for the long term. Certain former state monopoly enterprises like Pekaes, Cechofracht, Despred and Romtrans faced numerous roadblocks to successful privatization, resulting in a strategic logjam and a loss of market share. Others, however, such as Hungarocamion, were merged with Waberer and sustained big losses. The state of the transportation infrastructure presented a significant problem. In general, the level of development in these countries was far higher in the capital than in outlying regions, a gap reflected in the transportation infrastructure. All modes of transport were affected by the weakness, but also warehousing and customs facilities, communications, and much else besides. Into this “logistical vacuum” entered the first private, Western transport firms, enabling the ensuing boom in goods traffic. Due to state control and the poor condition of the road networks, rail transport played a significantly more important role than it did in the West. As Klaus Lippstreu realized, the share of freight transported by rail had been extremely high in the planned economies, with goods transport highly regulated by state-owned freight forwarders. Before the collapse in planned economics, Schenker’s activities in the region had been primarily in the transit traffic to and from Greece, Turkey and the Near East. In 1989, however, the rail systems were generally in a desolate state. Not only had the rail infrastructure suffered from decades of neglect, but the rolling stock and especially the organization and management of the railways were wholly inadequate. The railways were focused primarily on bulk goods and transport with the other former COMECON countries, a handicap given the rapid dislocation of the patterns of the foreign trade. With the fall of the Iron Curtain, scheduled rail traffic decreased. The role played by rail in bilateral transport decreased precipitously. In both East and West, the railways became much more aggressive, and were a core element of comprehensive logistical chains. Schenker promoted rail transport particularly as an element of comprehensive logistical service packages  ; the use of private freight cars also gained in importance. Nonetheless, the truck soon won out  ; it was simply more flexible and more efficient than rail transport. A tenfold increase in goods shipment by road was projected for 2010. With its reentry into the Eastern and Southeastern European market, Schenker’s focus was also on European road traffic. While Schenker’s business activities in these countries did revolve largely around road transport, it did not want to neglect other modes entirely. The decision of whether freight was to be shipped by truck, by train or multimodally depended on several factors. The shortest route was not always the best  : shipments to the CIS states via Poland and the Czech Republic often faced long delays at the borders. One ongoing problem was the unbalanced nature of this 59

Business Strategy in Transformation

traffic, as the Eastern European countries exported fewer goods than they imported. In addition, Eastern European clients often partially directly hired carriers offering rock-bottom prices. However, due to the structure of the market and frequent difficulty in obtaining the proper authorizations, much freight was moved using small 3.5 to 7.5 ton trucks, always overloaded. This pattern created problems, as these smaller trucks required no permits  ; presented a safety risk, particularly for shipments of hazardous substances  ; and distorted competition. The problem of safety in its broadest sense continued to be a hallmark of the freight business in Eastern Europe. The air and sea freight forwarding businesses were at the beginning very weak. The inland waterways held significant potential for the movement of bulk goods. Much hope was placed especially in Russia, with its extensive network of rivers and canals. In the short term, however, this proved rather a disappointment. With the opening of the Rhine-Main-Danube canal in 1992, goods could be transported by barge all the way from the Black Sea to Northern Europe. However, even multimodal shipments never really took off, except for a few politically motivated attempts. The Danube waterborne trade with Southeastern Europe met a particularly tragic fate  : the effects of the wars in the former Yugoslavia essentially brought ship traffic on the lower reaches of the Danube to a standstill. As one of the few freight forwarders with rail and inland waterway interests, this situation had particularly painful effects for Schenker. The rebuilding of the Schenker organization in Eastern and Southeastern Europe was thus a challenge with enormous risks. The infrastructure in these countries was still far short of what would be hoped for as ideal. It was hard to find properly trained, skilled and multilingual employees, and difficult to obtain suitable warehousing facilities and office space. In the medium term, a great deal of improvisation was unavoidable. Investments were made only with some apprehension, as the legal status of the property rights associated with the purchase of land or buildings was often rather nebulous. Customs officers also continued in their old ways, demanding payoffs left and right. In many areas, crime was high and increasing rapidly, with organized criminal groups playing a significant role, while public corruption was rampant. Careful scrutiny was thus required in nearly every business transaction. The situation was more promising in the areas of telecommunications and IT, because it was possible for a late-comer to jump over some stages of development. The languages of business were primarily English and German, with the Deutschmark and the USD serving as a basis for calculation. The growth in traffic between Western and Eastern/Southeastern Europe was borne in particular by the Schenker subsidiaries in Germany, Austria, Sweden and Finland. The other national subsidiaries functioned primarily as feeders for these existing routes. While Schenker had moved rapidly to establish branches in Eastern European countries that presence was still more in the nature of a toehold than a 60

Business Strategy in Transformation

pervasive presence. There was still much room for improvement in terms of Schenker’s share of the Eastern European freight market  ; with the exception of Germany, Austria and to an extent Scandinavia, it was largely a fringe player. In October 1992, Schenker Austria issued an informational brochure entitled “Schenker and Eastern Europe”, presenting economic data, customs and shipping conditions, and the nascent Schenker organization in those countries. Schenker offices/agents 1992

Albania Transshqip, Tirana Baltic Republics Please contact Schenker, Vienna Bulgaria Schenker, Sofia (sales) Despred, Sofia CIS Please contact Schenker, Vienna We are in the process of establishing a presence. Croatia Intereuropa, Zagreb (air) Hypocentar, Zagreb Czech Republic Schenker CS Interlogistik, AS , Praha Schenker CS Interlogistik AS , Brno Csad, Ostrava (consolidated traffic by road) Csad, Olomouc (consolidated traffic by road) Cechofracht, Praha (air) Cechofracht, Liberec (air) Cechofracht, Jablonec (air) All sales lead to Schenker Vienna please. Hungary Schenker, Budapest (sales) Hungarocamion, Budapest (consolidated traffic by road) Masped, Budapest (air) Poland Schenker, Warszawa (sales) Pekaes, Warsawa Pekaes, Czechowice Romania Schenker Bucharest (sales) Romtrans, Bucharest Romtrans, Oradea Serbia Please contact us when United Nations embargo is lifted. Slovakia Schenker Bratislava All sales leads to Schenker Vienna please. Slovenia Intereuropa, Ljubljana (air) Intertrans, Ljubljana 61

Business Strategy in Transformation

In most of these countries, Schenker had not yet progressed far beyond a token office or two and an arrangement to cooperate with the former state-owned monopolist. These former state monopolies still occupied a dominant market position. Schenker, with its long history of cooperation with the national freight forwarders and carriers, confronted the strategic decision of whether to develop an organization by means of takeovers or equity investments or to establish its own network from scratch. It was decided that starting with a clean slate was preferable, rather than proceeding by means of takeovers or joint ventures. Stinnes AG ’s corporate plan of 1997 also envisioned a strategy of organic growth, with support from the Swedish, German, and Austrian subsidiaries in accordance with the specified priorities. In practice, however, some mergers did eventually occur with certain privatized ex-monopolists with which Schenker had long successfully cooperated. Crucial to Schenker’s success in the region would be the training of the employees and the integration of the management teams into the Schenker universe. Existing resources of skill and knowledge needed to be tapped and made available throughout the entire organization. Accordingly, management in Vienna promoted a dialogue between the Western and Eastern European subsidiaries with regular conventions (“East meets West”) in various locations, meetings of sales directors, management conferences, etc., in order to integrate Schenker’s Eastern European staff in the dialogue at all levels of the corporate hierarchy. Improving the performance of the Eastern European sales departments was of importance  ; the sales capacity was lacking, because these were generally governed by a different view of this matter. The sales departments existed merely to receive orders, their employees waiting at their offices for the customers. Initially, there was no effective management and feedback system to measure sales effectiveness and success. This problem was recognized, and a wave of new hiring and employee training sessions ensued. However, major investment and efforts at personnel development would continue to be necessary  ; without them, there was no prospect of long-term growth in Eastern Europe. Schenker had responded with alacrity to the sweeping changes in Eastern Europe, with Schenker Germany, Austria and Sweden all quickly opening local representative offices or entire branches. These were not necessarily the best coordinated  ; accordingly, for a time, Russia had two separate Schenker branches, the eventual fusion of which was only carried out with some difficulty. Finally, by the mid-1990s, the organizational structure had been ironed out. In 1996, responsibility for Eastern Europe was divided up among the larger Schenker subsidiaries  : Sweden  : Northern Europe  : • Finland • Estonia 62

• Latvia • Lithuania

Business Strategy in Transformation

Germany  : Central and Eastern Europe  : • Poland • Russia Austria  : Southeastern Europe  : • Austria • Czech Republic • Slovakia • Hungary • Bulgaria • Romania • Croatia • Slovenia • Turkey

• Belarus • Ukraine • • • • • • • •

since 1999 Greece Bosnia and Herzegovina Serbia Montenegro Macedonia Albania Moldova

From 1999, responsibility for Eastern European business was transferred to the Schenker organizations in Austria and Finland, both of which were the market leaders in their respective countries, and which had strong historical and business ties with and a corresponding understanding of Eastern and Southeastern Europe. Finally, the global Schenker organization was structured around regional headquarters. Under the project name “Picasso”, Schenker carried out an internal restructuring in 2001. Under the overall direction of Hakan Larsson, CEO since 2000, responsibilities were divided among the managing board as follows  : Hager – for land transport/logistics and the European region  : East/Fagerström North/Silander Central/Nuzinger Germany/Hager Southeast/Wieland Lieb – for air and sea freight/logistics, non-European region  : Africa/Nme and Lieb The Americas/Elsessser Asia-Pazific/Villinger In 2003, the Region Central was introduced, which included Germany, Belgium, Switzerland, Netherlands, Luxembourg  ; Hangartner and initially also Russia. The Region Central accounted for about 40 % of the personnel and turnover in Europe and was led by Hans-Jörg Hager. 63

Business Strategy in Transformation

In 2007 the Network Management Region Europe was set up under the direction of Hans-Jörg Hager with the following task areas  : Göran Åberg – East Europe Ingvar Nilsson – North Europe Hans-Jörg Hager – Central Europe Joel Moebel – West Europe Elmar Wieland – Southeast Europe All national offices in Eastern Europe had achieved a positive result in 1997. Turnover in the transition countries was increased by 10 % in 1997 to 245 million Austrian schillings. The Southeastern European national organizations had thus already achieved some importance  :

Czech Republic

Turnover in 1,000s DM

Employees

Shipment

Tonnes

11,700

99

58,000

72,800

Hungary

9,900

53

32,000

34,000

Slovakia

4,600

42

27,500

9,500

Bulgaria

3,800

27

3,700

18,000

Romania

1,000

20

2,700

5,200

Croatia

1,700

10

4,400

5,400

The subsidiaries in Southeastern Europe, managed from Vienna, reached some 980 million Austrian schillings in 1998 and 1.26 billion in 1999 (including Austria). In Hungary, the Czech Republic and Slovakia, Schenker searched for suitably located warehouses and office space. The company planned to build its own facilities, rather than merely renting. In all of these countries, Schenker was at the limit of its capacities. Thus the expansion efforts were hampered by legal problems relating to land purchasing or transfer, such as unclear ownership, and also by poor traffic connections. In mid-November 1997, Stinnes became the largest single shareholder in BTL , which operated outside Sweden under the Scansped name. Scansped was BTL’s largest division, with more than 300 offices in 19 European countries and a fleet of some 7,000 trucks. This especially strengthened Schenker’s position in Northern Europe, the Baltic States, Russia and Ukraine. Under the Scansped brand, the BTL organization had been growing successfully  ; the acquisition of Huolintakeskus, the Finnish market leader, had particularly helped BTL’s position in the Russian freight rail transport market. BTL was the market leader in some of the Baltic States, and 64

Business Strategy in Transformation

prospects continued to be positive. Good results had also been achieved in Hungary, Poland, Russia and Ukraine. BTL Employees in Eastern Europe 1997 Poland Czech Republic Estonia Latvia Lithuania

306 59 127 25 6

Russia

100

Hungary

227

Ukraine

4

The name Schenker-BTL now stood for the largest logistics and freight transport provider in Europe, active in all the major Eastern European countries, from Poland, the Czech Republic and Hungary to Estonia, Lithuania, Latvia, Russia and Ukraine. Schenker employed some 900 people in Eastern Europe, handling approximately 250,000 shipments annually. The largest national subsidiaries were those in the Czech Republic, with 200 employees, and Hungary, with 300. In both countries, due in part to its absorption of BTL’s business, Schenker was one of the leading freight forwarding firms on the market. The objective was to continue to expand the company’s network and market presence, primarily in core land, air and maritime transport services, warehousing, logistics, and the trade show business. The overall conditions were not always conducive to that goal. The most important keys to success were skilled personnel and appropriate warehousing and office infrastructure, but also provisions for customs clearance. Schenker’s international organization and the intensive training offered by the Schenker Academy were especially helpful with improving employees’ skills, instilling in them the Schenker corporate philosophy and transferring needed knowledge. The changed scale of operations resulting from the merger with BTL made investments in IT infrastructure especially imperative. Each Eastern European subsidiary had carried out its own software development. The linguistic differences between countries made it very difficult to impose a company-wide solution in these countries. In 2004, eight Eastern and Southeastern European countries were admitted to the European Union  : Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia, the Czech Republic and Slovakia. Romania and Bulgaria followed in 2007. At that time, these countries were enjoying stronger economic growth than the rest of the EU, and their accession to the EU thus occasioned high hopes. The sudden vanishing 65

Business Strategy in Transformation

of customs frontiers was a huge challenge for the freight forwarding industry. Over the next few years, an increase in total freight volume of 50 % was projected, with the lion’s share accruing to road transport  ; rail transport was expected to decline by 60 %, to just 15 % of total volume. Inland shipping and maritime transport in general offered significant potential, but were hampered by the still inadequate port facilities. Air freight was well established particularly in Poland, the Czech Republic and Hungary  ; in Southeastern European countries with relatively insignificant levels of air freight activity, shipments were routed via the hubs in Vienna or Salzburg. A response was also the buildup of domestic transports in line with the Western European model. Road infrastructure was also in dire need of expansion. In 2002, Poland had just 389 km of highways and Hungary 448 km  ; the situation in Slovakia and the Baltic States was worse still. The consequences were near-permanent traffic congestion and a high accident risk  ; trucks driving with no lights and pedestrians walking along the highways were both frequent sights. Those customs formalities that remained continued to be handled with much red tape, with laws and regulations that sometimes seemed to change from one day to the next. Maintaining a staff of internal customs experts thus continued to be necessary. From a freight forwarding company perspective, the accession of these countries to the EU was grounds for mixed feelings. The abolition of the customs borders also meant the loss of not-insignificant revenue from customs clearance services, which would be reflected in a reduction in staff and in turnover. This would have to be compensated for by an overall increase in freight orders, rigorous cost controls, and the introduction of new services to offer customers. On top of the existing need for investment in warehousing, logistics, offices and IT infrastructure, it was one more challenge to face. Therefore in these countries the process of evolving from a simple freight forwarder to a logistics service provider was accelerated. The response included the expansion of existing regular routes in Eastern and Southeastern Europe, increased intermodal traffic, and the creation of regional hubs, such as Vienna and Salzburg for Southeastern Europe. EU Accession Forecast effect (2002) Employees

Decrease

1,834

76

Czech Republic

291

54

Hungary

290

46

Austria

66

Hungary Schenker-Masped

45

4

Slovakia

82

9

Business Strategy in Transformation

Employees 1992, or at date of establishment 2003 Czech Republic

11

307

Slovakia

12

74

Hungary

12

353

Slovenia

1

165

Croatia

9

40

Bosnia-Herzegovina

5

Macedonia

7

Romania

4

69

Bulgaria

10

93

Total

59

1,113

Schenker organization in Eastern and Southeastern Europe, 2002 Employees

Branches

Warehouse space, m2

186

3

23,000

Latvia

82

3

38,600

Lithuania

53

3

5,200

1,259

32

52,573

177

9

11,000

Belarus

3

1

2,000

Ukraine

6

1

1.000

Country Estonia

Poland Russia

330

18

19,310

Slovakia

Czech Republic

75

5

23,300

Hungary

331

9

23,580

Slovenia

5

1

1,000

39

4

400

9

1

1,000

Croatia Yugoslavia Bosnia-Herzegovina

3

1

–

Macedonia

4

1

–

Romania Total

63

4

2,000

2,625

96

203,963

67

Business Strategy in Transformation

Schenker’s strategy was based on rented warehouse space, maintaining its own network, and cutting-edge IT solutions. The advantage for the new Eastern and Southeastern European national subsidiaries was thus their integration into a global leader in the freight forwarding and logistics industry. This affected primarily the technical and management staff, who accomplished the know-how transfer with considerable personal commitment. Compounded to this was the existing infrastructure  : In 2002, Schenker controlled a total of 3 million square meters of warehousing space at 390 locations around the world. The largest proportion was in Europe (2,350,000 m2 and 300 locations), followed by North and South America (485,000 m2 and 55 locations) and Asia/Pacific region/Africa (185,000 m2 and 35 locations). Of greatest significance were the international logistics centers, which offered a full spectrum of services. Schenker was the land transport leader in Europe, with 23,000 employees in 32 countries and annual turnover of 3.6 billion euros. Through its network, Schenker offered a variety of time-standardized products with innovative IT solutions. This effort was aided by its air and maritime freight services, in which Schenker occupied the third and fifth places respectively, with 10,000 employees and turnover of 2.6 billion euros. In total, Schenker’s turnover in 2002 was some 6 billion euros, with 70 % of this from just 25 customers. The breakdown of Schenker’s 70 largest customers by industry was as follows  : Automotive

37 %

High-tech

25 %

Engineering

16 %

Consumer goods

15 %

Chemicals

7 %

In 2006, Schenker acquired BAX , an American logistics firm. BAX operated primarily in the United States and the Asia-Pacific region, resulting in a certain degree of restructuring within Schenker and the prospect of significant synergies to come. The goal was to fully integrate the two countries within a year, with no loss of employees or customers, and then retire the BAX name. BAX ’s only presence in Austria and Southeastern Europe was in the air freight sector, but its position was much weaker than Schenker’s. The path to success is rocky, and never straight. Even after the initial transitional economic shock of the early 1990s, some countries in Eastern and Southeastern Europe faced further economic setbacks from insufficient adjustments to market conditions, political turmoil, and  – in some cases  – a credit bubble. The global financial economic crisis of 2007 also hit the countries of East and Southeast Europe hard at least until 2009. The transition to a market economy required strong organic 68

Business Strategy in Transformation

growth in Eastern Europe and integration into the European Union. The economic downturn in the Western countries had a significant impact on economic growth in the transition countries. Nonetheless, Schenker continued to do fairly well, as pent-up demand for freight forwarding services was high enough to overcome the generally poor business climate. Air freight 2005 BAX

Schenker

Austria Employees

16

70

Shipments

11,528

59,906

2,838

24,814

11

16

2

3

Tonnes Czech Republic Employees Offices Shipments Tonnes Rank in market

2,918

7,096

600

3,128

10–15

3–7

17

17

4

1

2,460

10,385

824

4,615

5

4

Hungary Employees Offices Shipments Tonnes Rank in market

Schenker Austria and Southeastern Europe achieved in 2012 a turnover of EUR 1.3 billion with 5,308 employees (up from just 1,100 in 2000). The company’s employees were distributed as follows  : 59 % land transport, 23 % air and sea transport, and 18 % logistics.

69

Business Strategy in Transformation

Schenker national branches in Southeastern Europe Offices 2005

Employees

2012

2005

2012

Total area in m2 2005

2012

Bosnia-Herzegovina

1

2

15

43

280

1,350

Bulgaria

6

6

130

171

9,200

25,317

Croatia

5

6

90

96

2.900

9,459

Macedonia

1

2

15

40

200

2,500

Romania

8

6

102

1,107

2,700

77,728

Serbia

1

2

19

50

4,700

3,522

Slovakia

3

4

58

125

4,400

7,581

Slovenia

8

9

120

132

15,000

33,685

10

12

354

777

32,000

131,505

6

7

279

353

38,500

41,123

Czech Republic Hungary Moldova

–

1

–

Total

49

57

1,182

2,829

25

–

–

109,880

333,770

Greece

3

2

161

196

9,200

13,359

Turkey

3

6

338

392

30.400

79,100

Southeast Europe total

55

65

1,681

3,417

149,480

426,229

Austria

27

13

1,749

1,891

141,600

170,291

Total

82

78

3,430

5,308

291,080

596,520

Schenker Finland and East Europe had 4,333 employees and a turnover of 1.54 billion euros and the leading position in some countries. Schenker national branches in East Europe 2011 Locations

Turnover in ­million EUR

Finland

19

1,385

563

Estonia

4

168

44

Latvia

2

81

19

Lithuania

3

55

11

Poland

30

1,780

318

Russia

8

778

86

Belarus

2

4

1

Ukraine

5

82

11

71

4,333

1,053

Total

70

Employees

Business Strategy in Transformation

Market position

Land

Domestic

International Land

Air

Sea

Logistics

Finland

1

1

5

3

 2

Estonia

1

3

1

2

 2

Latvia

1

2

3/4

3/4

 1

3/4

3

3/4

8

–

1

1

2/4

3/5

 9

1

1/3

top 20

top 20

10

top 10

top 5

3

top 50

–

Lithuania Poland Russia Ukraine

71

GDR/East Germany/New Federal Countries

In the wake of its military defeat, Germany was in 1945 divided into four occupation zones  : the American, British and French zones in the West and the Soviet zone in the East. These were governed by military forces until 1948, when the Federal Republic of Germany (FRG) was founded in the Western zones and – as a response – the German Democratic Republic (GDR ) in the Eastern zone. As a result, Germany was divided into two competing political and economic systems. A British colleague once observed that Germany was the world’s teacher  : Its western half showed the world what capitalism was and its eastern half what communism was. The country’s division was extremely painful for the Schenker Group. It was not just overseas branches it was losing, but integral parts of an all-German organization that had developed historically. The pain of the division was mitigated only by the numerous Schenker employees who left East Germany and reinforced the West German organization. Originally, the Soviet Union had confiscated state properties in their occupation zone as a form of reparation and also carried out major dismantling activities. This also affected Schenker as a subsidiary of Deutsche Reichsbahn. However, the former business connections could be partially continued in the first two postwar years. For example, until 1947 Schenker Frankfurt/Main continued to operate groupage services to the Eastern zone, to Dresden, Erfurt and Ilmenau. Once the two German states were established in 1948, transports were hindered and even discontinued temporarily. All offices in the GDR were withdrawn from the control of Schenker’s central management. The special situation of Berlin as an interallied city in the heart of the Soviet occupation zone led to its increasing isolation, culminating in the 1948 blockade of West Berlin by the Soviets. The blockade led to a loss of relevance of the Berlin office, where short-term work had to be introduced and staff remuneration cut down. Business only picked up again after the blockade was lifted. 73

GDR/East Germany/New Federal Countries

Schenker was still headquartered in Berlin, as it had been in the past. On June 19, 1950, discussions were held with Reichsbahn representatives in the GDR . Since a common administration with East Germany was no longer feasible, a separate management was set up. This was an admission that Schenker no longer had any control over operations in East Germany. Mr. Krenn, as authorized representative of the Head Office of the Deutsche Reichsbahn, was to take the helm and appoint new heads of branches. These decisions, however, did not come a moment too soon, because a short time later Schenker’s East German branches were nationalized. The Regulation on an Association of State-Owned Enterprises “Deutsche Spedition”, a Public Law Institution (VEB)30 of August 17, 1950, was used to justify the expropriation. This affected the offices in East Berlin, Chemnitz, Dresden, Erfurt, Gera, Glauchau, Görlitz, Greiz, Halle a.d. Saale, Ilmenau, Leipzig, Magdeburg, Nordhausen, Plauen and Reichenbach. The Schenker headquarters was originally located in Berlin in order not to jeopardize the branches in East Germany. However, this consideration became irrelevant after the branches had been nationalized. On June 30, 1950, the headquarters of Schenker & Co GmbH was relocated to Frankfurt/Main, Main Kai 23-25, as this was considered a convenient location for the international shipping business. The central management in Berlin was dissolved and Berlin operations were taken over by Frankfurt/Main, where a “Berlin office of the central management” was established. Although the registered headquarters of Schenker & Co. GmbH remained in Berlin, the management now operated in Frankfurt/Main. This complex structure was later repealed and Frankfurt became the sole headquarters of Schenker. The “Deutsche Spedition” managed interzone transports and handled shipments into nonsocialist countries. In 1954, DEUTRANS   – Internationale Spedition was founded, a for-warding company that assigned transport execution to state-owned road transport companies, the Deutsche Reichsbahn and shipping companies. The company originally attempted to handle transports mainly via the railway, but in the 1960s was forced to realize that the trend towards road transport could no longer be ignored. The purchase of trucks turned out to be a serious problem in East Germany, where foreign currency reserves were scarce. Siegfried Wagner celebrated the establishment of VEB German Freight Forwarders in verse  : Es sind über 50 Jahre her Ich erzähl Euch keine Mär Da gründete man in Leipzig, Ihr wisst es schon Die berühmte VEB Spedition. Diese famose Idee, es ist bekannt Kam zu uns aus dem fernen Russland. 74

Over 50 years ago – This is not a fairy tale – The famous VEB forwarder Was founded in Leipzig, as you well know. Notoriously, this great idea Came to us from distant Russia.

GDR/East Germany/New Federal Countries

Da waren sehr schlaue Wirtschaftsleute Die sagten, hier machen wir fette Beute. Dort in unserer russischen Zone Das ist bestimmt für uns nicht ohne.

Crafty businessmen arrived and said „Here we‘ll make a big huge haul“. That’ll be not bad at all, For us in our Russian Zone.

Vereinnahmen wir den Privatbesitz Dies war natürlich kein guter Witz In das bekannte Volkseigentum Dafür gebührt der SU Ruhm. In Deutschland waren die Firmen privat So war’s seit Jahren in der Tat. Zunächst war Schenker an der Reih` Dann ging`s an die Leipziger Speicherei. Wer kennt die Firmen und die Namen Die alle im VEB zusammenkamen

Out of private hands we’ll take it – Which of course was not funny – And into public property we’ll make it Glory is to the Mother Russia. In Germany, companies were private, Which is how it’d been for ages. First they took their pick of Schenker Then they turned to Leipzig Speicherei. Who knows all the companies and names That into the VEB were merged  !

With its proximity to FRG , the GDR was in a difficult position. The common border and language enabled its citizens to receive Western television and radio, even if this was forbidden. East German refugees were openly welcomed in West Germany and supported. In the GDR the “Republikflucht”31 was considered a crime and was punishable by imprisonment in the GDR . As part of these extreme measures, in 1961 a wall was built, which became the symbol of the division. However, this did not stop the East German population from shrinking from 18.4 to 16.7 million between 1950 and 1988. Finally, the Communist regime in East Germany collapsed as well. The disintegration itself began in Hungary, where a “Pan-European Picnic”32 was held in the vicinity of Sopron in 1989. On August 19, 150 East German “tourists” broke through the border  ; Hungary did not try to stop them, and the six Austrian border guards on duty waved them through. As a result, the Hungarian-Austrian border was also opened to cars and a large number of small East German cars fled towards the frg . On November 9, 1989, the border crossing near the Brandenburg gate was opened and in 1990 the demolition of the wall began. Thus, the reunification of Germany, ritually proclaimed in West Germany since the 1950s as “Centerum Censeo”, became a reality. While Germany’s population increased from 61.5 to 78.2 million, the country became poorer in statistical terms. The overall GDP shrank from DM 22,096 to 19,186 (by 13.2 %) in 1990/1, pushed down by the new federal states’ GDP per capita, which was only one-third of former West Germany’s average. This was also linked to the significant financial transfer flowing from West to East, which continues to this day. Despite the large-scale financial aid, the economic differences remain significant even after two decades. 75

GDR/East Germany/New Federal Countries

Unlike the other former planned-economy states, the GDR was spared the ordeal of legal reconstruction and inflation. The reunification was actually a takeover in which prolonged adjustment processes were avoided because it was feared that the political “window of opportunity” could close again. The “New Federal Countries” were simply integrated into the political, economic and legal system of West Germany, including membership in the EU. The privatization of state-owned enterprises was initiated in 1990 by the Deutsche Treuhandgesellschaft33 which reorganized 13,000 SOE s34 up to 1994. As can be expected with such a large-scale transfer of assets, it was subject to fierce criticism and also in part allegations of fraud. But, most importantly, privatization measures led to unemployment rates much higher than in West Germany, a situation which has remained unchanged to this day. With the dissolution of the GDR , the country lost about 60 % of its foreign trade, as business with COMECON countries and especially the Soviet Union collapsed. The consequence of the changeover was a deep recession which had a negative impact on the economic reconstruction. For Schenker, the reunification initially meant a special boom (exceptional economic situation). The political change of 1989 offered an opportunity to rebuild a pan-German organizational network. Schenker was able to reactivate old business registrations dating from before 1948 and could therefore build on already registered offices. In a first step, eight branches were opened  : Chemnitz, Cottbus, Dresden, Erfurt, Leipzig, Magdeburg, Plauen and Rostock. As a ninth base, the existing office in Berlin extended its catchment area to the areas of Brandenburg, Potsdam and Frankfurt a. d. Oder. The New Federal Countries staff was trained in the West German offices and freight forwarding facilities were initially rented. Already in 1990, nationwide truck services were established between the gateways of the German Federal Republic and the country’s most important economic areas, with transit times of between 24 and 72 hours. Here Schenker cooperated with independent East German road transport entrepreneurs. In air freight, a direct access to the global Schenker Jet Cargo System was established. The Rostock branch assumed a gateway function for the entire Baltic Sea region. The new offices were to be fully integrated into the global network and to cooperate with all Schenker national subsidiaries. To do so, the entire product range, logistics, project business and acquired computer know-how was introduced. This of course required a large investment that would only pay off in the long term. But the Annual Report 1990 stated  : “Our gaze is focused on East Germany, which is expected to develop into a major transport market already in the medium term”. It goes without saying that reconstruction efforts faced great challenges. In April 1990, in one of the first trips after the fall of the Wall, Axel Frings drove to Chemnitz and Dresden, two offices for which Schenker Munich had assumed sponsorship. In a first step, a Schenker office had to be opened, after which an independently 76

GDR/East Germany/New Federal Countries

1995 Güstrow – New truck

1993 Schwerin: Rhenus-Weichelt becomes Schenker

operating forwarding company was to be established. However, the initial euphoria quickly dissipated. The state administration offices referred Schenker to the stateowned forwarding enterprises, whose local contacts proved to be friendly, but extremely hesitant. The building structure encountered was in a catastrophic condition and utterly inadequate for a modern freight forwarding business. Finally, in Chemnitz they arrived at the plant of a former petroleum trader, whose entrance gate was blocked by an ancient oak. Once this obstacle was overcome, their eyes fell on a freight elevator in the courtyard which read “anno 1937”, which was able to lift up to 500 kg with its mechanical lever action. They were therefore forced to continue their search for office and storage facilities. Their efforts were ultimately crowned by success on June 15, when Schenker moved into its first base in Chemnitz, right in the main freight station of Deutsche Reichsbahn. Here they were able to rent a 500 m2 warehouse with rail connection and three truck gates and loading bridges. The office was situated on the opposite side and could be equipped at short notice with telephone, telex and fax. Three employees were hired and trained in the Munich branch, while two private contractors were engaged, whose fleet was increased by three trucks. The first location of Schenker Dresden was in Magdeburger Straße35. Peter Linné was the first employee for Schenker Dresden, Schirmer and Triebe for Chemnitz, and Marx for Erfurt. The “boss” was Jürgen Franke, who came from Schenker Munich to Dresden. Previously, he had been in China for two years, and he had returned to Germany after the uprising in Beijing (Tiananmen Square).  Roland Kreitmayr became employee number 5 of Schenker Dresden, and 20 new employees came onboard within a year.  He had been posted in August 1990 by then Director of Schenker Munich, Kurt Höchtlen, for a year of service in the East. He was motivated by the promise that he 77

GDR/East Germany/New Federal Countries

would be exempted from military service by his contribution to the build-up of the East. At 20 years of age, this sounded of course like a good argument. His military service was in fact deferred  ; however, the draft notice arrived three years later  : His plan was therefore thwarted.  In Dresden he worked in trade logistics. A spirit of optimism prevailed at that time, and German trade fair organizers chose to hold their fairs in the East, including Dresden. The first trade fairs for bakers, butchers, car service workshops and general shop equipment were real blockbusters. At that time, the market in Saxony was huge for these manufacturers. At the end of his stay in the new federal states, he went to Leipzig in 1991, and helped organize the first “all-German” Leipzig Spring Fair for Schenker Logistics. Schenker Dresden is an example of how the Schenker organization systematically expanded after the fall of the Wall, by pursuing a strategy based on partnerships. Schenker Dresden was supported by  : • Schenker Munich as partner branch • Schenker Salzburg in Middle East transports, groupage traffic and customs • Schenker Ried i. Innkreis in truck freight transport, customs and scheduled services • Schenker Wels in freight transport and scheduled services • Schenker Düsseldorf in art transport  The first Schenker location at the Dresden Trade Fair was an office building in a shack on the trade fair venue, as well as an office room in the trade fair management premises.  The company later moved to three office rooms on the ground floor of the Dresden Harbor  ; six months later a further three rooms were occupied in the attic. The offices at the fair remained, however. The set-up of a branch office at Dresden Airport was now started, with the aim of offering air and sea freight. In addition, a Schenker travel agency for private and business trips was established. But for Schenker, the project “Reconstruction East” stood on two feet. In 1989/90, Schenker was still owned by Deutsche Bahn, which independently took over the expansion of Schenker in the new German states. Ownership of Schenker was transferred from Deutsche Bahn to Stinnes AG in 1992, and the Stinnes forwarding subsidiary Rhenus Weichelt had already built at extensive network in East Germany. In December 1989, Dr. Bernd Pahnke was offered the top post in East Germany, but initially refused. On the basis of a consultancy agreement that appointed him Project Manager for East Germany, he was responsible for development and operation of the offices. It was not possible for West German companies to set up offices in East Germany immediately after the Wall fell. Therefore, Rhenus Weichelt established R/W-Spedition GmbH as a company, with staff appointed by the “Treuhand”36. The former GDR district court was clearly informed that R/W did not stand for Rhenus 78

GDR/East Germany/New Federal Countries

Berlin 1991: Management Team Rhenus-Weichelt: from right Frank Rehlmeyer Rhenus-Weichelt, from left Edeltraud Stolpmann Controlling, Dr. Pahnke, Michael Lanzke Schenker Eurocargo

Dresden Messering 8

Weichelt, but for Regional/Worldwide. On April 1, 1990, Bernd Pahnke took over the company management for Rhenus Weichelt, which was initially assigned to the Europe Board. Rhenus Weichelt also initially faced a catastrophic infrastructure that reflected the economic decline of the GDR . The search for freight forwarding facilities was extremely difficult. In Dresden, operations were housed in two old garages  ; in Schwerin in a small hall completely unsuitable for handling cargo  ; in Ilmenau in a hall with an own ramp of 50 cm  ; and in Chemnitz in an ancient train station hall where a back staircase had to be used for supplies. In Leipzig they were finally able to rent a hall belonging to the WTB , a former wholesale trading company of the GDR . 79

GDR/East Germany/New Federal Countries

The fleet of the entire organization consisted of just 25 trucks in 1990. The personnel needed to catch up significantly in terms of skills in sales and business management. Their commitment, motivation and improvisation skills were positive qualities in the challenging process of establishing new offices and operations. Alongside Bernd Pahnke as Managing Director, the first employees in May 1990 were Mr. Schlothauer (Magdeburg branch) and Plachetka (Schwerin branch). Ultimately, the entire management team came from West Germany  : Here a path was chosen that diverged from other West German corporations. The dedication and reliability of many employees was emphasized and in the 1990s the pay was 30 % to 50 % higher than standard rates, but of course still below average wages in West Germany. The first cargo transport by the West/East alliance was carried out on May 1, 1990 from Hamburg to Schwerin. 32 of the 36 items in the 915 kg shipment were medicines, which casts a light on the prevailing situation. Already on July 1, 1990  – the day the monetary union was launched  – Bernd Pahnke was able to report that Rhenus Weicheltüber had an extensive network in East Germany with offices in Schwerin, Magdeburg, Leipzig, Dresden, Ilmenau, Chemnitz and Berlin. As of September 1990, regular scheduled services between the subsidiaries in the new federal states were started. Plans for a hub in the new East German states had already been developed in 1991 and implemented in February 1992, when the first German general cargo hub was established. On February 1, 1992, a logistics hub was opened in Berlin for the new federal states which guaranteed that groupage transport services could be realized within 24 hours. The system enabled Rhenus Weichelt to gain market leadership in the new German states. In 1990, Rhenus Weichelt established the R/W Spedition GmbH branch offices in Schwerin, Magdeburg, Leipzig, Dresden, Ilmenau, Rostock, Neubrandenburg, Berlin and Chemnitz. The Berlin area was covered by the local Rhenus Weichelt facility, which had expanded its handling capacity by 60 %. Development of the R/W Spedition GmbH  : May 10, 1990 June 29, 1990 May 1, 1990 May 1990 June 1990 

Registration of the company Registration of headquarters in Rostock Recruitment of three employees Establishment of the office in Schwerin Establishment of offices in Leipzig, Chemnitz, Ilmenau, Neubrandenburg in garages, warehouses, egg farms, etc. December 31, 1990 Number of employees 153 January 1991 Establishment of the office in Rostock and Cottbus (Frankfurt) 80

GDR/East Germany/New Federal Countries

The R/W Spedition GmbH also worked together with partner gates in West Germany  : Dresden and Ilmenau Schweinfurt Schwerin and Rostock Hamburg Leipzig Kassel Magdeburg Hannover Chemnitz Coburg Neubrandenburg Berlin The market in the 1990s was characterized initially by a discount wave, as customers initially understood liberalization to merely mean freight cost reductions. Carriers were also forced into cutthroat pricing to survive in the short-term. Number of Employees on December 31, 1991, at R/W Spedition GmbH Schwerin

28

Neubrandenburg

20

Magdeburg

19

Leipzig

23

Dresden

38

Chemnitz

32

Ilmenau

25

Rostock

11

Cottbus

7

Berlin Total

14 217

So both, Schenker and Rhenus Weichelt had each 9 offices and were therefore both represented in the same locations. Schenker’s acquisition by Stinnes led to the merger of the Rhenus Weichelt with the Schenker offices in 1991. The merger of Rhenus Weichelt GmbH with Schenker Eurocargo was concluded on January 1 1992, and regional responsibility was now transferred to Bernd Pahnke. From 1992, operations were carried out with offices in nine locations and the merger proceeded without any major problems The former Regional/Worldwide forwarding agency had always operated in the black. Rhenus Weichelt was the merger partner with more business and employees, so that the management of the new offices – later Schenker Eurocargo – was organized by Rhenus Weichelt. In line with the division in Germany between overland 81

GDR/East Germany/New Federal Countries

transport and international transport, the former Schenker offices were assigned the international segment. After the merger, R/W Spedition GmbH moved from Freital to Schenker Dresden at the harbor. The office space in the port administration building and storage areas for the handling general cargo were expanded. A new logistics terminal for land transport was inaugurated in September 1996 in Radeburg, near Dresden. Schenker International subsequently took over airport division, while office and warehouse space were added to the branch. Schenker Dresden thus steadily developed into one of the leading offices in Germany. Alongside Chemnitz and Ilmenau, it was repeatedly distinguished for its high level of success and efficiency. Bernd Pahnke managed the offices in the states of former East Germany for Schenker Eurocargo until 2000. In 1994, the sixth region  – the New Federal Countries  – was established at Schenker Eurocargo. Budget for 1994 in 1,000 DM Chemnitz

1,358

Schwerin

921

Dresden

880

Cottbus

70

Neubrandenburg

301

Magdeburg

508

Leipzig

593

Ilmenau

682

Rostock

318

Berlin

575

Total

5,056

In 1997, Schenker had a headcount of 470, including 20 trainees, and a turnover of DM 130 million in the new federal states. This grew to 576 employees, including 322 clerks and 56 trainees, by the year 2000. Sales amounted to DM 180 million, and 50 million had been invested. Offices  : 1991 1991 1991 82

Foundation of Rostock office Foundation of Cottbus office Neubrandenburg

GDR/East Germany/New Federal Countries

Potthoffstraße 5

1995 Güstrow Dr. Pahnke

1991 March, 1994 1995 1995 1995 1997 1996 1997 1999 2000 2000 2005 2006 2007 2007

Berlin Building extensions in Schwerin and Neubrandenburg New building Magdeburg New building Chemnitz Inauguration of the new terminal in Chemnitz New building Leipzig New building Dresden New building Güstrow Building extension in Güstrow New warehouse Chemnitz Building extension Ilmenau Inauguration of high-tech center in Dresden, air/ocean freight/ logistics, commissioning of high-rack warehouse in Chemnitz Building extension in Magdeburg Opening of logistics center at the seaport of Rostock, organizationally part of the Güstrow office Building extension in Radeburg near Dresden 83

GDR/East Germany/New Federal Countries

Schenker Radeburg

With the new buildings, Schenker had made investments amounting to more than DM 100 million in the new German states. This was also a sign of the great trust the company placed in the performance and management of its subsidiaries. At the same time it was a very positive signal to employees, meaning their future and competitiveness was safeguarded.

84

Regional Headquarters South East Europe

Austria Until the interwar period, Austria’s economy had focused mainly on the territories of the former Austro-Hungarian Monarchy. This continued even after the collapse of that second most populated country in Europe after the First World War. In the 1920s, half of the Republic of Austria’s foreign trade was carried out with this region and only about 15 % of the German Reich’s was carried out in this region. That changed after 1945 with the Cold War and the Iron Curtain. The importance of the “Eastern States” shrank to about 10 %  ; Austria now addressed itself to the “West” and was inevitably integrated into the area of today’s European Union. Austrian exports By value, shares in percent FRG

Italy

CSFR

Hungary

EU

EFTA

Eastern States

1922

11 %

7 %

7 %

9 %

24 %

4 %

28 %

1929

16 %

12 %

14 %

8 %

37 %

7 %

35 %

1937

15 %

14 %

7 %

9 %

44 %

8 %

28 %

1946

2 %

18 %

19 %

2 %

28 %

39 %

22 %

1950

15 %

13 %

6 %

2 %

47 %

8 %

15 %

1988

35 %

10 %

1 %

2 %

64 %

11 %

  9 %

85

Regional Headquarters South East Europe

Austrian imports by value, shares in percent FRG

Italy

CSFR

1922

16 %

4 %

1929

21 %

4 %

1937

16 %

1946 1950 1988

Eastern States

Hungary

EU

EFTA

16 %

8 %

23 %

4 %

29 %

18 %

10 %

34 %

5 %

42 %

6 %

11 %

9 %

34 %

5 %

32 %

24 %

8 %

17 %

3 %

38 %

32 %

23 %

17 %

7 %

4 %

2 %

43 %

6 %

13 %

45 %

9 %

1 %

1 %

68 %

7 %

6 %

Source  : Felix Butschek, “Statistische Reihen zur österreichischen Wirtschaftsgeschichte” (Statistical Series on the Austrian Economic History), WIFO, Vienna 1996. EU  : Belgium, Luxembourg, Germany, Denmark, France, Greece, Great Britain, Ireland, Italy, the Netherlands, Portugal, Spain. EFTA  : Finland, Iceland, Norway, Sweden, Switzerland. Eastern States  : Bulgaria, Czechoslovakia, the GDR, Poland, Hungary, Romania, the USSR.

This is most clearly reflected in its economic relations to Czechoslovakia. Austria and Czechoslovakia were the two industrial core countries of the Monarchy and were therefore closely interlinked. From 1947, foreign trade between the two countries shrunk to a remnant of its former amount. Austria  : Foreign trade with Czechoslovakia; value in percent of the total volume Export

Import

1929

14

18

1946

19

17

1947

9

13

1948

8

12

1949

7

6

1950

6

4

1951

5

3

1952

4

3

1953

2

2

1954

1

1

1955

2

2

Source  : Felix Butschek, “Statistische Reihen zur Österreichischen Wirtschaftsgeschichte”, WIFO, Vienna 1995

86

Austria

Up to the 1930s, economic development in Czechoslovakia was significantly more positive than in Austria and both countries had a similarly high GDP per capita, even as late as in 1950. Then the divergent dynamics of the two economies took its effect, and by 1992 Austria had quadrupled its GDP per capita, while their Czechoslovakian neighbors had only managed to double it. GDP per capita In 1990 International Dollars 1950

1973

1992

Austria

3,731

11,308

17,160

Czechoslovakia

3,501

 7,036

 6,845

In relation to the USA = 100 Austria

40

68

80

Czechoslovakia

37

42

32

Source  : Angus Maddison, Monitoring the World Economy 1820-1992, OECD, Development Center Studies, Paris 2000

Two-thirds of the Austrian borders were shared with the communist countries Czechoslovakia, Hungary and Yugoslavia. The Cold War and Iron Curtain therefore forced a realignment of the country’s economy and a structural change of business locations. The economic weight of the western provinces increased and traffic flows in this direction increased, especially to the FRG 37. Salzburg became the “gateway to the West” while Vienna was “at the end of the world”. Despite these changes, Austria was one of the “Western” countries having most intensive relations with the centrally planned economies of the “East”. This could be explained by the geographical proximity, the historical/cultural closeness and continuing family relations. Some pages of the Vienna telephone directory will make you believe you are in Prague. But also the economic policies pursued in this period fostered the contacts. Austria’s market economy was more “constrained” than “free”. The high rate of nationalization in the banking sector and industry in conjunction with a social partnership where both employers’ and workers’ organizations defined the economic policies, ensured the central government was a significant force in the 1980s. Austria therefore understood the workings of a planned economy, and when the Chancellor with his delegation traveled to Moscow, they could be expected to return with politically arranged “barter deals” – such as industrial products in return for natural gas. In times 87

Regional Headquarters South East Europe

of economic malaise, such as in the 70s, these economic relations were deliberately promoted via state-guaranteed loans and trade agreements. By the end of the 1980s, Austria had become an economically efficient and financially high-powered country. It therefore was only natural that it infiltrated these traditional markets after the opening of the East in 1989, becoming the largest foreign investor in some of these countries. The economic links now evolved in a way which can be considered normal for neighboring countries in a market economy. Since Austria was believed to have “expertise in the East”, many international companies moved their Eastern European headquarters to Vienna. Among these companies was Schenker. The development of Schenker Austria from the 1970s was significantly influenced by Paul Tegtmeier38, who in 1973 had been appointed to the Executive Board of Schenker Austria. He then chose a young graduate of the Vienna University of Economics and Business Administration (then University of World Trade) to support him. Elmar Wieland, born in Hallein near Salzburg, had completed a training course in freight forwarding and had worked from 1962 to 1974 for a forwarding company in Salzburg. While pursuing his professional career, he had earned a high-school diploma at the Academy of Commerce business school in Salzburg and then studied in Vienna until achieving a master’s degree in economics and social sciences. In 1974 he joined Schenker & Co. AG Vienna, where he was entrusted with the rationalization of the organization and future tasks. This initially involved the reorganization of Finance and Administration, for which purpose he also spent some time at the Innsbruck office. From 1981 to 1985, he assumed the management of the offices in Salzburg, Tyrol and Vorarlberg. This was followed by the build-up of an IT system, vulnerability analysis, organization of PR affairs, as well as the coordination and development of the supra-regional interests of the Austrian Schenker organization. In 1986 he was appointed to the Executive Board, where his tasks included education and training, among other things. His personal history had made it clear to him that this area was critical to the company’s success. The Schenker Academy, which virtually every employee attended at least once a year, also set an example for the Southeastern European offices. In 1993, Elmar Wieland was appointed Chairman of the Board, a position he retained until his retirement in 2013. From 1996, he also took over the management of the Schenker Headquarters South East Europe and was therefore responsible for the national companies in the region. Elmar Wieland served Schenker for 38 years, 20 years of which as Chairman of the Executive Board. He was therefore one of Schenker’s long-serving executives, also affectionately dubbed the “Regional Prince”, and had a corresponding status within the Schenker organization. He had lived through four owners (Austrian Credit-Institute, German Railway, Stinnes, and New German Railway)39, Austria’s accession to the EU and the opening of the East. Business had completely transformed during his tenure. IT developments had turned freight forwarders into logisticians and information tech88

On top: Hoher Markt Right: Austria-Hungary

89

Regional Headquarters South East Europe

June 4, 1989: Austrian and Hungarian Foreign Ministers, Alois Mock and Gyula Horn, cut the Iron Curtain

Austria 2001: Elmar Wieland and Erhard Busek

nology had revolutionized the transport industry  ; the quantities transported and organizational requirements were incomparably higher, and not only road transport but also air freight increasingly gained importance. Elmar Wieland remained a pillar of stability throughout these times of almost periodically recurring economic crises, which posed a constant challenge to the forwarding industry. It was impossible to deceive him, neither in theory nor in reality. In addition to his strategic tasks, he found time to oversee every detail – as you could see by just a glance at his desk. In spite of the “chaos principle” he never failed to find any document he needed. He always stood before his organization and his employees. When the “Master” visited the German headquarters in Essen, you could often hear him exclaim  : “I’ve got so many worries  !” His was succeeded by Kurt Leidinger, born in Upper Austria, who had started as an apprentice in the company. He was responsible for various functions as department head, was Branch Manager of Linz/Hörsching, Product Manager Contract Logistics for South East Europe and the board member responsible for air and ocean freight as well as contract logistics. He has worked as a teacher at the Schenker Academy and at a university of applied sciences, and has been a long-year member of the Executive Board of the “Verein Netzwerk Logistik Österreich”40. It is not difficult to predict that the challenges he faces will be no lesser than those mastered by Elmar Wieland. Schenker Austria has maintained its relations with Eastern and Southeastern Europe under the changed political circumstances. Since 1969, contacts have been maintained with around 30 export organizations from eight socialist countries. On the occasion of FIATA world congress held in Opatija, Schenker Vienna organized its first “Eastern Evening” with carrier partners from the COMECON region and Yugoslavia. This event became an established tradition, which paved the way for advantageous co-operations with existing government organizations in the freight 90

Austria

Elmar Wieland

Klaus Lippstreu

forwarding and transport industry, already under the communist regimes. The stateowned companies (Sojusvneshtrans, Poltrans, Romtrans, Deutrans, Cechofracht, Masped, Transjug, etc.) were also more willing to cooperate with a company which, due to its proximity to the state railway, was able to understand the situation of freight forwarders in the state-trading countries. Traffic considerations also played a role in the strengthening of relations. Container transport to Moscow, and from there via the trans-Siberian railway to China or Japan, was often less costly than the sea route to the Far East, making a cooperation sensible also from an economical viewpoint. With the opening of the Eastern European markets looming, Schenker pursued a “cautious Eastern policy”, as expressed by Paul Tegtmeier, preliminarily centered on Hungary and Czechoslovakia, and later on Bulgaria and Romania. The longterm objective was, however, the re-establishment of the 95 offices in Eastern Europe, which Schenker had already owned in 1930. In reality, however, it was not just returning to the posts it had lost after 1945. What seemed to be nostalgia for the former economic influence of the Austro-Hungarian Monarchy was in fact the creation of start-ups from scratch under changed conditions. As a result of these efforts, Schenker has a stronger presence today in these countries than ever before in its history. There was a separate investment budget for Eastern Europe and border offices were established with the opening of new border crossings. Since Eastern European airlines did not have the required freight space, substitute services with trucks from Prague, Budapest, Ljubljana and Maribor to Vienna Airport were established. The build-up of an own organization in the former Eastern Bloc countries carried considerable risks. From 1991, Schenker pursued a three-stage plan which comprised, in a first step, the establishment of representative offices in the capital cities as mere sales locations. This needed to be coordinated in each case with the previous 91

Regional Headquarters South East Europe

partners in the country. In a second step, the offices had to obtain regulatory approvals for the implementation of all forwarding services. The last step and real objective was the transformation of the representative offices into operating national companies, if necessary with a local partner, but with a majority participation of Schenker. Vienna therefore had a special position in the re-establishment of the Schenker organization in Southeastern Europe. Not only its market knowledge but also its role as the country’s market leader was crucial. Austria had initiated on its side business relationships with these countries and the Schenker offices in the federal states assumed supraregional functions, with Schenker Airport Vienna and Salzburg almost becoming a hub for the emerging traffic. In 1996, Schenker-Rhenus therefore instructed its Austrian subsidiaries to support the organizations and traffic growth in the Eastern European countries, with the exception of Poland and Russia. On the basis of its traditionally close ties to customers and shipping companies in Eastern Europe, Schenker Austria was capable of providing advice and assistance to the Schenker organization worldwide. From early 1996, Schenker Austria therefore took over the function of the responsible head office for the management in Southeastern Europe. The following national organizations reported to the management of the regional Headquarters Europe South East in Vienna  : • • • • • • • •

Czech Republic Slovakia Hungary Slovenia Croatia Serbia Montenegro Bosnia and Herzegovina

• • • • • • •

Macedonia Albania Moldova Bulgaria Romania Greece Turkey

Schenker Austria had taken over the shares in these companies, but in no way intended to manage these organizations like branch offices from the perspective of the former “Imperial and Royal Monarchy” The aim was to build up the Schenker establishments in Eastern Europe and transform them into autonomous, successful organizations. Schenker Austria itself was a composite company, Schenker International and Schenker Eurocargo stood under common management, and the affiliated companies were to be handled in the same way. Land, air and maritime transport were to be equally developed, while taking into account existing structures and external trade developments. In 1997, Elmar Wieland therefore explicitly stated  : 92

Austria

Dezember 1991: Lippstreu, Wieland, Tegtmeier,

Ljubliana 2004

Bernhard

East West Meeting 2006

East West Meeting 2006: Albin Budinsky, Elmar Wieland, Theoman Maler

1996: Management meeting East Europe: Osteuropa, from the left standing Valenko, Pinter, Bucalic, Jordan, Lip, Grainer, Hohenauer, Wasilewski, Wieland, Rosenau, sitting Szügyi, Schaffer, Franke

93

Regional Headquarters South East Europe

Salzburg Hub

• Schenker Austria is shareholder with a 100 % participation in these companies (with the exception of Turkey). • This means it assumes full responsibility for all trade, commercial and administrative matters. • The objective of the Board in Vienna can only be to manage the regional companies involved as independent and self-reliant businesses, or to enable them as quickly and effectively as possible to carry out this task. • The Executive Board in Vienna can therefore only create the conditions for independent and successful companies, or act as a catalyst for all developments. • Of course, Schenker Vienna is available as contact for all questions and problems – however, it is neither able to nor wishes to interfere in day-to-day operations. • This is left to bilateral discussions and agreements. • Conversely, the Board of Schenker Austria expects all regional companies in Western and Eastern Europe to engage in an open discussion about objectives and problems and wishes to be heard and respected in the fundamental issues. This is especially true in the case of risks, investments and other fundamental matters. • Only by working together is it possible to meet the demanding goals of development in Southeastern Europe. 94

Austria

Vienna Albern New Schenker Head Office Vienna

95

Regional Headquarters South East Europe

Board Members 2014: Reinhard Just, Alexander Winter, Kurt Leidinger, Michael Meyer, Helmut Schweighofer

National companies 2005 Offices Bosnia and Herzegovina

1

15

Handling-warehouse space m2 280

Bulgaria

6

130

9,200

Greece

3

161

9,200

Croatia

5

90

2,900

Macedonia

1

15

200

Romania

8

102

2,700

Serbia and Montenegro

1

19

4,700

Slovak Republic

3

58

4,400

Slovenia

8

120

15,000

10

354

32,000

3

338

30,400

Czech Republic Turkey Hungary

96

Employees

6

279

38,500

55

1,681

149,480

Austria

27

1,749

141,600

Total

82

3,430

291,080

Czech Republic

Czech Republic After the First World War, Czechoslovakia emerged as one of the successor states to the Austro-Hungarian Monarchy, spanning the territory of Bohemia and Moravia as well as Slovakia, previously part of Hungary. Czechoslovakia was an industrially developed region with a GDP per capita equaling that of the Republic of Austria and an industrial production that even surpassed it. The economic development in the interwar period was largely positive. In September 1938, the “Sudeten territory” was annexed to the German Reich  ; later Slovakia was separated as an independent state while the “remaining Czech lands” were placed under German control as the Protectorate of Bohemia and Moravia. After the Second World War, the original Czech boundaries were restored. As a result, three and a half million German-speaking “Sudeten Germans” were displaced and expropriated in 1946/8 – about 20 % of the population. This, and the subsequent nationalization and introduction of a planned economy by the communist government led to a substantial slowdown of the economic development. Nevertheless, Czechoslovakia – alongside East Germany – was the only Eastern Bloc country which had from the outset an industrial infrastructure and adequately trained workers. In a first stage after the Second World War, Czechoslovakia tried to pursue a “third way” between capitalism and communism, but these attempts were thwarted when the communist takeover took place in February 1948. Later, there were also attempts to liberalize the strict communist regime (“Prague Spring” 1968), but these were crushed by the invasion of the Warsaw Pact forces. Only after the collapse of the Eastern Bloc in 1989 was the way opened for liberalization. In June 1990, the first free elections were held and in 1993 an amicable separation from Slovakia was negotiated. The Czech Republic now embarked upon an extreme course towards a “market economy without adjectives”, i.e. without “social” or the like. Due to its high level of education and foreign investment, the Czech Republic had relatively favorable conditions for a “turnaround”. However, the loss of markets in the Comecon area, previously responsible for two-thirds of the country’s foreign trade, had a negative impact and by 1992 the GDP had shrunk by 15 %. By the 1990s, stimulated by the proximity to Germany and Austria, the realignment towards Western Europe had already taken place and half of the country’s foreign trade was carried out with the EU. The privatization of the former state-owned enterprises, carried out mainly through “voucher privatization” was largely completed by 1996. The restitution of assets confiscated in 1948 by the communist government had also been initiated  ; however the displaced German-speaking population was excluded from the restitution.

97

Regional Headquarters South East Europe

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

10

–

1990

–1

–

1991

–12

–

57

–

1992

–1

–

11

–

1993

0

4

21

41

1994

2

4

10

40

1995

6

4

9

35

1996

5

4

9

33

1997

–1

5

9

33

1998

0

7

11

36

1999

2

9

2

38

2000

4

9

4

38

2001

3

8

5

38

2002

2

7

2

39

2003

4

8

0

40

2004

5

8

3

40

2005

7

8

2

40

2006

7

7

2

39

2007

6

5

3

40

2008

3

4

6

39

2009

–5

7

1

39

2010

3

7

1

39

2011

2

7

2

40

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

10,363

 9,400

1993  : 41

10,497

20,200

43

Year

Inhabitants In 1000

1990 2011

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

The area of today’s Czech Republic was already a core business area for Schenker in the 19th Century. In 1874, just two years after the company was founded in Vienna, the first branch was established in the region. In 1879, the Schenker branch in Prague was opened, headed by Mr. Dupal and Eduard Schenker, the nephew of Gottfried Schenker. In 1880, the branch office in Děčín was added, in 1893 Kamen98

Czech Republic

ický Šenov and Eger, and in 1900 Karlovy Vary. In 1894, the company’s headquarters was in Prague, Senovážné náměstí41 21. In 1905, Emanuel Rebfeld, the owner of “Moldau- und Elbe Schleppschifffahrts GmbH”42, joined as a partner  – he died, however, in 1910. In 1907 a demarcation line was traced between the offices in Prague and Děčín, which allocated northern Bohemia to Děčín while everything to the south went to Prague. The company’s headquarters in Prague in 1907 was ­Hybernská ulica43 4, next to a travel agency on Havlíčkovo náměstí44 21. In 1910, Schenker reached a new dimension in Bohemia. Schenker now took over the Prague-based transport company Beck, Brock & Co., with offices in Prague, Ústí nad Labem, Krásné Březno,45 Děčín and Laube. The owners, Rudolf Beck and Ernst Brock, with a 37.5 % share in the company, were appointed heads of the new branch office and Schenker Prague 1923 received a monthly fixed salary of 30,000 Czech koruna. An open trading company under the name “Schenker & Co., Prague” was established in the place of the previous offices. Beck & Brock also managed an own insurance broker office which had close­­business ties to Schenker & Co. In 1913, the company – with 64 employees in Prague  – transported mainly pig iron, pipes, glass, sugar, cotton, lead crystal, wood and textiles. With the founding of the Czech Republic in 1918, the local government tried to enforce the nationalization of Schenker. In the eyes of Vienna, this was nonsense. A shipping agency organized on a nationalistic basis would be a contradiction in itself, as no forwarding business could operate with nationalist sentiments alone. It did not make any sense to nationalize an agency for international transport services, as plainly obvious in the business description alone. In other words  : even unlimited fodder cannot make a lame horse budge. Ultimately, the government dropped the nationalization plans of its own accord. However, the situation from now on in Czechoslovakia became more complicated. There were three independent Schenker enterprises which had to be consolidated. First, there was Schenker & Co. Prague, stemming from Beck, Brock & Co. In 1930 this company had its head office in Prague on Hybernská ulica 4 99

Regional Headquarters South East Europe

and over 10 branches  : Ústí nad Labem, Brno, Meziměstí, Királyegyháza, Hradec Králové, Náchod, Bohumín, Olomouc and Plzeň. Second, there was the old and important branch in Děčín, which more or less encompassed the German-speaking region in Czechoslovakia, with 13 branches in 1930  : Bodenbach, Česká Lípa, Jáger, Sokolov, Jablonec, Jiříkov, Nový Bor, Karlovy Vary, Moldava, Liberec, Kamenický Šenov, Teplice-Šanov and Varnsdorf. The 150 staff members of Schenker Děčín headed by Heinrich Schimpke were housed in a prestigious building on Sternplatz that belonged to the bank Česká spořitelna46. In Slovakia, Szmattana & Rübener was acquired in 1919, giving Schenker a new independent office in Bratislava with an additional branch in Parkany. There were now confrontations between Schenker Vienna, Berlin, Prague and Děčín. Prague tried to merge all Schenker enterprises in Czechoslovakia, an undertaking which was however rejected by Tetschen. For Heinrich Schimpke, the division of the three business regions was a satisfactory solution, since it reconciled the national currents of the Czech, Slovak and German offices. In Děčín, none of the rival Czech competitors were able to gain a foothold, since they were not able to gain support in the German industrial and commercial circles. The Prague office put forward the legal necessity of nationalization measures, which ruled that at least one company owner had to have a permanent residence in Czechoslovakia – a condition Tetschen and Bratislava did not fulfill. Prague was the seat of the government agencies, offices of the railway and shipping services as well as the banks. Therefore, for many reasons and for the benefit of the overall company, it was necessary to join forces and act in concert. It was therefore proposed to register Prague as main office and the other Schenker offices as branches – which would, however, retain their independence. The Vienna office nonetheless feared that the direct link to the parent company would be broken and Prague would no longer be required to report to Vienna. In 1921 the “Prague Agreement” was signed, a compromise which set out that agreement with the management in Prague was required in all important matters. Negotiations with government agencies, railway and shipping companies, banks, etc. could only be carried out after consultation with Schenker Prague. In order to allay the concerns of the other offices, it was expressly stated that the independence of the branch managers would not be compromised within their own sphere, nor would links to the parent company be loosened. In particular, balance sheets still had to be submitted to Vienna. However, the compromise failed to take into account the German Schenker organization in Berlin, which insisted on its influence in Děčín. Berlin therefore called for a unified management for the entire Silesian region, regardless of political borders, and demanded that a Silesian group be established together with the branches in Poland and Germany, which were controlled by Berlin anyway. The decision was 100

Czech Republic

therefore taken to align the entire Upper Silesian industrial area to Berlin, without Prague losing its influence on the management. As a result, the management of all Schenker enterprises in Czechoslovakia was carried out via Prague, in conjunction with a profit sharing arrangement. The offices maintained their independence  ; Bratislava was aligned to Vienna and Tetschen to Berlin – a convoluted structure that could only be maintained through a constant exchange of information. In the 1930s, this complex organizational structure was finally abandoned in Czechoslovakia and all offices were required to report centrally to Prague. A further problem was posed by the Oderberg Warehouse Joint Stock Company47, incorporated in 1920 with a capital of 4 million Czech koruna. In 1921, Schenker Berlin had acquired 50 % of the company’s shares in order to integrate it into a warehouse complex. However, nothing came of these plans and the Oderberger warehouse therefore had low levels of utilization. However, the rest of the shares were acquired in 1926 in order to avert difficulties with the other shareholders. From 1927, no dividends were paid and in 1929 the capital was devalued to 2.4 million to cover the losses. Schenker Prague was consistently successful in the 1920s and was able to continuously generate profits. It had good relationships with large industrial corporations, almost had a monopoly position with sugar transports and was something like number-one forwarding agent for the Soviet trade delegation in Prague. The company owned two warehouses and four office buildings, meaning it had high hidden reserves. Until 1926, Prague was able to raise 16 million Czech koruna of its own resources to relieve the debt of the Czechoslovak branches and 2 million Czech koruna to pay off debts amassed by Oderberger Lagerhaus AG . The necessary expansion of its own warehouse in Prague had to be postponed because the Vienna headquarters sucked in all available capital to cover its losses. The relationship between the two shareholders in Prague and the Vienna office was friendly, even cordial at times. Due to his retirement, the partner relationship with Rudolf Beck was dissolved on June 30th, 1930, and it was agreed that 1.5 million Czech koruna would be paid after three years for his 17.5 % share. The disbursement was therefore not carried out until 1933, when the sale of the entire Schenker Group to the Deutsche Reichsbahn was being negotiated. As for the second Prague partner, Ernst Brock, his son Walter Brock was registered as a shareholder in Prague in 1929. At that time, Schenker had 615 employees in Czechoslovakia. In June 1933, Schenker was constituted as a joint-stock company, in which the former Schenker partners, Ernst Brock and Rudolf Beck, were represented. When the Deutsche Reichsbahn acquired Schenker in 1931, business in Czechoslovakia was also placed on a new footing. The impression emerged that a company within the company had been created. Failed transactions during the global economic crisis inflicted considerable losses. The takeover by the Reichsbahn and, later 101

Regional Headquarters South East Europe

on, the Nazi seizure of power led to political reactions in Czechoslovakia which had a direct impact on Schenker. From 1932 to 1934, Schenker Prague was embroiled in three lengthy criminal proceedings for espionage and foreign exchange and tax offenses. The company was accused of being a spy center for Nazi Germany and using Czech business leaders and politicians for their purposes. Rudolf Beck, Ernst Brock (who had just been posted from Hamburg to Prague), the director Robert Anthony and a number of branch managers were charged by the Finanzlandes-direktion48 in Prague and in some cases temporarily arrested. The company’s main bank, the German Bank for Agriculture and Industry49, was forced to cancel all loans, while political pressure was applied to have management positions filled by Czech citizens. Prof. Dr. Josef Drachovsky, Board of Directors of Apollo-Mineralolraffinerie and member of the state-owned Prager Außenhandels AG , was appointed president, and Dr. Frantisek Fousek, Board of Directors of the Prague Rail-Industry Company and Olleschau Paper Manufacture Stock Company, stepped into one of the two vice president positions. Prof. Josef Tischer, who taught at the Business School in Prague, was appointed second Vice President. As Department Director, he had already been responsible since 1923 for finances, and now took over the actual company management as General Manager. Kindl, a former attorney, was also newly appointed in Prague management and subsequently faced massive allegations from Berlin. Ultimately, the Board of Directors of the Prague Stock Corporation only included a single Sudeten) German­despite this being repeatedly criticized by Berlin. In contrast, the “Aryanization” demanded by Berlin could be carried out without much of a stir, and Jewish employees were dismissed. During the Second World War, Schenker continued to operate in former Czechoslovakia  ; in 1945 the organization was seized and in 1948 it was nationalized. Schenker responded very quickly to the market opening in the Czech Republic. In 1989, Schenker Regensburg established an office in Prague headed by Herbert Maria Gruber. However, the former state-owned forwarder Cechofracht and its substantial market share could not be ignored. On March, 1 1991, the Joint Venture Schenker Interlogistik A.S. was therefore established  : • 51 % Cechofracht a.s. Prague • 28 % Schenker Eurocargo AG , Dortmund, headquarters of Rhenus • 21 % Schenker & Co. AG Vienna Jiří Grainer was Managing Director from 1991 to 1997. While sales were provisionally still carried out via Vienna, implementation was executed by Cechofracht. Head Office was Prague  ; the first branch was established in Brno and national distribution and warehouse projects were launched. In addition, the first national 102

Czech Republic

logistics project for Procter & Gamble – which was to continue for many years – was started. As a result of the company’s growth, a first terminal covering 1,500 square meters in Praha-Zličín was commissioned and a border office in Folmava was set up for transit customs handling. The company focused on warehouse and distribution business  ; the remaining forwarding activities were neglected. Jablonec, where traditional glass and jewelry production had to a certain extent survived, held a special position. However, the infrastructure was problematic and Cechofracht only had a single warehouse under its control. The joint venture with Cechofracht was increasingly criticized due to the negative image of the former state-owned company, and also the future of the partner seemed to be anything but certain. In addition, the expected pick-up of air and maritime business failed to materialize. Therefore it was decided to establish a new company. Cechofracht sold its shares to Schenker in 1993 and Schenker Interlogistik spol. s.r.o. was established. The shares were now  : • 79 % Schenker Eurocargo, Dortmund • 21 % Schenker & Co. AG Vienna The company now developed swiftly. In 1994, trade fair and exhibition services were launched in Brno and Prague, and regular national groupage transport services were started to Austria, Sweden and the Netherlands, with an own customs clearance. The first heavy haulage for Mitsubishi, including from a Japanese desulfurization plant to a Czech power plant, was carried out successfully. Schenker Interlogistik Prague was appointed exclusive partner for all air and sea freight by Autopal Ltd. (Ford). A customs office in Vojtanov was opened and a customs warehouse for customers such as Ferrero, IDV and Pirelli was acquired. In 1994, the turnover already amounted to 100 million Czech koruna. In 1995, the ownership of Schenker Interlogistik was transferred 100 % to Schenker Vienna. Groupage freight services had already been established in EU countries. The Czech branch concluded a three-year contract as the official logistics agent of the ForARCH Construction Trade Fair in Prague. Schenker became the exclusive partner of the BVV (Brno Exhibitions and Trade Fairs) and took over most transport services for the Brno Trade Fair. Business centered mainly in storage and distribution (spirits, brown goods, and electronics) and in European groupage shipments – mainly imports. Customs clearance was still a major problem, as there were no custom brokers and the unemployment rate in Prague was close to zero. Consequently, there were major problems in finding appropriate staff in Prague. Air and sea freight services were being developed. Schenker Vienna had to continue to rely on cooperation with Cechofracht to service the Jablonec region, a situation that could not be changed for a variety of reasons. Schenker still had a relatively small 103

Regional Headquarters South East Europe

market share in the cross-border road freight transport, but resources and activities were relatively well developed. In 1997, the integration of the Swedish company BTL with Schenker was initiated. For the merging of the companies in the various countries, an own “Steering Committee” was set up, which also had to deal with the Czech Republic, where BTL was represented in Liberec with Scansped Czech s.r.o. This company was formed by a merger of BTL , Letrans and Cetrans. Cetrans was a smaller investment firm, which however soon relinquished their participation to Scansped and no longer played a role. The Letrans in Liberec was a limited liability company, founded May 23, 1991, with a capital of 100,000 Czech koruna. Managing Director and sole owner was Petr Lelek, who was at the same time head of Scansped Czech. Petr Lelek comes from Liberec and had founded a family-owned company there (Letrans s.r.o. Liberec) with two employees at home “in the living room”. The first transport route was Liberec – Tillburg (NL) – Liberec. The company prospered, created new routes and expanded its headcount. New offices were occupied in April 1993  ; at the same time the cooperation BTL /Scansped was launched with shipments to Finland and Sweden. In Liberec, Letrans handled the shipments for Scansped, which had bought freight space from the company. Letrans was active in freight forwarding and trading, had 15 employees and enjoyed an increase in sales between 1994 and 1996 from 8 to 13 million Czech koruna. It had no branch offices, the operating rooms were rented and the only participation it had was in Scansped. The headquarters of Scansped was in Liberec, at U Jezu50 2, in the north of Bohemia and had an 800 m2 warehouse for transport operations to Northern Europe and Russia/Ukraine. It had an office in Děčín with 12 employees and a 300 m2 warehouse, as well as an office in Prague with 17 employees and a 300 m2 warehouse for transports to Germany, Switzerland and Italy. Added to these was Brno with two employees for full truck loads and Aš for special business with PLM Plastic. Scansped Czech had 13 direct transportation routes and was ISO 9002 certified. The company had suffered losses in the last few years, but had entered the profit zone in 1997 again, owing mainly to new business in the Aš Office. In 1997, Schenker Interlogistik generated 66 % of its turnover in European land transport and 20 % in logistics. Its headquarters were located in Prague, on Londynska ulica51 58. The company was headed by Anton Jordan, who had been Financial Director since 1994 and succeeded Jiří Grainer as Managing Director in 1997. 100 employees worked in an office covering 848 m2. Storage and handling areas included 8,500 m2 in Prague, 500 m2 in Varnsdorf, 200 m2 in Brno and 400 m2 in Domažlice. There were offices at border locations in Kladno, Folmava, Cheb, Draženov, Voitanov, Pomezí and Vysočany. The company’s activities focused mainly on national and European transport, customs and trade fairs. The Logistics Service was very successful from the beginning. A first step towards air freight services had been taken by rent104

Czech Republic

ing an office at Prague Airport. Sea freight was slowly developing. Heavy transports were being carried out by Japan for the Showa Aluminum Corporation. Comparison 1997 Schenker Interlogistik s.r.o. Founded

Scansped Czech s.r.o.

March 3, 1991

June 23, 1993

Headquarters

Prague

Liberec (Reichenberg)

Managing Director

Anton Jordan

Peter Lelek

Employees

100

57

Offices

14

5

Shareholders

100 % Schenker Vienna

67 % Bilspedition AB 18 % Letrans spol. s.r.o. 15 % Cetrans

In million CZK Equity

1.0

21,176

Turnover

166

93 1995

Shipping orders

207

94 1996

215

176 1997

19,409

9,612 1996

22,832

12,290 1997

Operating profit

17

8

Profit/loss carry-forward

13

–12

1997 in million CZK

As was to be expected, a struggle for leadership now began in the merged company. This not only affected the personal concerns of the management, but also the question of whether the Schenker or BTL system and network should be used. The Swedes (BTL) had promised their managing director in the Czech Republic leadership through Scansped  – surely a premature move. Peter Lelek therefore naturally endeavored to take over the Schenker office with the support of his management team. However, the tables turned very quickly. At the beginning, Schenker only had a minority stake in the parent company BTL , but this was quickly increased to a majority, until eventually the company was acquired in full. Stinnes, the parent company, took it for granted that all national companies would work consistently according to the Schenker system. Schenker had the upper hand since their revenue was twice as large as Scansped’s, which only had offices in in the northwestern region. Schenker, in the contrary, covered the entire 105

Regional Headquarters South East Europe

Customer event Jablonec 1993

Petr Lelek 2001

Anton Jordan 2001

territory of the Czech Republic. In number of employees, Schenker ranked number 6 of all forwarders in the Czech Republic, while Scansped only ranked 30. In 1997, Schenker had a profit rate of 5.5 % on turnover, while Scansped’s rate was 3.6 %. Schenker was therefore the larger and more successful company. What’s more, it was imperative that the company’s headquarters be located in Prague and not the peripheral Liberec. After long negotiations, where each party put their arguments forward and presented a variety of indicators, the fundamental decision of the Steering Committee was pronounced in February 1998. Schenker was awarded the company leadership 106

Czech Republic

in the Czech Republic. Petr Lelek’s shares were sold to Scansped, while Cetrans’s shares had already been acquired earlier. Contrary to BTL’s practice, Stinnes applied the four-eye principle. The management therefore always consisted of two persons, the MD and the Controller, in this case Petr Lelek and Anton Jordan. Both were on equal terms and the tasks were distributed precisely. Petr Lelek’s disappointment was foreseeable, but the headquarters of Schenker Vienna made ​​it clear that it considered each national company a self-reliant organization that had to develop independently and to which it only offered assistance. The two companies fitted well together and, as usual, working groups were set up. In the words of Anton Jordan, now it was clear “where God lives in the new company”52. BTL took over Petr Lelek’s shares and thus became the sole owner of Scansped Czech. Based on the balance sheet of 1997, 68.7 % of the new joint company’s shares were owned by Schenker and 31.3 % by BTL . In July 1998, the Supervisory Board consisted of the Chairman Elmar Wieland, Schenker Vienna  ; Deputy Stefan Ericsson, BTL Gothenburg  ; and Hartlieb, Schenker Vienna. The management was performed by Peter Lelek and Anton Jordan, who in 1995 had arrived from Schenker Germany to the Czech Republic with a three-year assignment contract, which was soon to expire anyway. All managers were retained, as the company was expected to develop dynamically. A problem still to be solved was the convergence of personnel and operational functions at two locations as far apart as Prague and Liberec, as well as the site of the headquarters and terminal in Prague. If the headquarters were to relocate to Scansped’s site in Liberec, the management for Controlling and International would have to move to the airport, which would however involve higher rent costs. The new terminal in Prague was situated in the city’s south and thus an own distribution network would have to be developed for delivery and pickup of shipments. In 1997, an expenditure of 105 million Austrian schillings was planned for the expansion of the location. It was therefore decided that the hub and main location would be Prague, while Liberec would serve as a Scandinavian platform. On January 1, 1999, the merger of Schenker and BTL was concluded and Schenker CS Interlogistik now changed its name to Schenker-BTL . Key indicators for Schenker and Scansped jointly, before and after the merger Year

Turnover Million CZK

Employees

Offices

1997

331

157

19

1998

416

108

12

107

Regional Headquarters South East Europe

The merger was a resounding success, as clearly reflected in the key indicators. The number of routes increased (Germany, Austria, Italy, Finland, Russia, Scandinavia, Balticum), as well as customs clearance, storage and transports for all across Europe. The turnover continued to rise sharply, while headcount and branches decreased significantly due to the merging of offices. But this was just a temporary halt in the continuing expansion. The air cargo sector in particular was considered a growth market in the Czech Republic. In January 1998, Schenker became an IATA agent  ; however, the technical requirements still had to be developed at Prague Airport. The customs office pushed for an online clearance. In contrast, two handling companies (Czech Odgen and CSA ) were established which were investing in opposite directions from the airport. Forwarding agents were therefore uncertain about where to move their future offices. Fellow forwarders now asked Schenker about their plans. Schenker’s answer was to initially establish two small offices (20 square meters each) at both handling companies, connected to their IT network – an approach which was judged by its colleagues to be “not stupid at all”. As long as the Prague Airport was not yet fully developed, Schenker Czech Republic continued its cooperation with Schenker Vienna, including partly shared sales services, due to the fact that a qualified air freight seller was extremely difficult to recruit. In sea freight, a new employee was able to pursue new paths with St. Pölten and Linz, and break away from the Schenker seaport locations Hamburg and Bremen in order to operate independently. In 1998, Schenker Czech Republic began with the import and distribution of spare parts for Ford Motor Company and opened a branch in Draženov for this purpose. The successful cooperation continues to this day. Alongside Ford, Schenker was also active for other automobile manufacturers. Katusice was a storage place for “just in time” deliveries to Skoda (V W) in the Mlada Boleslav factory. A new Distribution Center was opened in 1999 in Jablonec (glass and glass jewelry stone industry). The fairs and exhibitions in Prague and in Brno Holesovice were operating successfully. In 1999, the Czech national company had 200 employees housed in 15 offices in 11 cities, a turnover of 500 million Czech koruna, and was awarded the ISO 9002 certificate. In Prague, the location issue had not been resolved yet. A new central terminal was needed due to the company’s growth. Schenker was able to stop in the nick of time the purchase of a large warehouse, after Czech customs authorities developed a new site concept that did not consider this warehouse. In mid-2000, the Czech national company started operations in a new terminal favorably situated in the immediate vicinity of the customs offices in the Logistik Park Rudná near Prague, which now also housed the headquarters. A logistics warehouse, a transit station and an office building were developed in just six months on a total area of 10,000 m2, making it the most modern facility in the Czech Republic at that time. A new branch in České Budějovice was opened, which played an important role for inter108

Czech Republic

Prague May 2000

national shipments to Southern Europe. That year also saw the success of transport services to Expo 2000 in Hanover and the expansion of regular groupage services to Italy and France. In 2001, a logistics center for Vishay (Electronics) was opened in Plzeň and cooperation with the sportswear manufacturer Nike was kicked off  – which exists to the present day. The company started shipments with “tracking and tracing”, a tracking program with which customers can monitor their orders online and “online application for less-than-container loads”. An air and sea transport department was opened in Brno for customers from Moravia. 2002 also marked the year of computer technology. An electronic data exchange with the customs authorities was launched and barcodes, EDI (Electronic Data Interchange) and COS were introduced in the IT area. The first containers with groupage cargo embarked to Asia, groupage services to Poland and Spain were started, and for the first time the turnover reached one billion Czech koruna, with 100,000 shipments per year. In 2003, Deutsche Bahn AG acquired Stinnes AG and thus its subsidiary Schenker. This year, new offices were opened in Hradec Králové and Nový Jičín, with the company’s first railway access. On May 1, 2004, the Czech Republic joined the European Union. Four border branches (Folmava, Vojtanov, Pomezí and Draženov) had to be abandoned. The 109

On top: May 2000: Opening Schenker Prag; below: Terminal Prague; down: Prague

110

Czech Republic

Brno

number of offices therefore dropped from 20 to 16  ; however, the number of employees remained unchanged at 307 and the turnover continued to grow. In addition, with daily trips and more favorable freight rates, the frequency of the groupage traffic increased and new connections were established with the Baltic countries. Schenker was appointed official shipping partner of the BVV for the Brno Exhibition. The company was headquartered at Rudná u Prahy (Prague District), K Vypichu 1087, had a total headcount of 349 employees at 17 locations and 35,000 square meters of warehouse space. In April 2004, Peter Lelek left the company  ; the new Managing Director was Dipl.-Ing. Tomáš Holomoucky, who is still at the company’s helm today. Tomáš Holomoucky had previously been Marketing and Quality Manager at Scansped Czech s.r.o. He had studied Foreign Trade in Prague, then completed an internship at the Commerzbank in Offenbach, and arrived at Scansped in 1995 after engaging in other activities. In 2009, he was elected to the Board of the Freight Forwarding and Logistics Association of the Czech Republic. In 2005, a modern terminal was opened in Liberec, the company’s first own investment for transportation and warehousing/logistics in the Czech Republic. New groupage services were started to Hungary, Romania, Poland and Ukraine, and 111

Regional Headquarters South East Europe

On top left: Brno; right: Liberec; left: Liberec

overseas to Hong Kong and the USA . The RAPID domestic distribution system was introduced, capable of servicing the entire Czech Republic within 24 hours. An outsourcing project was initiated for the automobile supplier Happich in Bor u Tachuva which continues to this day. It involves the organization of inbound shipments, including warehousing, commissioning, packaging and value added services, as well as outbound shipments in over 50 countries around the world. In 2006, an SAP accounting system was introduced, the company was awarded the ISO 14001 certification, and four new branches in Bor and Tachova, Trutnov, Brno, Modřice and Strančice, were opened. Schenker transported the equipment of the Czech football team to the World Cup in Germany. The turnover reached 2 billion Czech koruna for the first time. In 2007, a toll system was introduced on highways and freeways of the Czech Republic, as in most European countries, with the associated financial burdens for forwarding companies. With the products SCHENKER rapid and SCHENKER skybridge, which combine the advantages of sea and air transport, direct imports from China were started to counteract limited shipping space and long transit times. E-export 112

Czech Republic

and electronic consignment notes were introduced for inland transport, and a new terminal was opened in Ostrava. The impact of the global economic crises of 2007 was also felt on the Czech market  ; demand fell and fuel prices rose, while the strong Czech koruna also had a negative influence. Schenker Czech Republic, development during the crisis Year

Turnover in million CZK

Employees

Branches

Shipments

In tons

2007

2,800

639

18

224,000

675,000

2008

2,700

784

19

231,000

653,000

2009

2,000

663

18

280,000

581,000

Schenker also suffered from the economic crisis through a decline in turnover, although the number of shipments remained stable. The company did not emerge from the crisis until 2010, when Schenker introduced new products and created additional transport routes. 25 million euros were invested in the Terminal Prague. The integration of Railog into DB Schenker led to an expansion of the product range for railway forwarding. In addition, daily groupage services were started from North Moravia to Poland, Slovakia and directly to Lithuania. e-Schenker Booking (electronic placing of orders) online application was introduced, enabling customers to electronically enter and monitor their orders. Another innovation in land transport was the electronic proof of delivery (ePOD). The company’s new logo became DB Schenker. In 2009 Schenker was appointed exclusive partner of the Nordic ski world championship in Liberec, thanks to its global network, expertise and modern logistics center. Its tasks included national and international transport, storage and installation of the sports facilities. The same year, the entire Schenker organization pledged to reduce 20 % of its CO 2 emissions until 2020 by means of organizational measures and modern means of transport. Schenker attempted to achieve these environmental goals through special projects. In 2010, 1.2 million euro were invested in a new logistics center in Pardubice/Eastern Bohemia, for the ESAB pan-Europe project. 13,500 pallets could be handled with 15 hydraulic loading ramps over an area of 12,000 m2 six freight cars could be unloaded simultaneously. The warehouse was equipped with cutting-edge technology for service, safety and energy saving. It also housed a 400 square meters office building for 65 people. This is one of the three European distribution warehouses of ESAB , the world’s largest producer of welding material and technology. In September the test run for rail transports from the ESAB factory in Vamberk to 113

Regional Headquarters South East Europe

Pardubice was started. Within one year 111,000 tons were transported on 2,300 freight cars. This was the equivalent of 5,000 trucks not congesting the roads and a saving of 140 tonnes of CO 2, or 30 %. For this project Schenker received the “Free Way Award” from the Ministry of Transport, a prize awarded for the reduction of road traffic. Schenker was able to convince its customers that railway transport was a good option also for short stretches, especially in the case of poor road infrastructure. The Ministry of Environment also awarded the prize “Efficient Use of an Extensive Part of Brownfield for the Purpose of the Construction of an Intermodial Logistics Center” to the project. A new logistics center was opened in Brno with 8,000 m2 storage area as Schenker Railport, for combined road and rail with a hub for land, sea and air. The integrated rail connection had a ramp which extended over 85 meters. Activities that had previously been scattered across four locations could now be combined. Only the fair and exhibition logistics remained at the fairgrounds. Another milestone was the integration of Schenker High Tech Logistics, enabling the acquisition of new logistics expertise in IT and the electronic industry. The integration of BAX was started in 2006. BAX had promising air import business and handled a large logistics project for DELL in Modletice. In 2007, the project was taken over by Schenker High Tech Logistics in the Netherlands, and in 2010 finally integrated into the Czech national organization. In 2009, the company was awarded a similarly sophisticated logistics project for one of the most important IT and telecommunications manufacturers, which was then successfully implemented in Strancice. Schenker was also the official logistics partner for the J50 Race and Aerobics Championship of the Czech Republic. The specialized team of experts SCHENKERsportevents organized the transport of equipment for the Jizera 50 between Prague, Liberec and Bedřichov. This race looks back on 40-year tradition and is part of the world league for cross country skiing. In 2007, the race was first held as part of the FIS Marathon Cup. As noted by Tomas Holomoucky, Schenker could tap into its long-standing partnership with the Jizerská 50 and extensive experience at major sporting events, including the Olympic Games. In addition, Schenker was the official Czech logistics partner for the EXPO in Shanghai  – an exceptional challenge. Schenker was entrusted with the transport of the “Plaquettes of Good Fortune” from Prague’s Charles Bridge53, among other valuable exhibits. This white-glove work ranged from the disassembly of the plaques to their careful shipment in special boxes, transfer to the airport, flight to Shanghai and further transport to the exhibition grounds. Customs procedures in Prague and China were time-consuming and the insurance amount extraordinary. Schenker Czech Republic ended 2010 with the largest turnover and transport volumes in its history. In the Sirus Award contest, Schenker already ranked among 114

Czech Republic

the top 10 companies in maritime and air transport. The air transport company CSA awarded Schenker a prize for the largest volume in air transport. In 2011, DB Schenker Rail was integrated, which brought significant momentum to the development of rail transport, especially between Germany and the Czech Republic. In the same year, Schenker also received the AEO C certificate by the Customs Administration. The AEO (Authorized Economic Operator) was introduced as part of changes that followed the Czech Republic’s EU accession. To achieve this status, financial stability, an appropriate accounting and logistical system, reliability in customs regulations and a high safety standard were required. The certificate ensured customers could receive preferential, fast and easy customs clearance. Shipment tracking on mobile phones was introduced. DB Schenker was again the official logistics partner of the J50 cross-country ski race and the City Triathlon in Karlovy Vary. Most recently, the year has ended with record turnover and transport volumes. Year

Turnover in million CZK

Employees

Branches

Shipments

in tons

1991

–

 11

 2

–

–

1992

–

 26

 4

–

–

1993

173

 36

 5

–

–

1994

110

 50

 6

–

–

1995

166

 85

 6

–

–

1996

207

 96

 8

–

–

1997

215

103

 8

–

–

1998

416

108

12

 28,500

 18,200

1999

560

169

15

 63,700

 16,700

2000

741

230

16

 78,250

162,000

2001

897

245

18

 98,900

159,000

2002

1,000

266

19

130,000

215,000

2003

1,300

305

20

149,000

294,000

2004

1,500

307

16

178,000

400,000

2005

1,750

333

14

152,000

523,000

2006

2,200

478

18

195,000

608,000

2007

2,800

639

18

224,000

675,000

2008

2,700

784

19

231,000

653,000

2009

2,000

663

18

280,000

581,000

2010

3,000

777

18

390,000

781,000

2011

3,346

800

18

437,000

952,000

115

Regional Headquarters South East Europe

20 Years DB Schenker

In 2011 DB Schenker organized several festivals and events to celebrate its 20th anniversary in the Czech Republic  – where it boasted 18 offices, 800 employees and warehouse space of 66,600 square meters. For each transport performed, a Czech koruna was donated for welfare purposes. An environmental campaign was launched in which each employee planted a tree. A gala evening was held for customers, a cultural program with a presentation and buffet in representative rooms of the Pražské křižovatka center, as well as a theater performance. Smaller events were also held at individual terminals on the anniversary of their inauguration. Christmas celebrations were organized in the various branches, with dinner, raffle, dancing and fundraising for children’s homes. Since 2005, a different branch each year organizes an annual sports event for employees with about 300 participants. Annual Christmas events are organized for customers, attended by 250 to 400 people, and sometimes a golf tournament or smaller event, such as a visit to a wine cellar or a fireworks display at the Brno Dam. Customer events are also organized each time a new terminal is opened, featuring buffets and an amusement program such as an air balloon ride, Segway ride or archery. Since 1999, a magazine for customers has been published under the title “The Bulletin”. In 2011 Schenker spol. s.r.o. had an annual turnover of 3,346 million Czech koruna and a transport tonnage 116

Czech Republic

20 Jahre DB Schenker in Tschechien

Board members: Vladimir Handl, David Martis, Katarina Smrcekova, Tomas Holomoucky, Zdenek Kaspar, Jifi Koutnik, Lubor Lepic, Jan Liptak

of 952 million tons. With around 900 transport units, it hauled a total of 125,890 shipments in export, 171,770 in import and 136,390 domestic shipments. It had virtually every conceivable quality and safety standards as well as the AEO status for customs services.

117

Regional Headquarters South East Europe

Slovakia Until 1914, Schenker was represented in the region known today as Slovakia by the company Philipp Steiner. After the Second World War, Slovakia detached from the Hungarian part of the Austrian-Hungarian Monarchy and became incorporated into Czechoslovakia. As part of the nationalization process, branch offices could no longer be subordinated to Vienna  ; instead, the owner of an office was required to reside in Czechoslovakia. As a result, a company under the authority of Schenker Prague was established in Bratislava in rooms of the Hotel Carlton at Grösslingová ulica54 4. By 1921, branch offices had been established in Žilina and Királyháza (Korolevo). In 1930 the company was headquartered at Mostová ulica55 2. The subsidiary developed in a satisfactory manner, turning a profit within the first few years of doing business. It was a major hub for Danube transports, such as sunflower cake from Bulgaria and sea salt from Egypt, and exports of grain and sugar. From March 14, 1939 to May 1945 in the independent state of Slovakia, there was a Schenker branch office in Bratislava, which in 1941 was located at Rybné námestie56 7. Heading the office and signing all documents until 1939 were Dr. Vojtech Schick and Moric Rübner. The next signatories were Hermann Schwab and Felician Weisz. Future president Gustáv Husák allegedly worked at Schenker as an authorized representative during the war. The main materials being transported were grain, salt, wood and magnesite from Košice. Turnover in Czech koruna 1941

5,827,181.70

1942

8,976,031.80

1943

8,867,407.19

After the Second World War, operations were primarily run by the Schenker Company, particularly with respect to transports of personal property. In 1946, the company’s address was Ulica armady57 8. Dr. Rubel died in 1947  ; in 1948, the Communist government implemented nationalization. 

118

Slovakia

1909: Schenker Office in Hotel Carlton

Old office

119

Regional Headquarters South East Europe

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

10

–

1990

–3

–

1991

–15

–

61

–

1992

–7

–

10

–

1993

–4

–

23

–

1994

6

14

13

–

1995

6

13

10

22

1996

7

11

 6

31

1997

4

12

 6

34

1998

4

13

7

35

1999

0

16

11

48

2000

1

19

12

50

2001

4

19

 7

49

2002

5

19

 4

43

2003

5

18

 8

42

2004

5

18

 8

42

2005

7

16

 3

34

2006

8

13

 4

31

2007

11

11

 2

30

2008

6

 9

 4

28

2009

–5

12

 1

36

2010

4

14

 1

41

2011

3

12

 4

43

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

5,298

  6,400 

47

2011 5,398 18,600 38   Source  : Handbook of Statistics, 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

January 1, 1993, saw the consensual separation of Slovakia from the Czech Republic. Each became an independent state, but the two countries maintained a customs union. Privatization of former state enterprises was largely complete by the end of the 120

Slovakia

1990s. The primary engine of the economy is located in the West, in the Bratislava region in particular. Key trading partners are the Czech Republic, Germany, Russia, Austria and Italy. As early as 1989, Schenker Vienna established a representative office in Bratislava  ; the two cities are only an hour’s drive apart. Due to rapid economic development and the global Schenker Eastern Europe conception, the representative office was converted into an independent national company on July 1, 1992, Schenker Slovakia spol. s.r.o., located on ulica Vladimíra Majakovskieho58 9, Bratislava. The company had a capital of 1 million Slovak koruna and was a 100 % subsidiary of Schenker Co. AG Austria. A team of three employees performed sales operations via Vienna. The first Managing Director was Reinhold Bernhard from Austria, who was subsequently replaced by Manager Peter Salajka from Slovakia. Manager Peter Csokay from Austria served as the authorized representative. Contrary to expectations, Slovakia held up well after separation from Czechoslovakia. Even the corporate planning division of Stinnes AG Southeast Europe found that in 1997, despite political deficits, the country demonstrated dynamic growth, and the transport market was increasing, notwithstanding a low total transport volume. Schenker focused on a small but promising segment (warehousing, distribution, custom clearance and full truck loads (FTL), and achieved comparatively good results despite sparse relations. Transports from Germany into Eastern Europe began quite early. In 1995, Schenker Eurocargo began coordinating material flows and distribution for Siemens Automotive in Michalovce, Slovakia. In a specially established Siemens logistics center in Würzburg, cargo shipments from all over Europe were bundled, prepared for shipping and sent to Slovakia at a rate of three to four truckloads per day. In 1997 Schenker Slovakia spol. s.r.o., headquartered at Kopčianska ulica 92, had 47 employees under the direction of Managing Director Karol Pinter at a new 4,000 m2 terminal with 1,150 m2 warehouse space, 800 m2 customs warehousing and a 250 m2 office. The site, which was immediately adjacent to the land transport customs office, also handled customs clearance and warehousing. Offices were erected at the Bratislava airport with 2,000 m2 of warehouse space, at the trade fair grounds in Bratislava and as a border outpost at Petržalka/Berg. Regular weekly groupage transport services and transports to Germany, Austria, Sweden and the Netherlands were set up. Complete logistics solutions were offered for key accounts such as Ford and Philips. From 1995 to 1997, sales had doubled to reach 5 million Euros.  Initially, air and maritime transports were still conducted via Schenker Vienna, as Schenker Slovakia had not been able to create adequate and stable resources. Business had been strengthened by the renting of offices at Bratislava Airport in early 1996. For sea transport, Slovakia was completely dependent on Vienna and therefore unable to cover its costs. The relevant training was carried out by the 121

Regional Headquarters South East Europe

respective departments in Vienna, leading to stagnation of business in Slovakia without the ability to drive on expansion. Nevertheless, the Bratislava office was bursting at the seams and a 50 million Austrian schilling investment was made for a foothold in the Port of Bratislava and the opening of an Incheba office for trade fairs and exhibitions. Schenker’s takeover of BTL and BAX had no direct effect on Slovakia since neither company had offices there  ; however, the company in Slovakia also operated under the name Schenker-BTL and was managed by the regional headquarters for Europe South East Vienna. The year 2000 saw the upgrading and expansion of Schenker BTL s.r.o. in Bratislava. In addition to the branch offices at the Bratislava airport, the Incheba Expo center and the Petržalka border office to Austria, a test office was built in Košice-Haniska, in the economically important region of Banská Bystrica. That same year, Schenker Slovakia served as official carrier for the 2002 Winter Olympics in Salt Lake City. Key customers came from the consumer goods and auto industry sectors, which had established branches in Slovakia. Schenker Slovakia’s customers included large vehicle manufacturers such as Ford, Volkswagen, Nissan, and Motor Car Wiesenthal. The German automotive industry also used Schenker’s railway-related logistics services to supply their products with components from Slovakia. This was also true of names in the food industry such as Coca-Cola Beverages, and in the telecommunications and electronics companies. In 2003, an office at SACHS in Trnava was opened, allowing for the tracking of transports. The May 2004 accession of Slovakia into the European Union meant the border office to Austria, Petržalka/Berg, had to be closed. On April 30, 2004, on the eve of EU accession, a new terminal at Bratislava commenced operations with an investment of 4.6 million euros and the staff relocated from Kopčianska ulica92. The property of the new logistics terminal in Bratislava boasted an area of 34.000 m2, of which 14,000 m2 were paved, and 4,000 m2 of modern warehouse space with 6,000 places for pallets, 1,200 m2 of office space, and 19 docking gates. It was equipped with a modern information and communication system, making it the most modern logistics terminal in Slovakia. It enjoyed an ideal location at the motorway junction between the Czech Republic, Hungary, Eastern Slovakia, and the business centers of Vienna, Bratislava, Brno and Györ. The number of employees shot up from three in 1992 to 71 twelve years later  ; 60 of these employees worked in the new terminal. In addition, there was an own air freight office at Bratislava airport, an office at the Bratislava Exhibition Center, a branch in Košice which was founded in 2000 and which specialized in warehousing logistics, and an office in Trnava, the new center of the automotive industry. An office was opened in Vyšné Nemecké at the new EU border to Ukraine. Alfred Wolfram took over the position of Managing Director 122

Slovakia

Schenker opening 2004

Schenker Zilina

GST Kosice Pal Rack system equipment

123

Regional Headquarters South East Europe

from Karol Pinter in 2005. This year also marked the opening of the branch office in Žilina. In 2006, this national company received 14000  :2004 Environment ISO certification. In 2000, it was one of the first companies in Slovakia to obtain TAPA Level A certification for the highest safety standards, which included GPS , driver registration, and security monitoring for clients such as Samsung. In 2008, domestic groupage services were started. The hub is located in Zvolen, the main problem lies in the uneven freight flows, with a strong west-east divide. On July 1, 2008, Dietmar Schmickl of Schenker Linz took over the function of MD in Bratislava, while Alfred Wolfram went to Vienna and become Rail Product Manager for the South-eastern Europe region. Initially, the new Managing Director was confronted with a level of growth that had brought the organization to the limits of its capacity. From 2007 to 2008, the number of shipments had practically doubled, and sales had risen by a quarter. This, how-ever, was a concern that would not trouble him for long. Because of the global financial crisis, although the number of shipments rose in 2009, sales actually fell by a quarter. Schmickl’s task, therefore, was to use the crisis as an opportunity to promote a restructuring, a process which indeed took place over the following years. But the period of massive growth was over for the time being. Nevertheless, the national organization expanded. Although the country’s economic performance declined in 2009, the need for logistics services was so backlogged that demand increased even during the crisis. The year 2008 saw the opening of the Zvolenska Slatina branch, which then relocated to Zvolen Inplant in Gan with the start of cooperation with Samsung Electronics. In 2009, the Košice and Zvolen branch offices moved to a new terminal, and Schenker became the official logistics partner for Marathon in Košice. In 2010, logistics services commenced in Žilina for Kia Motors, and an international training system was introduced for the entire national organization. In 2011, the FTL center in Zvolen was established for the national organization. Slovakia is the world’s number one producer of motor vehicles per capita. In 2011, 640,000 motor vehicles were manufactured at three automobile plants (V W, PSA , and KIA )  ; the number is said to have reached one million by 2012. Automotive logistics services at Schenker Slovakia are concentrated at the Žilina branch office. There, parts for windscreens and exhaust systems are stored, picked up and transported to the Korean automotive industry’s production lines in Žilina and to Nošovice in the neighboring Czech Republic. The necessary precondition for cooperation with Korean clients is the joining of two cultures and languages, achieved through permanent employment of colleagues from the Korean Schenker organization. The ability to communicate in one’s native language is an inestimable customer service benefit in the automotive and electronics industries. 124

Slovakia

Dietmar Schmickl

Alfred Wolfram, Sona Horvathova

Christmas party 2008

125

Regional Headquarters South East Europe

SOPKA Cup

Schenker Party

126

Hungary

Development Schenker Slovakia s.r.o. Year 1992

Turnover 79

Shipments in 1,000 EUR –

Number of employees 3

1993

439

5,423

12

1994

1,294

9,523

–

1995

2,352

18,566

28

1996

2,695

23,910

35

1997

5,023

24,564

47

1998

4,428

24,960

47

1999

3,992

26,775

54

2000

4,867

29,040

55

2001

8,481

33,059

55

2002

9,267

38,285

58

2003

10,013

47,580

78

2004

11,079

53,279

71

2005

11,899

–

59

2006

16,311

–

68

2007

22,791

60,000

72

2008

30,254

130,298

92

2009

22,091

166,360

105

2010

23,641

227,745

112

2011

23,373

240,690

125

Hungary The Kingdom of Hungary was one “k” in the k. u. k. Monarchie59. The two-state construction was held together by the central position of Franz Joseph, at once the Emperor of Austria and King of Hungary. Otherwise the only jointly conducted activities were foreign affairs, economics, customs and monetary policy, and the military. Hungary had a strongly agricultural orientation at this time, with substantial amounts of grain, livestock and wine being exported not only into the Austrian half of the Empire (Cisleithania), but all over Europe as well. After the First World War, the Republic of Hungary emerged with considerable losses in population and territory. Among other things, it lost its access to the sea, since Croatia became part of Yugoslavia. The interwar period was politically turbulent  ; 127

Regional Headquarters South East Europe

during the Second World War, Hungary was on the side of the German Reich. In 1944-5, the country was occupied by the Soviet Union under whose influence it fell to the victorious Allies in the Yalta Agreement. A Communist regime was erected, followed by the concomitant nationalization and economic planning methods. The year 1956 saw a popular revolt against the Stalinist regime  ; the uprising was bloodily suppressed. Approximately 200,000 Hungarians fled the country in a mass exodus towards Austria, the only border to the “West”. Beginning in the 1960s, economic planning restrictions began to become more relaxed. Small private businesses were permitted as long as they employed only family members. It was striking how numerous these families could be. Tourism played a significant role as well. The Hungarian lakes (such as Lake Balaton) and spas were meeting places not only for German and Austrian guests, but for tourists from the GDR as well. Thus that country played a significant role in the falling of the Iron Curtain. In 1989, thousands of GDR “vacationers” waited at the Austrian border until Hungary opened its doors. A large number of Trabants and similar vehicles drove through Austria towards West Germany. Hungary was therefore one of the most advanced countries among the COMECON states in terms of foreign trade, as the site of a limited opening that took place during the Communist regime. The downside was high foreign debt, which remains a characteristic of the region to this day. Even in Hungary, the transition to a market economy was a shock at first. From 1990 to 1993, although the real GDP fell to 82 %, it enjoyed a relatively low unemployment rate and level of inflation compared to other nations. After satisfactory growth rates were achieved, the global financial crisis that started in 2007 brought about a significant decline in economic development. Overall, real GDP per capita increased by 140 % from 1990 to 2011  ; the population, however, had declined by 400,000 people, or 4 %.   The Schenker freight forwarding company has a long tradition in Hungary, dating back to its founding in Vienna in 1872. The Budapest office, established in 1874 under the leadership of Emmerich von Sonnenberg, was the first branch, followed by the Brno office in 1902. The company’s cofounder, Moritz Karpeles, came from Tab, Hungary, a town 30 km south of Lake Balaton. There were also a few other leadership positions held by Hungarians at the Vienna headquarters. The Schenker forwarding company was, therefore, an Austro-Hungarian company from its earliest beginnings.   • In 1874, the Budapest office was established on the advice of Moriz Hirsch. Emmerich von Sonnenberg was entrusted with its management. • In 1879, Schenker established its own shipping company, the Adriatic Sea Steamship Company in Fiume60, which at the time belonged to the Hungarian part of the empire. In 1881 the Drau Dampfschifffahrt-Gesellschaft61 was formed. 128

Hungary

• In 1904, Emmerich von Sonneberg became a partner shareholder in Budapest  ; in 1914, net income totaled 46,458 crowns. • The address of the company until then was 1882 Carlsring62 9, 1889 Waaggasse63 2, 1913 Árpád utca64 6 Year

Growth GDP real

1990

–4

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

–

29

–

1991

–12

–

35

–

1992

–3

10

23

–

1993

–1

12

23

–

1994

3

11

19

–

1995

2

10

28

86

1996

0

10

24

72

1997

3

9

18

63

1998

4

8

14

61

1999

3

7

10

61

2000

4

6

10

56

2001

4

6

9

53

2002

5

6

5

56

2003

4

6

5

59

2004

5

6

7

60

2005

4

7

4

62

2006

4

8

4

66

2007

0

7

8

67

2008

1

8

6

73

2009

–7

10

4

80

2010

1

11

5

82

2011

2

11

4

81

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

Year

Inhabitants In 1000

1990

10,374

 6,800

61

2011

 9,974

16,400

54

Source  : Handbook of Statistics, 2012, Central, East and Southeast Europe  ; Vienna Institute for International

Economics Studies, Vienna 2012

129

Regional Headquarters South East Europe

Operations at Schenker Budapest were significantly affected by the consequences of the First World War. More than the Republic of Austria, Hungary lost economic opportunities as a result of cession of territory, and found itself in a difficult situation as a land-locked country with a strong agricultural orientation. In addition, political turmoil was particularly violent, culminating in 1919 in a “Soviet government”, which largely paralyzed business activities. Many companies were affected by expropriation attempts, and Schenker was no exception. With the passing of the Soviet government regulation on March 29, 1919, all companies with more than 20 employees would have to be socialized. Some Schenker employees supported this project, and only the vigorous protests of attorney Lederer, who saw himself as a steward of the company, were able to prevent this. Meanwhile, plans were underway to place all freight forwarding companies in Budapest under the central management of a five-member directorate. Although the president of the trustees of the forwarding officers, clerks assured in fact that Schenker, as a foreign company, would remain unaffected, the Schenker Group responded with the precautionary measure of a complete cessation of operations in Hungary. The problem was solved a few months later on its own by the collapse of the Soviet government. In 1921, Emmerich von Sonnenberg along with his son Marcel von Sonnenberg, Emil Karpeles, and Gottfried Schenker-Angerer appeared as partners of Schenker Hungary. At that time there was discussion of transitioning from a general/open commercial partnership into a limited joint stock company in Budapest, but this was delayed because of a disagreement about the allocation/division of capital between the Vienna headquarters and the Sonnenberg family. Finally, a more elegant solution was found  : in 1926 Schenker Vienna acquired all shares of the existing Continens freight forwarding company AG which had been under 51 % ownership by Schenker Vienna since its founding in 1920. Continens then bought Schenker Budapest. The general commercial partnership was dissolved and converted into “Schenker & Co. Budapest, International freight forwarding corporation AG ”, meaning that Schenker AG , which was founded in 1920, had formally been in existence since 1920. In March 1926, capital was fixed on the basis of the gold standard with 600,000 pengö in 7,500 shares. Geza Szekely was Managing Director, and the management board included Gottfried Schenker-Angerer, Stephan Karpeles-Schenker, Marcel von Sonnenberg and Dr. Tibor Saxlehner, brother-in-law of Stephen KarpelesSchenker. In 1925, the office building in Budapest at Nador utca 26 was acquired and made the headquarters of the company. In 1930, Schenker Hungary had a workforce of 97 employees. Although the company’s balance sheets showed profits until 1929, no dividends were paid/distributed off after 1926 due to poor performance in Hungary during the interwar period. The number of branches varied between four and eight. Only three regular groupage shipments/services took place between Vienna, Tetschen and Trieste and 130

Hungary

only the Danube operations saw a significant turnover. The company operation/ business was thus chronically in deficit, and justified its existence solely on the basis of it significance for transports within the global Schenker concern. Because Budapest was an old Schenker office, however, closing it was hardly an option  ; meanwhile, the Vienna office was putting on the pressure to increase profitability. Schenker’s top executive, Emil Karpeles-Schenker, traveled himself to Hungary to reorganize the company and revive its earlier appeal. In his opinion, the most important factor was a disciplined work ethic according to clearly defined guidelines that would create a sense of administrative order. Business in Budapest was indeed able to recover from all the big losses over the next few years, but repeated setbacks were recorded which prevented very active efforts. The losses of the Hungarian branch office were estimated at DM 100 to 150 thousand annually. Therefore it had to be ensured that no other branch office experienced a situation as unfavorable as that of Budapest. Despite the unfortunate course of business, the Hungarian Schenker company, with its Budapest office across from the Stock Exchange did have some assets. Thus Schenker Budapest was able to take over the company Ullmann & Seligmann in 1920 for 250,000 crowns. Together with the British-Hungarian Bank, which had a large merchandise trade department, the company was converted in September 1921 into the British-Hungarian transport corporation. Another considerable asset was the warehouse company Centrum-Lagerhäuser AG . Schenker Budapest had found itself in a difficult situation in the early 1920s due to quitting/termination from/of their warehouses in Königsmühle. At the time, railway stations did not have depots, and Budapest was experiencing an extraordinary shortage of storage space. After months of searching, a solution was found  : the building complex of a former grain mill belonging to the numerous Haggenmacher heirs. This facility, located in the city center, close to the Western Railway, had a warehouse area of 21,000 square meters. However, there was no rail connection and the former mill building had to be adapted for storage purposes. In 1923, Centrum-Lagerhäuser AG was founded, with a capital of 50 million crowns. The company’s shares were half-owned by the Haggenmacher heirs, and half by Schenker. Marcel von Sonnenberg (the son of Emmerich) became President, while Ödön Vogel, former director and co-owner of Continens AG , became General Director. He had negotiated the deal and received as a commission a 10 % stake in Centrum, albeit with a purchase option for Schenker. The joint stock company carried out extensive investments totaling about 500,000 pengö, and received a low A PR of 10,000 Swiss francs from the Haggenmacher Group to lease the entire warehouse complex for ten years. The completion of the railway link had to wait, however, until tracks could be laid over one of the most trafficked streets in Budapest. Completion of this project fell into the period of weaker economic activity. 131

Regional Headquarters South East Europe

Nevertheless, the warehouse was a great success. Due to the central location/position, the storage rooms filled quickly and were used not only by Schenker, but by other companies as well. The expansion of storage operations necessitated renewed investment and capital contributions from the shareholders. Because the Haggenmacher Group considered itself unable to make such an investment, Schenker took over the remaining shares in the end for a sum of 220,000 pengö, thereby becoming Centrum’s sole owner. Centrum’s annual net income from 1926 to 1930 averaged 33,000 pengö. In the 1920s, Schenker was also able to initiate a close cooperation with the Hungarian State Railways. Already in 1926, together with Hungarian State Railways MÁV 65, the transit agency Tota Schenker AG was established with 50 % ownership by Schenker. The company, which was founded with a capital of 400,000 crowns, had as its raison d’etre the forwarding of express transports and freight transports. Continens was officially involved, as it was 100 % owned by Schenker. The entirety of Hungarian transit traffic over the railway at that time totaled around 400,000 tons, 35,000 tons of which were assigned to Schenker. Other forwarding companies wished to participate in Rota AG   ; this was successfully prevented despite constant urging. A contract extension in the year 1929 intensified the collaboration. Schenker Budapest retained the sole commercial agency of the Hungarian State Railways company for own purpose, and all branches of the entire company abroad. Based on an contract signed with Deutsche Reichsbahn in 1926, Schenker took over not only the task of promoting transit traffic but also keeping the Hungarian railway apprised of important economic processes and tariff-related actions taken by other transport companies, and providing tariff-related and other information. In the 1930s, Nazi Germany began its “de-judification”66 program at Schenker Hungary. Since local trade there was under predominantly Jewish ownership, some business was lost. Through these coercive measures, Directors Székely and Sonnenberg Jr. were forced to exit the company. In 1940, Stephan, a confidant of Marcel Holzer and former head of Schenker London, took on the position of Managing Director. The goods transported in this period were mainly grain, wine, sugar, meat, plums, cotton, bauxite, machinery and iron sheets. In 1946, after the war, attempts went underway to revive Schenker in Hungary. On October 6th, 1948, however, private forwarding companies lost their business licenses, their employees forced to incorporate into a state enterprise  ; here again, Schenker was no exception. The resultant state-owned international forwarding monopoly, Masped (General Hungarian Transport Company) was founded on July 5th, 1948. Masped was divided into sub-departments by mode of transport – rail, truck, etc. Alongside it were 50-some agencies for foreign trade of products such as chemicals and mineral oil  ; these agencies had their own forwarding departments. 132

Hungary

These firms gathered orders from industry and were able to coordinate their own deliveries within the COMECON area, to be invoiced in transfer rubles67. All transports to the West, about 10 % to 15 % of Hungary’s foreign trade, had to be carried out through Masped. The freight forwarding entities from industry, therefore, had to submit their orders to Masped for delivery or forwarding under strict monitoring. This applied to shipments via Hamburg, or imports of raw materials with Western currencies. Shipments traversed the Donau to be transported overseas  : cellulose from the Soviet Union, fertilizer from Florida, iron ore from India, cargo to China, semi container ships. Masped had its own foreign trade offices in Poland, East Germany, Hamburg and Vienna. This way of structuring the flow of goods prevailed until the end of the planned economy in 1990. The “foreign exchange ruble” was eliminated because it gave the illusion of an unrealistically low cost structure. Most foreign missions, too, were closed down. The entire Hungarian economic structure was turned upside down. Previously, there had been a division of labor among the Comecon countries  ; now one could buy and sell freely. The Soviet Union, previously the largest trading partner, to whom virtually anything could be sold, now was almost completely gone. Schenker responded very rapidly in Hungary. By as early as 1989, Schenker Frankfurt had founded a representative office in Budapest at Visegrádi utca68 42– 46. The office was managed by Kruger, who had previously worked in the timber trade. He was supported by three colleagues from Germany and one from Austria. The 80 m2 office consisted of two rooms and a kitchen. In 1992, the representative office was converted into a national company, Schenker Hungaria Kft., which was based in Budapest at Szabadkikötő utca69 5–7. Schenker’s interests in Hungary, however, were very complex and multifaceted. In neighboring Austria, Schenker Vienna was already heavily involved in regular groupage transport with Hungary and had worked with Hungarocamion on land transport and with Masped on air transport. Other Western Schenker national organizations had already established transport services with various Hungarian partners. This fragmentation of interests impeded the development of Schenker’s own organization in Hungary. Therefore the newly established entity fell short of the ideal of a powerful forwarding company. Then Jürgen Franke came from Germany and expanded the business. Staff training already took place in Frankfurt. In 1994, Schenker Hungaria moved its headquarters to Freeport Budapest, in the vicinity of Masped Trias. Until 1996, Schenker Hungaria had 49 employees in Budapest with 620 m2 of office space and a 9,666 m2 warehouse, and one office in Györ with 5 employees, 100 m2 of office space and 300 m2 of warehouse space. Turnover had increased from USD 5,000,000 in 1995 to USD 5,700,000 in 1996. As part of the regional reorganization in 1996, Schenker Austria acquired responsibility and ownership of Schenker Hungaria. 133

Regional Headquarters South East Europe

First office, second from the left Richard Reichert

134

Hungary

2012: 20th anniversary celebration

The company saw success in European land transport mainly to Germany, Austria and Italy. It also provided special transport and customs clearance services along with warehousing and distribution logistics. First steps were also taken in sea freight, with the support of Schenker Austria. The traditional dominance of local Hungarian freight forwarders, but also the strong market position of shipping agencies made action in this segment extremely chal- Erdélyi Kálmán lenging. In air freight, Masped was the partner of the global Schenker organization. Schenker Austria basically had a supervising role. This situation could not be changed for the time being. In addition, Herber Hausner, a subsidiary of Schenker Austria, was already active in the removals sector in Hungary. First as a representative, and in 1990 as Hausner Kft. with its ownsubsidiary and 4 employees. In early 1993, Robert Bosch engaged Schenker Austria for the construction and management of a logistic distribution warehouse in Hungary. Despite the very limited offer of adequate warehouse space, a suitable property in Pomáz, on the 135

Regional Headquarters South East Europe

outskirts of Budapest, was finally found. After successful development, the business was transferred to Schenker Hungaria in 1995. In 1997, with a turnover of 910 million forints, Schenker Hungaria held the ranking of 20th forwarding company in Hungary. Schenker in Hungary 1997 in 1000 Austrian schillings  Schenker Hungaria

Herbert Hausner

Pomáz Bosch Lager

Total

68,948

30,366

16,151

115,465

Gross proceeds

21,846

12,140

8,225

42,211

Expenses

22,118

7,963

4,900

34,981

2,264

4,300

3,325

9,889

Turnover

Revenues before taxes

From 1997, with the acquisition of the Swedish forwarding company BTL by Schenker, the company’s requirements in Hungary changed. Companies had to be merged in all countries where both BTL and Schenker were active. In Hungary, this proved to be problematic from the start because the leading Hungarian freight forwarders – Masped – also had a long-standing participation in the BTL subsidiary MaspedTrias. The state enterprise Masped had been privatized in 1991 with the help of a number of business consultants. The idea of selling to foreign investors also came under consideration. Twenty-eight forwarding companies who were initially interested in this course of action eventually withdrew before it could take place, as Masped had worked with all foreign carriers and any forwarding company that came on board would lose revenues from the other companies. Therefore Masped was left to its own devices during the privatization process. On December 20, 1991, it was established as a joint stock company with a capital of 2,681 million forints. The state provided support in the form of favorable loans  : the general interest rate of 20 % was reduced to just 7 % for privatization. All 250 to 300 employees at Masped were able to acquire an equity stake. With 100,000 forints in cash, one could buy the value of 5 million forints, with the rest to be paid over ten years, which the company could also deduct as an expense from its taxes. Thus 51 % of shares in the company went to an employees’ consortium, with an additional management buy-out of 25 %. Facilitating the Masped privatization was the fact that the company was not only active in the transport sector, but had a number of real properties as well, including an office complex in downtown Budapest. Masped was therefore a financially strong company. It also possessed excellent access to the local market and had the know-how and great expertise in the transport sector, having conducted business with foreign companies in the past. In the competitive 136

Hungary

environment created by the economic opening, sales plunged by half, forcing the management to restructure the company. Big problems came only with the global financial crisis in 2008. Today, Masped AG is a portfolio holding company for finance, shipping and real estate. Even if Masped remained a Hungarian company after privatization, in some business sectors it would have had to strive for Joint Ventures with foreign companies. The reason behind this was that an investment of foreign capital was required, and a foreign partner would bring along know-how and transport infrastructure. Thus on April 4, 1991, Masped-Trias was established with a capital of 650 million forints to provide warehouse and groupage services. Masped and Swedish Bilspedition (BTL) each held a 49.75 % stake, while 0.5 % went to Transteam AG , an employee company founded by the Masped AG before privatization. Masped and Transteam brought contributions and business in kind, while BTL contributed capital and know-how. The company was given the name Trias because it was a confluence of three partners. Business leadership was the responsibility of BTL . In 1997, when Masped Trias came to the attention of Schenker, the company had 227 employees, including 34 customs agents, one main office in Budapest, and branch offices in Györ, Debrecen and Marcali  ; it had a property with an area of 67,000 m2, 20,000 m2 of warehouse space (measuring six meters high), and 6,000 m2 of paved outdoor warehouse space. Masped Trias already had ISO 9002 certification, and 60 % of its turnover came from groupage services, especially with Austria, Finland, Germany, UK and Italy. Headed by Kálmán Erdélyi, Masped Trias was 82 % owned by Eurosped Kft., which employed a staff of 100 people to provide border freight forwarding service and had offices at various border locations. Masped Trias collaborated with Scansped in some countries, and with various forwarding companies in other countries. Masped Trias had developed in a satisfactory manner, and had even overcome financial difficulties  ; by 1997, its turnover amounted to 2,880 million forints. 1993 = 100

Turnover

Result before taxes

1994

116

186

1995

120

188

1996

153

224

1997

197

296

Schenker Hungaria, on the other hand, had 69 employees under the direction of Jürgen Franke, 1,100 m2 of office space, and four floors of warehouse space with an area of 9,700 m2. Along with the Budapest office, it had two other branches and worked mainly within the Schenker internal network. 137

Regional Headquarters South East Europe

In 1998, Schenker-BTL “knocked on the door” of Masped in order to acquire its stake in Masped Trias. The very difficult discussion, which ended up lasting a year and a half, had an unsettling effect on customers and staff. Schenker was under pressure, since the merger of the Schenker and BTL national companies was supposed to be complete in all countries. At Masped too, however, there were worries about the future. A strong foreign partner was a necessity in the international forwarding business. Masped Trias had found such a partner in Swedish BTL   ; however, the merger of the two resulted in an entirely new situation. This complicated the negotiations considerably, since both Schenker and BTL aspired to lead the new joint venture and Masped did not want to be pushed to the edge. For the merger of the national companies, a high-level Steering Committee was formed at the parent companies  : For Schenker  : • Thomas Held • Knut Heymann • Wolfgang Monning   For BTL   : • Hakan Larsson • Harald Silander   The headquarters function for Southeastern Europe had been transferred in 1996 to Schenker Vienna, and the Board of Directors there, of which Elmar Wieland and Klaus Lippstreu were members, actively intervened in the negotiations. In 1997, the relation of Schenker to Masped-Trias was 40/60 in terms of transport volume and 30/70 in terms of profit. Schenker Austria demanded a one-third stake in the new company and the leadership role since only Schenker Vienna could ensure that companies in Southeastern Europe would develop in a uniform manner and be under regional leadership. Its proximity to and longstanding connection with Hungary, knowledge of the market, overall business responsibility for Southeastern Europe, and the evolution of Schenker International were persuasive arguments. BTL could claim to have managerial responsibility for the former Masped-Trias, and that Masped supported its endeavors. Both companies agreed that for reasons of national importance and to avoid a competitive situation, Masped should retain a share. The question was now how the two companies would be evaluated as a basis for the equity shares. Masped-Trias, Eurosped and Schenker Hungaria were to be valuated based on the balance sheet of December 31, 1997, with the results determining the ownership structure. However, this notion was rejected and a new proposal prepared, whereby Herbert Hausner and Eurosped would not be included in the merger and no staff reductions would be made. 138

Hungary

Vienna then proposed to reduce Masped and BTL’s shares from 49.75 % each to 30 % each, and to award Schenker 40 %. Masped, on the other hand, suggested taking over Eurosped and transferring to BTL a 10 % stake in Masped-Trias in exchange. Thereby the company’s shares were to be proportioned as follows  : BTL

59.75 %

Masped

39.75 %

Transteam

0.5 %

Further, major decisions were to be subject to a three-quarters majority, and a guaranteed dividend was granted to Masped. Masped-Trias would therefore purchase Schenker Hungaria without relinquishing shares in the company. Schenker rejected the request for majority decision making, but accepted the guaranteed dividend. Since Schenker Hungaria accounted for 20 % of the total value of the new company, the following new business structure was proposed by Schenker Austria  : BTL

47.75 %

Schenker

20.00 %

Masped

32.75 %

Transteam

0.50 %

Masped felt that its stake was too small. It did not wish to go below 40 %, citing hidden reserves in Masped-Trias and a unique position on the Hungarian market. The existing (old) contract stipulated that business management responsibilities would remain with BTL , and that the company would restrict its activities to land transport and logistics. Both sides were starting to lose their patience. Dr. István Kauz, CEO of Masped, wrote in a letter to Schenker that if an agreement was not reached soon, Masped would no longer deal with the issue at hand. In Vienna, Schenker, too, was thinking that a stand-alone solution might be preferable to a dubious compromise. After long negotiations, a solution was finally reached and the property of Masped Trias was taken out of the company and transferred to Masped AG . At the same time, Masped-Trias concluded a long-term lease for the existing facilities with Masped AG . In return, Masped was willing to decrease its share to 10 %. On July 1, 2000, Masped Trias took over the business, expertise and staff of Schenker Hungaria. The company had a capital of 260 million forints, employed 300 employees at the previous location of Masped-Trias and had 23,580 square meters of warehouse space. BTL Gothenburg and Schenker Austria held each 45 % of the company’s shares while Masped AG held 10 %. BTL Gothenburg initially 139

Regional Headquarters South East Europe

Schenker Hungaria-Austria

Schenker Hungaria. Bosch project

2000: opening MaspedSchenker Budapest: Detlev Trefzger, Günter Müller, Istvan Kautz, Laszlo Kaldor, Klaus Lippstreu

140

Hungary

Common Christmas party: Gabor Molnar, Csaba Sari, Arpad Vasarhelyi,

Kaldor Laszlo

Elmar Wieland, Andrea Olar, Michael Meyer, Tibor Gyabronka, Kurt Leidinger, Laszlo Kaldor, Ferenc Kovacs, Reinhard Just, Gergely Lukacs

chaired the Supervisory Board, but later Schenker Austria took over the position. The MD was the former managing director of Masped Trias, Kálmán Erdélyi. Jürgen Franke was his deputy, but shortly afterwards he resigned from the Hungarian company to take over the helm in Schenker Slovenia. As expected, the merger of Schenker Hungaria with Masped Trias was extremely difficult due to very different corporate cultures. This meant that 20 of the 70 employees originally active for Schenker Hungaria chose to leave the company. Due to the ultimately very positive experience of the Kautz István merger, Masped AG and Schenker Austria decided, with the active support of Dr. Lieb, also to establish Masped Schenker Kft. before the end of 2000. The remaining sea freight activities of Masped Trias and Masped AG were bundled under its roof and furthermore the entire air cargo business of Masped AG , which was already handled worldwide with Schenker. Masped Schenker Kft., based in Budapest, Vaci ut85, started with 46 employees. Masped initially held 74.9 % of the shares  ; in the following years however the shares were equally divided. While Masped was responsible for the company’s finance and controlling divisions, Schenker Austria took over the management of forwarding services. The company’s Managing Director was Mr. László Kaldor, who at the same time also belonged to the board of Masped AG . 141

Regional Headquarters South East Europe

2012: 20th anniversary celebration

The excellent experiences they had gained in integrating their activities in land, sea and air sectors prompted Masped AG and Schenker Austria to bundle their activities in the railway sector. For this purpose, Masped Railog was founded on December 6, 2004. Already on January 1, 2001, Masped-Trias was renamed Schenker Kft. to make better use of the Schenker brand and to avoid misunderstandings. Kálmán Erdélyi retired in 2003. Zoltan Varga, who had been with Masped since 1972, now became Managing Director of Schenker Hungary  ; in 1994 he became Commercial Director and in 2002, he became Managing Director of the of Masped Rail. Hungary’s entry into the EU in 2004 resulted in large losses for the company because its customs business was largely eliminated. Of the 48 employees working with customs, only 8 could be retained, resulting in commensurate rationalizations. In 2005 the company moved to the new Budapest Intermodal Logistics Center (BILK ). This was one of Europe’s largest logistics parks with rail and road connections. Schenker’s new facilities had an area of 65,000 m2, a 24,000 m2 building complex, a 17,000 m2 logistics warehouse with an 11 meter ceiling, a 5,000 m2 cargo terminal, 1,300 m2 warehouse space for hazardous materials, and a 3,000 m2 office. The national headquarters of Schenker Kft., Budapest, Europa utca70, 5, BILK , was relocated there as well. Schenker also managed storage, commissioning and supply for RPA , a Philips-Olivetti subsidiary in Györ, and picking and packing for 30,000 different products for Bosch in Budapest. Schenker, and Hungary itself, were hard hit by the financial crisis that started in 2008. Pressure to lower prices came from all international customers, and quantities were largely reduced. Finally, in the wake of the 2008 financial crisis, Masped was willing to sell its shares. As part of the integration, all joint ventures were consolidated. In 2010, DB Schenker took over Masped’s stake in 142

Hungary

Csepel 2004

BILK CrossDockWarehouse 2012

2012: 20th anniversary celebration

143

Regional Headquarters South East Europe

2012: 20th anniversary celebration

Sandor Barenyi and Arpad Vasarhelyi

Masped-Schenker Kft. and Masped-Railog Kft. These companies had previously merged with Hungarcargo Kft. and Romtrans Hungaria Kft. under the umbrella of Schenker Kft. Schenker thus maintained a 100 % stake, and began operating under a single name. The sole exception was Herber Hausner Kft. The building at Váci utca71 85 that now housed the railway and sea transport department originally belonged to the Masped. In 2011, with 189 employees in nine offices and 37,200 square meters of warehouse space in Hungary, Schenker carried out all services for the Schenker organization. The main office was in Budapest, with branches in Vecsés, Debrecen, Györ, Szeged-Algyö, Szombatheley, Vesprém, Pécs and Záhony. Herbert Hausner Kft. had 9 employees at a single location with 498 m2 of storage area, and operated primarily in the relocation business. Slovenia Slovenia originally belonged to the Austrian half of the monarchy (Cisleithania) and enjoyed a relatively high level of education and economic development. In 1918, after World War I, it became part of the Kingdom of Yugoslavia72, and after World War II a Federal Republic of the Socialist Federal Republic of Yugoslavia73. Following the collapse of the Communist regime, the population decided in a referendum in 1990 in favor of the establishment of a separate state. The Declaration of Independence in 1991 was followed by a brief military conflict with the Yugoslav central government, but in 1992 Slovenia was recognized as a sovereign state. Slovenia was the most industrialized part of Yugoslavia and therefore had relatively favorable starting conditions for a transition to a market economy. Its GDP per capita was initially equal to that of Greece or Portugal. Historically, Slovenia has been a transit country with 144

Slovenia

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1990

−5

–

552

–

1991

−9

–

115

–

1992

−6

–

207

–

1993

3

9

33

–

1994

5

9

21

–

1995

4

7

14

–

1996

4

7

10

–

1997

5

7

8

–

1998

4

8

8

–

1999

5

8

6

–

2000

4

7

9

–

2001

3

6

9

27

2002

4

6

8

28

2003

3

7

6

27

2004

4

6

4

27

2005

4

7

3

27

2006

6

6

3

26

2007

7

5

4

23

2008

3

4

5

22

2009

−8

6

1

35

2010

1

7

2

37

2011

1

8

2

47

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

Year

Inhabitants In 1000

1990

1,998

8,900

1992  : 44

2011

2,053

21,300

51

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe, Vienna Institute for International Economics Studies, Vienna 2012.

145

Regional Headquarters South East Europe

good rail and road infrastructure, including the seaport of Koper and Ljubljana airport. The transition here also suffered a severe recession and GDP decline, which continued until 1992  ; that, however, marked the beginning of significant economic recovery  : Inflation could be contained, the Slovenian tolar became convertible in 1995, public debt was relatively low, and in the mid-1990s over 60 % of its foreign trade was carried out with the European Union. However, unemployment remained high and a “shadow economy” flourished accordingly. This was not only caused by the loss of markets in former Yugoslavia, but also by the manner in which companies were privatized. The 1,345 companies privatized until 1997 had dominated the production sector. Of the capital, 10 % had to be transferred to the Pension and Disability Insurance Fund, another 10 % to a compensation fund, and 20 % to a Development Fund of the Republic of Slovenia, which distributed the funds to Slovenian citizens. Almost all privatization schemes included employee participation and management buy-outs, only a few allowed the participation of foreign investors. This form of privatization therefore rarely led to new capital and know-how. Already in 1907, Schenker was represented in Marburg with a branch office supervised by Vienna. After the First World War, the office had to be newly established in what was then the Kingdom of Yugoslavia. Thus Prvo jugoslovansko transportno d. d. Schenker & Co. branch office in Maribor74 was founded in 1920. Schenker Marburg was nationalized by communist Yugoslavia after the Second World War, and from then on Schenker worked with the leading state-owned forwarding agency Intereuropa. From this time on, a number of Schenker national companies worked together with the leading freight forwarder State Intereuropa. This was especially true for Schenker Germany, where these services were concentrated in the Frankfurt Main office. Schenker national organizations that had no contracts with Yugoslav forwarding companies were practically excluded from the market. The shipments were carried out by rail, whereby the location Salzburg had a special significance for tariff reasons. For prepayment reasons, the shipments were controlled by the Yugoslav forwarders. In the 1990s, a changeover to truck took place and these rules were no longer applied. After the fall of the Wall75, Schenker made a late entrance into the Slovenian market, despite it being a neighboring country of Austria. This was due to former contracts with the former state-owned forwarding companies. For the time being, Schenker Vienna worked with Intereuropa, Ljubljana (air freight) and Intertrans Ljubljana (overland). In 1994 a representative office was established in Ljubljana, at Letališka ulica76, 33. The first employee was the Slovenian Marino Fakin. In 1995, the office was converted into a separate national company, Schenker & Co. AG , Ljubljana branch office. It was headed by Oton Valenko, who worked with an employee in an office of 52 m2and rented external storage areas. On July 16, 146

Slovenia

Svetek, Fris, Wieland

Ljubljana

1997, the company moved to the vicinity of the customs office and other forwarding agencies. On January 1, 1998, the company was renamed Schenker d.o.o. Slovenija and storage space was rented for the consolidation of export shipments. However, the company’s presence on the Slovenian market was still infinitesimally small. For historical reasons, there continued to be a very heterogeneous partner structure. The cooperation with national forwarding companies had evolved  : Intereuropa Land with Schenker Euro Cargo (SEC), Frankfurt and Schenker Vienna, Intereuropa Bahn with SEC Frankfurt and Intertrans with Schenker Salzburg, Linz and Graz. Sea freight business was operated directly via Schenker Vienna. The main services were transportation brokerage, export groupage transport and services according to request. Schenker Slovenia processed on average about 100 transport orders and organized eight groupage truck shipments for export a month. The company was already entertaining thoughts of establishing its own branch structure. In 1997 the corporate plan of Stinnes confirmed that Slovenia was showing strong growth despite the small size of the overall economy. The transport market, 147

Regional Headquarters South East Europe

it reported, was attractive due to its central location in Europe and good transport links. The Headquarters Southeast Europe in Vienna also considered the country to be economically successful  ; its trade partners were mainly Italy, Austria and Germany. However, Schenker had a relatively insignificant market position and handled all transactions via foreign partners. Despite staffing problems, intensive activities were pursued to establish an operational organization. However, the market proved difficult to penetrate due to attempts by local forwarders to forestall competitors. For the time being, participations seemed to be excluded. As part of the merger of Schenker with the Swedish BTL in 2000, the company was renamed Schenker-BTL d.o.o., Ljubljana. But air freight continued to be handled with Intereuropa at Ljubljana Airport. In 2001, Schenker acquired an interest in Intertrans, the number 2 of Slovenian forwarders. The Intertrans d.d., Brnčičeva 51, SI-1000 Ljubljana, headed by Rok Svetek, had 156 employees, 9 offices and warehouse space of 9,700 square meters. Its activities ranged from international overland transport to regular scheduled services to and from all European countries, and included national overland transport, customs services, trade fairs and exhibitions, storage services, groupage freight, removals, and air and ocean freight, as well as railway transport. Already at that time it had a large and sophisticated logistics business for the pharmaceutical industry. Alongside the capital Ljubljana, it had offices in Sežana, Jelšane, Maribor, Gruškovje, Lendava, Obrežje, Brnik and the seaport of Koper. The Intertrans was founded in 1964 as a division of Road Haulier Association Intertransport. Its first Managing Director was Milan Svetek, the father of the company’s incumbent MD. The division grew rapidly and developed all types of transport services, especially in full and part loads (FTL , LTL), groupage freight services, and customs clearance. A network of partners was built up in Slovenia and in Europe. Consolidated services were provided mainly via Salzburg, in cooperation with Franz Welz GmbH. A milestone was the development of intermodal railway transport services. Groupage freight services from Buchs and Salzburg were just as much routine as international full wagon transports. In 1974, the first Rolling Motorway (Rola) was established from Cologne to Novi Sad in cooperation with Kombiverkehr KG, Frankfurt. The product performed very well and continues to service various destinations with daily trips. The intermodal activities were pooled in the subsidiary Adria Kombi d.o.o. Under the direction of Rok Svetek, the company successfully serviced numerous routes and developed new ones, in response to demands from the shipping industry. Due to legal changes, in 1978 the freight forwarding activities of the Association of Road Hauliers were transferred to the newly established Intertrans. The new Managing Director was dipl. ingPeter Sečnik, who led the company successfully through the turbulent period up to the early 1990s, which saw the disintegra148

Slovenia

tion of Yugoslavia, the Yugoslav War, economic crisis and inflation. The company’s continued growth required its network to be expanded. It established own offices in Belgrade, Zagreb, Zadar and Novi Sad. In 1988, Intertrans acquired 30 freight cars for the transport of grain, a very lucrative but short-term business. The branch in Belgrade specialized in the Middle East and became an important factor in this region’s transport industry. With the economic opening of Yugoslavia in the late 1980s, Intertrans began a new strategy of direct groupage freight forwarding services to Germany, Netherlands and Italy. In 1991, Intertrans had 220 employees in 12 offices. The initial period after the breakup of Yugoslavia was very difficult for the company. At least 30 % of the market share was lost and all offices outside of Slovenia were forcibly closed. The number of employees therefore fell to 140. The state-owned company was privatized in 1994, transferring 60 % of its property to the employees, and the rest to various investment funds. The restructuring of the company, however, was successful and Intertrans began to grow again. In 1996, Rok Svetek took over the helm, a position he holds to this day. The company built up an international network of partners in 110 countries. In Ljubljana, a modern terminal of 5,000 m2 was built as well as office space covering 2,000 m2, which was extended to 5,000 square meters by 2004. In 1997, Intertrans was the first forwarding company in Slovenia to acquire ISO 9001 certification. In the early millennium, the owners were forced to decide whether to turn the company into an independent logistics provider or find a strategic partner. A number of large international freight forwarding companies were interested in Intertrans. However, in 2002 a decision was taken in favor of Schenker  : Schenker was a prominent partner with various branches in Germany and Austria and had already worked with Intertrans since its establishment. It shared a similar corporate culture and had a long-term strategy in the region that guaranteed long-term stability, especially in view of Slovenia’s accession to the European Union in 2004. In 2003, Intertrans was fully acquired and Slovenia Schenker d.o.o. was established. The merger was successful, only one customer was lost and not a single employee departed. While Schenker had operated with just 5 employees, activities now skyrocketed. At the time of Slovenia’s accession to the EU in May 2004, Schenker d.d., Ljubljana, at Brnčićeva ulica77 51, led by MD Rok Svetek, had 117 employees at 9 locations with 9,700 m2 of warehouse space and was among the country’s leading companies in land, sea and air transport. In 2005, the logistics terminal in Ljubljana was extended to 23,000 m2  ; Schenker had 6,000 m2 of logistics space in Sežana and 2,000 m2 in Maribor. On January 1, 2006, the company changed its name from Intertrans to Schenker d.d., handling 114,000 shipments a year and a volume of 64,000 tons. It was cer149

Regional Headquarters South East Europe

Maribor

Tent warehouse

tified according to ISO 9001/2000 and TAPA Level A  ; in 2008 the AEO (Authorized Economic Operator) certification (F) was obtained, facilitating EU customs clearance. Significant investments swiftly followed  : In 2008, 27.3 million euros were spent on a terminal in Ljubljana  ; mid-June 2008 saw the inauguration of the Logistics Center in Spodnje Hoče near Marburg, which with an investment of 6 150

Croatia

Management Team

million Euros provided 8,500 square meters of warehouse space and 6,080 pallet places and is one of the country’s most modern. In 2011 Schenker Slovenia had 138 employees, 7 offices and 52,000 m2 of storage area. It offered all forwarding services of the Schenker Group. Croatia After the First World War, Croatia – which had previously belonged to the Hungarian part of the Austro-Hungarian Monarchy – became part of the Kingdom of Yugoslavia. After the Second World War, the country embraced communism under the leadership of Marshall Tito. In 1991 Yugoslavia broke up and Croatia declared itself an independent state after holding a referendum. It was followed by a war with the Yugoslav central government, culminating in half a million refugees and displaced persons. By 1993 the GDP had shrunk sharply, leading to hyperinflation. In addition to the industrial sector still played an important role as well as tourism, particularly for foreign exchange earnings. Foreign trade now shifted mainly to Germany, Italy, Slovenia and Austria. 151

Regional Headquarters South East Europe

Year

Growth GDP real

Unemployment rate Annual average

1990

–7

–

610

–

Change ­Consumer prices

Public debt in % of GNP

1991

−21

–

123

–

1992

−12

–

666

–

1993

–8

–

1.518

–

1994

6

–

98

–

1995

7

–

2

–

1996

6

10

4

–

1997

7

10

4

–

1998

2

11

6

–

1999

–1

14

4

–

2000

4

16

6

–

2001

4

16

5

35

2002

5

15

2

35

2003

5

14

2

35

2004

4

14

2

38

2005

4

13

3

38

2006

5

11

3

35

2007

5

10

3

33

2008

2

8

6

29

2009

−7

9

2

36

2010

−1

12

1

42

2011

0

13

2

46

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

4,778

 8,000

1994  : 44

4,403

15,100

40

Year

Inhabitants In 1000

1990 2011

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe, Vienna Institute for International Economics Studies, Vienna 2012.

Since Croatia was in the Hungarian half of the Austrian-Hungarian monarchy, the company was managed by Schenker Budapest. This part of the country had a special importance due to its Mediterranean port of Fiume (nowadays Rijeka), where a separate Schenker office was built in 1885. Ludwig Fischer and Alexander Brüll, who operated an own freight business in the location, participated as silent partners 152

Croatia

with 25 % of the profit and loss. After Ludwig Fischer retired as a company officer in 1904, the company Fischer & Brüll was dissolved and the business in Fiume was established under a new contract. Alexander Brüll and the head of Schenker Budapest, Emmerich von Sonnenberg, were listed as public shareholders in the company Schenker & Co., Fiume. Alexander Brüll paid out Ludwig Fischer with 300,000 kronen and took over the management of the company. The new partnership agreement dated January 1, 1905, listed August Schenker-Angerer, Emil Karpeles, Géza Benisch, Johann Dupal, Emmerich von Sonnenberg and Alexander Brüll. Although the company in Fiume was a general partnership, it retained its character a branch vis-à-vis the Vienna headquarters. In 1907 Schenker also established a first office in Zagreb, which however had to be closed during the two world wars. In 1921, the Prvo jugoslovensko transportno d. d. Schenker & Co78 was established with headquarters in Zagreb until 1933, and then moved to Belgrade. It had branch offices in Jesenice, Maribor and Subotica  ; the merchandise it transported was mainly eggs, fruit, copper, bauxite, machinery, iron, steel, gypsum and paper. After the Second World War, the Schenker organization was nationalized. In the Communist era, the usual monopolies for certain transport sectors existed, such as Jugotransport (rail, air), Interopa – which Schenker worked together with – and Transped or Transadria for maritime transport. The general problem of Yugoslavia’s transports was the same as in Slovenia. In the first years after the market opening, Schenker cooperated with agents, such as Intereuropa, Zagreb (air freight) and Hypo Centar, Zagreb (land transport). The regional Headquarters Southeast Europe in Vienna still considered Croatia to be a crisis region with an uncertain development. The corporate plan of Stinnes AG Southeast Europe confirmed Croatia had shown economic growth in 1997 despite a difficult domestic and foreign policy environment. The transport market started to become attractive, especially with Italy, Germany and Austria. However, it was noted that Schenker’s market volume was small. On September 29, 1995, Schenker Eurocargo d.o.o. Representative for Croatia was founded with six employees, 100 m2 of office space and 200 m2 of warehouse space. Air and sea freight were still handled via Vienna. On May 1, 1996, the representative office was converted into a national company, Schenker Eurocargo d.o.o. Hrvatska, Zagreb, based first in Slavonska Avenija79 bb, then at ulica Ante Kovačića80 7. The Managing Director Darko Bucalić led six employees, who mainly came from Jugotansport, including Ivica Škoc, who still works for the company today. The Schenker office on ulica Ante Kovačića81 was situated directly in the center of Zagreb, on the first floor of a rented apartment in an old building. The entire company was housed in this apartment  : customs and business transactions in the living room, accounting in the study room and management in the bedroom. The 153

Regional Headquarters South East Europe

company remained here for two years, in working conditions that were correspondingly challenging. The apartment had a kitchen and a bed, which were factors that weighed in positively. However, an office in the city center was completely unsuitable for business operations. All documents had to be prepared here, while trips to the customs office (Jankomir, Žitnjak Airport, Western Station) had to be taken several times a day, although at first groupage services were carried out only once a week. Since the building was in a short-term parking zone, finding a parking space was akin to winning the lottery. Schenker cars were regularly towed away in this period, and the company lost count of the number of parking tickets it received. Sometimes even large trucks would come to unload here because the address was noted on the documents. On March 13, 1997, the company and its 10 employees moved from ulica Ante Kovačića 7 to Slavonska avenija bb82 . Initially, about one consolidated transport a week was organized, with goods arriving at a small warehouse rented by Zagrebšped at the Western Station – where there was no office, no desk and no telephone. The entire process was carried out from the car or a phone booth because neither cell phones nor Internet were available yet. At the beginning, Kia Croatia was almost the sole customer  ; it was followed by others such as Gea Klima, DBT, Jadran, Lesnina, and Milan. In 1998, Schenker Euro Cargo d.o.o. had 7 employees, 100 m2 of office space, 200 m2 of customs warehouse space, and provided regular services to and from Austria, the Netherlands, Split and Rijeka. The goal was to develop groupage transports with other Schenker offices and expand activities in air freight. In 1998 the company was recognized with a state award as one of the most successful companies in terms of turnover growth. On May 5, 1999, in the wake of the acquisition of the Swedish BTL by Schenker in 1997, the company’s name in Croatia was changed from Schenker Eurocargo d.o.o. to Schenker-BTL d.o.o. In 2000, the company’s build-up had been completed and a transport and organizational structure in Zagreb had been created. The Croatian market developed positively for Schenker-BTL . With a branch office at the airport, air freight also became an important component and first railway container transports were carried out. In 2001, the company name was changed again from Schenker-BTL to Schenker d.o.o. and an office in Krapina was set up on June 1, 2001. In 2002 the company was awarded the position of IATA Air Freight Agent for the Zagreb airport, as well as the ISO 9001  : 2000 certification. On October 1, 2004, an office was established in Rijeka  ; this was followed by an office in Ploče on March 1, 2005, and one in Osijek on December 1, 2005. The latter was closed on April 7, 2009, but reopened again on June 1, 2011. 154

Croatia

Terminal Zagreb

Schenker Osijek

In 2004, the company moved into a new head office and warehouse in Zagreb, at Heinzelova ulica83 60. This led to the establishment of a domestic transport system with guaranteed delivery times of 24 hours across Croatia. Instead of the 400 m2 warehouse space it had previously had in Zagreb, Schenker d.o.o. now had 3,000 m2 across 9 locations. In 2008, 7 million euros were invested in the Terminal Zagreb and the number of employees more than doubled as against 2004. In April 2011, the new logistics terminal with headquarters in Zagreb was opened. With 2,500 m2of warehouse and customs warehouse space as well as 155

Regional Headquarters South East Europe

1,000 m2 of office space, it was one of the most modern in Croatia. The company had already achieved a leading position in overland transport. Distribution in Croatia was now accomplished within 24 hours, which is a particular feat in view of the country’s geography. The hub in Vienna (air import) and Salzburg (air export) also helped create favorable conditions. As very first logistics provider in Croatia, Schenker received the TAPA FSR certification (Transport Asset Protection Association). A permanent fleet of 75 vehicles operated with the DB Schenker logo. Schenker ranked number 3 in Croatia in terms of operating results, and Croatia had even achieved quality leadership within Schenker Europe in terms MD Martin Erich Kuen of the KPI (customer performance indicator). The guaranteed delivery/pick-up times could be fully achieved, a feat made possible by the company’s Collection Distribution System that had been in place since 2008. The Managing Director was now Martin E. Kuen. In 2011, Schenker Croatia was represented in 10 locations with 106 employees and had 4,050 m2 of storage area. In addition to its headquarters in Zagreb and branch offices in the city and at the airport, offices existed in Krapina, Ploče, Rijka, Sesvete and Split. In 2011, a new location was set up in Osijek with 1000 m2 of warehouse space and 159 m2 of office space. Activities in this important economic center in Slavonia were initially kicked off with a sales agency, which was transformed into a branch office after just four months due to strong customer demand. The company was active in road, rail, air and sea transport (with a port office in Rijeka), intermodal transports, insurance, international relocation, distribution, warehouse and all related services, logistics management, and consulting. In 2011, the gross profit could be broken down into  : land 85 %, air 5 % and sea 10 %. Special transports were mainly carried out for sporting events, such as the Olympic Games in Athens, Torino, Beijing and London, and the European football championship of 2012. But also a part of the Berlin Wall was transported to the German Embassy in Zagreb, as well as the equipment of the Eurovision Song Contest 2007 and for other concert events.

156

Croatia

Number of employees Schenker Croatia Year

Nmber

1996

6

1998

7

1999

10

2000

14

2001

20

2002

26

2003

27

2004

40

2005

55

2006

84

2007

103

2008

107

2009

115

2010

99

2011

106

Despite the company’s success, some shortcomings in Croatia’s general business culture were lamented. An oversized and ponderous public administration was still in place. Many companies are still in government hands and must be state-subsidized. The privatization process had seen many companies transferred to people with close ties to the government – so-called VIP privatization – who in the aftermath were awarded the government contracts. Many large contracts were assigned without a tender process. Financial liquidity remains a significant problem  ; especially government-related enterprises do not pay or pay only after more than 200 days. Use of the new highways is very expensive, so that a major part of all shipments is still carried out over the old roads. The infrastructure and the rolling stock of the State Railway are very old. On the positive side, the level of education is quite high, English language skills are a matter of course. However, the unemployment rate is high and many young professionals are migrating to Western countries. Problems continue to exist in the judiciary, as regards corruption and minority rights. It is expected that the EU accession in the mid of the 2013 will have a positive influence. In terms of corporate culture, Schenker Croatia with its about 100 employees has a manageable size and therefore the company’s cohesion goes beyond mere work activities. A Christmas party is organized for the staff, and from time to time 157

Regional Headquarters South East Europe

also a barbecue party on the terrace of the Head Office in Zagreb. Staff members also attend sporting events, such as the Schenker Football Tournament in Stuttgart, and the company is sponsor of the Marathon 2008 and other smaller events, such as dance competition in Krapina or a wine event in Metković. Serbia and Montenegro After the Second World War, the Socialist Federal Republic of Yugoslavia consisted of six republics, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia, and two autonomous provinces within Serbia, Kosovo and Vojvodina. With the formation of the Federal Republic of Yugoslavia from Serbia and Montenegro in 1992, this heterogeneous state structure finally disintegrated. Industry, agriculture and trade were important for the economy of Serbia and Montenegro  ; however, the development was negatively affected by the elimination of the internal market. This was aggravated by the war in Yugoslavia and related international economic sanctions from May 1992 until November 1995. As a result, the GDP 158

Serbia and Montenegro

plummeted by 50 % until 1997, only 40 % of the country’s industrial capacity was utilized and the unemployment rate soared to around 50 %. 1993, the country experienced hyperinflation, which was only substantially reduced after the mid-1990s. The external debt was high and even after the economic sanctions were lifted, the economy did not manage a true recovery. Despite the fact that foreign trade had been liberalized, foreign aid and investment were sorely lacking. In the countries of former Yugoslavia, the economy had to be rebuilt after the war. The situation in Bosnia-Herzegovina, Macedonia and Albania was initially unclear. A revival of the economic situation was expected following the lifting of UN sanctions. But, the country received few international loans, and hence infrastructure development was difficult. An economic recovery was expected to take place only after the regulation of policy issues. Foreign trade was directed mainly to Germany and Italy. Serbia

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1998

–

–

–

–

1999

–

13

44

–

2000

5

12

80

196

2001

5

12

93

105

2002

4

13

17

 73

2003

3

15

10

 67

2004

9

19

11

 55

2005

5

21

16

 52

2006

4

21

12

 38

2007

5

18

 7

 31

2008

4

14

14

 29

2009

−4

16

 9

 35

2010

1

19

 7

 43

2011

2

23

11

 49

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

1990

1998  : 7,568

1999  : 4,600

2001  : 38

2011

7,259

8,800

47

Public debt in % of GNP

159

Regional Headquarters South East Europe

Montenegro

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1998

–

32

–

–

1999

–

34

–

–

2000

3

37

20

–

2001

1

37

22

–

2002

2

36

16

85

2003

3

33

7

47

2004

4

31

2

45

2005

4

28

2

39

2006

9

22

3

33

2007

11

18

4

28

2008

7

15

7

29

2009

−6

14

3

38

2010

3

17

1

41

2011

3

16

3

46

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

2000

613

 5.600

2003  : 42

2011

620

10.500

39

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012.

Schenker had already set up a branch office in Belgrade in 1890, which operated until the First World War. As late as 1915, salaries for 4 officials were transferred from Sofia. In order to be represented in the newly created Kingdom of Yugoslavia after World War I, Schenker bought the company A. Mallys Nachfolger84 in Marburg an der Drau as a border crossing location in 1919. This was followed by the establishment of the Prvo jugoslavensko transportno d. d. Schenker & Co. in 1920. The company was headquartered in Zagreb and had six branch offices in Belgrade, Maribor, Thessaloniki, Šentilj, Subotica and Novi Sad. At the company’s inception, the Yugoslavian National Bank held 40 %, Adriatica 25 %, and Schenker Vienna 35 % of the shares, whereby Schenker had a syndicate agreement with Adriatica. In 1922, the bank divested half of its shares, making Schenker majority owner and 160

Serbia and Montenegro

giving it the capacity to rule out that another company could use Schenker as a competitor against the Schenker Group. A branch office in Thessaloniki was also affiliated to the Yugoslav company, since no plans existed to establish an organization in Greece. The company was registered in French, English and Italian and the share capital amounted to 2.25 million Yugoslavian dinars. The President was Daniel Dimović, and the General Director D. Noskes. August Schenker-Angerer and Jacob Spielmann were also represented on the Board of Directors. However, the situation in Yugoslavia was far from satisfying  ; although the balance sheet of 1921 had recorded a net profit of 282,000 crowns, actually a loss of at least two million crowns had to be acknowledged. The organization was still in its infancy  ; the lack of trained personnel was a particular drawback  ; acquisition and information activities functioned poorly, and handling was inadequate. In 1931 Schenker was represented with 84 employees in Belgrade, Zagreb, Jesenice, Maribor, Novi Sad, Subotica, Sušak and Zagreb  ; in 1933 the headquarters was moved to Belgrade. A pool agreement for transports from Yugoslavia and Greece had been concluded with Intercontinentale, which the companies Adolf Blum & Popper and Lipa had also joined. In 1936 Schenker took over the agency of the river shipping company Navigatinuea Fluviala Romana. Since Schenker was also an agent for DDSG , Bavarian Lloyd and the state-owned inland shipping line Jugoslavenska rečna plovidba85 in Yugoslavia, it held a key position in the Danube traffic. The “de-judification” imposed by Nazi Germany led to significant business difficulties in the Balkans. By mid-1938, a total of 14 Jews were dismissed from the Schenker organization in Yugoslavia. Already in 1934 the company had separated from the then-incumbent Jewish Director-General Noske and appointed a German businessman as new Managing Director, upon the recommendation of the Consul-General in Belgrade. In 1938, however, it transpired that he was married to a Jewess. The Berlin Schenker Headquarters therefore pressured him to voluntarily withdraw from the company, because of his family circumstances. After the Second World War, Schenker was nationalized. Due to the political turmoil caused by the disintegration of Yugoslavia, the resumption of transport activities by Schenker was delayed for several years. Until 1995, Schenker could only advise its clients  : “Please contact us when the UN embargo is lifted”. After the trade embargo was lifted, a first special transport was carried out from the Schenker Šentilj to Serbia. The shipment contained three kettles for the brewing industry from the Slovenian Laško over Austria and Hungary to Vršac. The kettles were 16 meters long and 3.5 meters wide. Despite the extremely short-term order, Schenker and its partner were able to deliver the shipment in good time. The biggest obstacle was the border crossing Hungary/Serbia in 161

Regional Headquarters South East Europe

Tompa, because the Serbians had an own committee for such shipments, which had to issue a special permit with appropriate separate “special fees”. After a four-day delay at the border, the three low loaders were allowed to continue their journey and arrived on time at the brewery in Vršac. Schenker Austria, as Headquarters Southeast Europe, had taken over responsibility for the development of the local organization in 1997, where it was however only represented by a single representative office. In the continuation of the long-term cooperation with some Serbian forwarders, consolidated transports were carried out by truck from Salzburg to Belgrade. The business focus was groupage services from Salzburg and Frankfurt/ Kelsterbach  ; rail traffic was under the control of Schenker in Austria, Germany and Greece. In the late 1990s, the Kosovo conflict had an adverse impact on the freight forwarding business. This was partly due to the blockade of the Danube, as Schenker was one of the few forwarders who carried cargo over the river. Rail transport (block trains) from node Sopron in western Hungary to different destinations in Southeast Europe, carried out since 1997, was also badly hit by the war in the Balkans. The block trains originally routed through Serbia (already 210 trains in 1998) shortly had to be diverted to new routes, leading to increased efforts and costs. In its Manual for Shipments to and from East and Southeast Europe, Schenker stated in 2000  : “The full range of services could not be provided due to the last war”. Truck transports are already operating well again with regular weekly departures. Railway transportation is still limited due to the partly destroyed infrastructure, not all stations can be accessed. Air cargo shipments to and from Belgrade are possible again. 2002 saw the establishment of the Yugoslav Schenker d.o.o. Mr. Ljubomir Rukavina was the Managing Director, who also brought his previous business, alongside personnel and business, into the new company. The Schenker national company was active in the European land transport area, consolidated transports and full truck loads  ; two transport destinations per week to Salzburg and to Wien were already established. Customs clearing was included and warehouse spaces ware rented in Belgrade. The Schenker office provided distribution in Serbia, Montenegro and Kosovo. The responsibility for air, sea and rail businesses continued to be in Vienna’s hands. In 2003, Mr. Rukavina was dismissed as manager and temporarily replaced by Mr. Damir Klasnja until year end. End of 2003, Mr. Slavoljub Jevtić became the new General Manager for Serbia and Montenegro, as he had gained extensive work experience in the area. Schenker d.o.o., Belgrade, at ulica Gavrila Principa 86 46, now had 9 employees in an office and 1,000 m2 of warehouse space  ; the number grew to three offices with 27 employees by 2006. 162

Bosnia and Herzegovina

Neven Marcesku

From left: Bane Nesovanovic, Jelena Kojic, Milan Mitrovic, MD Neven Marcesku, Vadimir Jasovic, Zorica Misic, Aleksandar Lazarevic, Ivan Milicevic

In 2009 investments of 7 million Euros flew to a terminal in Belgrade  ; in 2011, there were 46 employees working in two offices, especially in customs service, air freight, groupage and full loads in rail transport, and trade fairs and exhibitions. Bosnia and Herzegovina The country with the capital Sarajevo has long been plagued by political conflict. After a long affiliation with the Ottoman Empire, it came un der Austro-Hungarian administration in 1878 and was annexed in 1908. It was something like a colony within the boundaries of the monarchy and the “Bosniaks” were an elite unit of the 163

Regional Headquarters South East Europe

army. After the First World War, it became part of the Kingdom of Yugoslavia, and during the Second World War was occupied by German and Italian troops. From 1945 it became part of the communist Republic of Yugoslavia. In 1992, it declared its sovereignty in the wake of a referendum. This was followed by three years of civil war until a ceasefire was negotiated in the Dayton Agreement (USA ). However, there continue to be conflicts between the different religious as well as ethnic groups  – 48 % Bosniaks, 37 % Serbs and 14 % Croats, alongside other minorities. The country’s democratic and economic development has been considerably hampered by the conflicts. Unemployment rate Annual average

Year

Growth GDP real

Change ­Consumer prices

Public debt in % of GNP

1995

50

–

–

–

1996

86

–

–

–

1997

37

–

–

–

1998

16

38

16

–

1999

10

39

6

–

2000

6

40

5

42

2001

2

40

3

40

2002

5

41

1

35

2003

4

42

1

31

2004

6

43

1

26

2005

4

44

3

26

2006

6

44

6

22

2007

6

43

2

30

2008

6

41

8

31

2009

−3

42

0

35

2010

1

43

2

40

2011

1

44

4

39

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

1995  : 3,660

2000  : 3,900

1999  : 60

2011

3,840

6,800

46

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012.

164

Bosnia and Herzegovina

Economically, Bosnia Herzegovina was among the least developed parts of Yugoslavia, and the Bosnian war and domestic political disputes exacerbated its backwardness. Despite the strong economic growth it experienced in the second half of the 1990s, the unemployment rate reached 40 %. Exports consisted half of wood and minerals, while the current account deficit was compensated mainly by transfers from expatriate citizens. The most important trading partner is the European Union, and the largest investor, Austria. However, the country suffers from an inefficient administration and ethnic conflicts  ; its Transparency International index is evidence of the high level of corruption. The monetary policy is characterized by a fixed linkage of the currency (convertible mark) to the Euro. The global financial crisis that struck in 2008 has significantly reduced growth rates. In 2008, an association agreement was signed with the European Union, which opened up the prospect of membership. The transport infrastructure is underdeveloped and suffered further damages by the Bosnian war. Since 2001, the construction of highways initiated and a railway renewal program was decided in 2005. The most important airport is Sarajevo. In Bosnia-Herzegovina, the Interšped d.d., Sarajevo, acted as a Schenker Agent. Transports were handled via Salzburg and Vienna, no direct services were provided. Already in 1996, first studies were conducted concerning the establishment of an own company. In 2000, a representative office was set up in Sarajevo, whose sole employee was Salko Kruho. He began with a weekly service to and from Austria. Business developed well, so that the company was soon able to stand on its own feet. Therefore, Schenker d.o.o. Bosnia and Herzegovina was set up under his direction at the end of 2001 and the first employees were recruited. In 2002, the office had three staff members, and a small logistics center near Sarajevo was opened. The expansion was funded by the company’s own profits, despite difficult economic and political conditions. The scars of the civil war were still very visible, the economy was under construction, infrastructure was weakly developed with an outdated rail and road network, as well as an ineffective administration weakened by corruption. Nevertheless, Schenker was the country’s first logistics company to achieve ISO 0991  :2000 certification in 2003. The number of employees of Schenker d.o.o., Sarajevo, at the address Halilovići 9, increased from 11 employees in 2004 to 40 by the end of the decade. Now the office was also active in air and sea freight and had an office at the airport next to the one in Sarajevo. Investments now flew into the Terminal Sarajevo, and a border office was opened in Bosanski Brod at the crossing to Croatia. This could be purchased from an agent at a favorable price and office, equipment and four experienced employees were taken over. The company had more than 3,000 customers, including Siemens, Würth, 165

Regional Headquarters South East Europe

10th Anniversary celebration

Management Team 2013: Fahrudin Imamovic, Zlatko Lopicic, Adnan Alibasic, AlmaNasufovic, Salko Kruho, Dario Biscevic, Zdenko Pehar

Coca-Cola and the Ministry of Civil Affairs. A special project was the delivery of passports from Germany to Bosnia with relevant safety requirements. In 2011, the national company had 2 locations, 38 employees and 1,350 m2 of storage area. It was active in international land transport, rail transport, air and ocean freight, logistics, warehouse and special transports. 166

Macedonia

The Bosnian national company organized the largest rafting event on the Neretva River, which acquired country-wide fame after being broadcast on TV. Schenker is sponsor and logistics provide for the largest jazz festival and theater events. Macedonia Macedonia was always marked by ethnic conflicts and has long been a pawn of international politics. From 1946, it was a constituent republic of communist Yugoslavia, and in 1991 declared its sovereignty after the collapse of the latter. Due to a name dispute with Greece (administrative regions  : Western, Eastern and Central Macedonia), the official name is Former Yugoslav Republic of Macedonia, or FYROM . Macedonia is an ethnically mixed region, about two-thirds of the population are Macedonians, and Albanians – the largest minority group – account for a quarter of the population, a circumstance which has repeatedly led to conflicts. During the Kosovo conflict in 1999 it hosted 400,000 refugees, accounting for the fact that the population did not decrease despite emigration. It is one of Europe’s most backward countries and has not really been able to cope with the transformation process, neither economically nor politically. The industrial sector is weak and economic growth was sluggish compared to the other countries in transition. The unemployment rate was never below 30 %, although the country managed to get a grip on the excessively high inflation. There have been advances in the privatization process, but the state administration is still inefficient. The substantial current account deficit is mainly balanced by transfer payments from Macedonians working abroad. The country’s most important trading partner is the European Union and Macedonia has had the status of a candidate country since 2005. In the 1990s, Makošped, Skopje, was Schenker’s most important partner, with branches in every major city and at each border crossing. It was Schenker’s partner for gateway services from Kelsterbach and Salzburg. The establishment of a separate company was not given priority. 2001 saw the establishment of a representative office and separate company, Macedonia Schenker DOOEL , with a focus on land transport. A special transport in Skopje was the shipment of X-ray equipment, which was a gift from the Japanese government to Macedonia. With a weight of 6,750 kg, they were distributed under difficult conditions to 19 clinics and brought into hospitals across the country. Schenker’s goal of building a nationwide organization in Southeastern Europe, but also positive trends in the development of the new Republic of Macedonia, led Schenker to establish Schenker d.o.o., Skopje, on January 15, 2001. Next to the development of consolidation services primarily with Germany and Austria, 167

Regional Headquarters South East Europe

container and railroad business became one of the company’s main pillars. In close cooperation with Schenker Railog, but also with the Macedonian Railway, the company developed quickly into market leader in the railway forwarding business. Year

Growth GDP real

Unemployment rate Annual average

1990

–

–

Change ­Consumer prices

Public debt in % of GNP

597

–

1991

−6

–

111

–

1992

−7

–

1.511

–

1993

−8

–

362

–

1994

−2

–

128

–

1995

−1

–

16

–

1996

1

32

2

–

1997

1

36

3

–

1998

3

35

0

–

1999

4

32

−1

41

2000

5

32

6

57

2001

–5

31

6

56

2002

1

32

2

49

2003

3

37

1

45

2004

5

37

0

42

2005

4

37

1

45

2006

5

36

3

39

2007

6

35

2

32

2008

5

34

8

28

2009

−1

32

−1

32

2010

3

32

2

35

2011

3

31

4

28

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

2,028

4,400

1994  : 46

2,059

9,200

32

Year

Inhabitants In 1000

1990 2011

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012.

168

Macedonia

DB Schenker Macedonia first owned distribution vehicle

Previous offices 2005–2011

– 2008 Macedonia First warehouse – Mr.Klaus Lippstreu (member of the board) – 2007

The first managing director of the company was Mr. Vorim Andrijevski. After the death of Mr. Andrijevski, Mr. Zoran Lazoroski took over the company’s helm on September 6, 2005. Under his leadership, the company rapidly grew from the original four employees to 16 employees. On October 13, 2011, a new terminal boasting good transport connections was opened in Skopje – the country’s most modern. Covering an area of 8,200 square 169

Regional Headquarters South East Europe

DB Schenker Macedonia – new terminal Openinig of the new terminal in Skopje. 13.10.2011 – Speech and 10 years present awarding by Mr.Wieland to Mr.Lazoroski

meters, it had 800 square meters of office space and 2,500 square meters of warehouse space. A large part was used as a bonded warehouse for transshipments, and 900 m2 with 100 pallet places were used for contract logistics. With 35 employees, the full service range of Schenker Group could now be offered, especially in land transport, sea freight import and rail transport, both in import and export. Air freight continued to be handled via Vienna Airport. Despite the still-difficult economic conditions and the strong import bias of shipments, the Schenker office was able to set itself an ambitious growth target on its 10th anniversary. 170

Macedonia

Logistics and Transport Fair in Skopje 2011 (10 years celebration) From left to right: Tomislav Gjorceski, Goran Minovski, Zoran Lazoroski, Ivica Nikcevski, Ana Andreevska, Goran Zakoski, Zoran Sorcev, Dragan Janev, Ivana Tomic, Gjorgji Gjorgjievski, Aleksandar Damovski

Together with DB and DB Schenker Austria, DB Schenker Macedonia organized the military transports for the German Army from Kosovo back to Germany.

171

Regional Headquarters South East Europe

Albania Albania in its present-day boundaries was established after the First Balkan War in 1912. This was followed by turbulent decades  ; during the two World Wars it was occupied and also the interwar period was troubled by political conflicts. In 1944, the country was liberated from fascist rule and the leader of the Communist Party, Enver Hoxha, established a dictatorship. Until his death in 1985, Albania drifted into increasing isolation. He was at loggerheads with all the “fraternal socialist nations”, especially Yugoslavia, and had hundreds of thousands of small bunkers built all across the country. In 1990, the Communist regime was overthrown  ; in 1991 the first free elections were held and in 1992 reforms were initiated, companies privatized and the legal framework expanded. In 1997, development was interrupted by a special financial crisis. Many people lost their savings through widespread pyramid schemes. This year, the BNP shrunk by 11 %. After the riots, new elections were held and a new constitution was declared. During the Kosovo war, Albania was forced to take in tens of thousands of refugees. In 2009, it applied for membership in the European Union. The transition to a market economy was difficult. From 1990 to 1992, the BNP decreased by 40 %, inflation reached a three-digit level and official unemployment rate was 27 %. After the crises of the early years, however, the country was able to make some progress. Inflation declined until price stability was reached and economic growth remained persistently high. The BNP per inhabitant increased 3-fold between 1990 and 2011, although it is still among the region’s lowest. Unemployment flatlined at a two-digit level. However, real figures are much higher, as agricultural workers  – which account for close to 50 % of the working population – are excluded from the statistics. Since 1990, about 400,000 Albanians have emigrated, and help the domestic economy with their transfer payments. In addition, an ongoing rural exodus is taking place. Infrastructure, especially water and energy, is underdeveloped, so breakdowns and outages are rampant. The streets were barely developed during the communist era, as private cars were banned and only low transport capacities were required. Although roads on the country’s main axes were improved, they remain in poor condition in the countryside. The outdated rail network has a total length of just about 400 km. The country’s most important trading partner is Italy, which accounts for around 50 % of the exports and 35 % of the imports. The neighboring former Yugoslavia hardly plays a role. In addition to food, especially chromium, textiles, asphalt and cotton are exported, whereas imports are mainly food, machinery, chemicals and consumer goods. 172

Albania

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1990

−10

10

–

–

1991

−28

 9

36

–

1992

−7

27

226

–

1993

10

22

85

–

1994

8

18

23

–

1995

13

13

8

–

1996

9

12

13

– –

1997

−11

15

33

1998

9

18

21

1999

14

18

0

64

2000

7

17

0

64

2001

8

15

3

72

2002

4

16

5

68

2003

6

15

2

65

2004

6

14

3

61

2005

6

14

2

58

2006

5

14

2

58

2007

6

14

3

57

2008

8

13

3

54

2009

3

14

2

55

2010

4

14

4

60

2011

3

13

3

58

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

3,2

1,900

54

2011

2,8

6,800

25

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

Albania’s economic level is still relatively low compared with other Southeast European countries. This is reminiscent of the old story about two shoe dealers that come to an unspoiled African territory. The one calls home  : I’m coming back immediately, 173

Regional Headquarters South East Europe

no one wears shoes here  ! The other cries on the phone  : Send shoes, there’s a huge market here  ! In 2010, Markus Aminger presented the view of the competent regional headquarters in Vienna on business opportunities in Albania. A spirit of optimism could be felt here. Due to the strong economic growth, demand for transport services and logistics were growing. Since 2006, imports had soared by 50 % and exports by 30 %. Germany itself was becoming an increasingly important trading partner  ; since 2006, imports from Germany rose disproportionately by 62 %. This development was also reflected in transshipments at the port of Durrës, which tripled in volume since 2006. Albania was one of the few countries in East/Southeast Europe that had not experienced a decline in direct foreign investment in recent times. The economic prospects of Albania were therefore good. However, trade dominated in Albania, which still lacked a manufacturing industry sector. In addition, Albania was a very import-biased land and goods such as food, chemicals and pharmaceutical products dominated. Significant problems in the infrastructure persisted. One of the major routes for land transport was the ferry connection from Trieste, Koper Ancona to Durrës. There were also two land-only routes across the Western Balkans. What’s more, the road to Macedonia was in an extremely poor condition and mostly single lane. The development was given top priority because it is the European Corridor 8. In total there are four ports in Albania, while about three-quarters of the foreign trade goes through Durrës. The port handling generally went very well, even if equipment was outdated. The acquisition of further shipping companies in the port of Durres was directly linked to the hinterland connections. Macedonia alone had an annual potential of up to 35,000 TEU s per year and many containers were still handled via Thessaloniki. Therefore, the hinterland infrastructure played an extremely important role. A very positive asset was the new highway connection to Kosovo, since the port of Durrës handles some thousand TEU s per year. Rail network was in poor condition and rail transport in Albania therefore played a minor role. The main route ran from Slovenia through Serbia to the border of Montenegro/Albania to Tirana – but played a rather minor role. Very positive was the existing rail link to Montenegro, but a railway line to Macedonia was still missing. Excellent flight connections to Tirana existed, with over 11 airlines from many European countries. From Frankfurt it was a 2.5 hour flight to Tirana. The airport is located just off the highway, between Durrës and Tirana, and can be reached by the two urban centers within 35 minutes. The airport itself is a modern facility with a small freight terminal, which houses a freight forwarder and customs office. Cargo clearance was also done smoothly. 174

Albania

Schenker Office Durres

175

Regional Headquarters South East Europe

Warehouse Durres

However, urgent action was required in Tirana’s liability and customs clearance. There was still no uniform liability regulation for the transport industry and many trucking companies worked without liability insurance for cargo and property damage. CMR regulations for international road transport applied, but only for imports and exports, and not for domestic transport in Albania. Urgent action was also required in clearance at the Customs Court in Tirana. The Customs Court should be moved to the city periphery in more spacious premises to shorten the turnaround times. However, Albania will continue its rapid economic growth in the future and Schenker will continue to intensively develop and invest in the market in the foreseeable future. Until then, Albania had been a blank spot on Schenker’s map. Only Schenker Macedonia used the forwarding agent INTER ALBA in Durres for transit processing of import containers to Macedonia and Kosovo.  Therefore, Thomas Arvanitis and Zoran Lazoroski of the Headquarters Southeastern Europe began in Vienna the search for potential partners in Albania in early 2008. On the recommendation of Mr. Thomas Arvanitis, Ilirjan Ferri of FERRI Transforwarding Service Co., based in Durres, was invited in June 2008 to attend a meeting in Vienna. Ferri Transforwarding was founded in 1994, had its seat in Durrës, offices in the EU, Asia, North and South America and Africa and had a strong presence in Albania. In August, a bilateral cooperation agreement between Schenker and FERRI was signed.   Already in October 2008, a “Europa Hub” for groupage freight to/from Albania was established at Schenker in Bologna. At the same time, the cooperation between Macedonia and Greece with Schenker FERRI for maritime and air cargo was 176

Romania

developed. In December 2008, the Standard Operating Procedure (SOP) for sea, air and land transport was developed. From 2009 to 2011, consolidated transports from Bologna to Albania with one or two departures per week were steadily developed. During this period, the Schenker project department also handled special transports to Albania on behalf of FERRI . In spring 2012, the hub was moved from Bologna to Milan, as European offices had a better connection to Milan. In January 2013, FERRI Transforwarding Service was finally appointed Global Partner of Schenker. Romania Until the Second World War, Romania’s economic importance was predominantly rooted in agricultural exports and oil production. A Communist regime was established in 1945, and the corresponding nationalization and economic planning measures followed in 1948. At the time, Romania attempted to be as self-sufficient as possible. Wood exports, for example, were not permitted, and foreign trade had to be billed in hard currencies such as U.S. dollars or Deutsch mark. Among the Eastern states, the ruble was used as a transfer ruble, a pure accounting currency that could not be used for cash payments. With forced industrialization, economic performance developed very positively until the 1960s. Under the dictatorial leadership of Nicolae Ceaușescu from 1965 to 1989, the country detached politically from the Soviet Union and transferred to an unconventional economic policy that eventually led to significant setbacks and supply difficulties. As a result, the country fell behind, even among other countries with a planned economy. GDP per capita in 1990 international dollars87

USA = 100

1950

1973

1992

1,182

3,477

2,565

12

21

12

Annual real growth of GDP per capita 1950  –  73

1973 TEU 92

4.8

−1.6

Source  : Angus Maddison, Monitoring the World Economy 1820–1992

177

Regional Headquarters South East Europe

Year

Growth GDP real

Unemployment rate Annual average

1990

−6

–

5

–

1991

−13

–

170

–

1992

−9

–

210

–

1993

2

–

256

–

1994

4

–

137

–

Change ­Consumer prices

Public debt in % of GNP

1995

7

–

32

7

1996

3

7

39

11

1997

−5

6

155

15

1998

−2

6

59

17

1999

−1

7

46

22

2000

3

7

46

23

2001

6

6

35

26

2002

5

8

23

25

2003

5

7

15

22

2004

9

8

12

19

2005

4

7

9

16

2006

8

7

7

12

2007

6

6

5

13

2008

7

6

8

13

2009

−7

7

6

24

2010

−2

7

6

31

2011

3

7

6

33

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

23.207

4.400

1996  : 32

2011

18.991

13.800

38

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

The fall of the Berlin Wall in 1989 brought the end of the communist regime also in Romania, and with it, the transition to a/the market economy. Economically, this was initially a shock  ; by 1992, the real GDP had fallen by 25 %. Inflation was also significant, but was gradually able be reined in after 1998. However, Romania would 178

Romania

again be dramatically affected by the Russian crisis of the late 1990s and the international financial crisis of 2008. In 2007, Romania was able to join the EU, but ranks among the EU countries most in need of development. GDP per capita, however, tripled by 2011 from a low starting level in 1990. One particular problem was the considerable decrease in population during this period – an 18 % drop, or 4 million, due to labor migration or emigration. Schenker had been present in Romania already in the 19th century. In 1879, seven years after the company’s founding in Vienna, the first foreign branch office was established in Bucharest, followed by branches in Brăila in 1891, Galati in 1901 and Constanța in 1917. Before 1914, Schenker Vienna ran a national company with 120 employees in Bucharest. Romania initially remained neutral in World War I, and Schenker Bucharest accordingly sought to remain open in all directions. In August 1914, two railcar loads of rifles and five wagons of cartridges/rounds  ? were rapidly transported with the help of an Italian ship into Turkey, which was allied with the Central Powers, and Schenker sent regular reports on all major transport movements to Vienna. The Romanian transport company Sartia, which was owned by Schenker, carried out the shipments to Turkey, thus circumventing the boycott of the Western powers. On the other hand, the company did not wish to displease the Romanian authorities and, in spite of protests from Germany, refused to completely break off business with Russia and Serbia. Nevertheless, Schenker was placed under Romanian forced administration at the beginning of the war. In 1916, Romania joined the war on the side of the Western powers, which led to partial occupation of the country by the German Reich. Schenker Bucharest was then reopened by a handful of people. At the time, Schenker transports were run by the German organization Carmen, which belonged to Express, which was in turn wholly owned by Schenker & Co. The Carmen, Romanian Company for Sea, Continental Waterways and Land Transports Company was converted into a stock corporation in 1921 along with a private belonging to E. Mihalovici, who held 30 % of shares. Its capital grew to four million lei by 1925. The balance sheet totaled 29 million lei, and in 1928 the company had a profit of 450,000 lei. The company was headquartered in Bucharest, with branches in Brașov, Constanţa, Galati and Ploești, along with an additional nine agencies. It employed about 60 officers under the leadership of Leo Kapralik, President, and Director General Edmond Mihalovici. However, Schenker separated from the company in 1924.   An independent company, Schenker OHG , had emerged in Bucharest in collaboration with Schenker Ltd. London. Sales were very successful, 12 branches were founded and staffing soon reached prewar levels. In 1922, however, one of the branches violated the strict Romanian customs and currency laws. In subsequent 179

Regional Headquarters South East Europe

court proceedings, a fine of 8.5 million lei was imposed. The amount was so incredibly high that Schenker decided to decommission the national company. The date of liquidation, however, was able be postponed again and again until inflation in Romania rose so high that the penalty was reduced to a minimum. Now, a corporation was founded in place of the general partnership  ; it commenced its operations on the premises of the former branch office. In 1923, therefore, the Societatea Anonima Romana de Transporuri International Schenker & Co. was established in Bucharest on Calea Viktoriei88 11, where it was located until 1944. Schenker & Co., Romanian Stock Company for International Transports conducted business in Romanian, French and English. It was established in cooperation with Schenker Ltd. London, Banca Chrissoveloni and Banca de Credit Roman. Its capital of 4 million lei increased to 10 million in 1927 and to 40 million lei in 1928. The company had its headquarters in Bucharest and branch offices in Arad, Brașov, Cluj, Cernăuţi, Brăila, Galați, Constanţa, Giurgiu, Satu Mare, Timişoara, Sibiu, and Oradea Mare. C. Argetoianu served as President, and Louis Danneberg was Director General. Among the board members were Jakob Spielmann and Stefan Karpeles from Vienna. In 1929, total assets amounted to about 60 million lei, with reported profits amounting to about 5 million lei. The goods transported were mainly oil, grains, ores, machinery, sugar and yarn. In 1931, Schenker Romania had 219 employees and was led by an Executive Committee which included Popa, Danneberg, and Kohlhammer. The latter also attended to the interests of the transport agencies of the Deutsche Reichsbahn. With the assumption of power by the National Socialists in the German Reich, board member Kohlhammer was tasked with the “de-judification” of the Romanian Schenker organization. A total of 114 Jewish employees were laid off by mid1938 in Romania, more than half of the staff. However, it was virtually impossible for Kohlhammer to find a single viable carrier in the “German ethnic islands in Romania” – Brașov and Sibiu. A lack of language skills and the impossibility of obtaining a work permit made it difficult to hire German carriers. The decline in profits owed to the high severance pay required by law, and the hiring of new employees who first had to be trained by the Jewish employees who were being dismissed. Since trade in Romania was partly in Jewish hands, sales went lost. The Second World War saw Romania initially on the side of the German Reich. During this time, Schenker performed almost all oil and gasoline shipments from Romanian deposits. From early 1939 until August 1944, an average of 28 trains of petroleum products was dispatched on a daily basis. In August 1944, Romania switched sides, and German property in Romania was confiscated. Mr. Schiegl was serving as Director General at the time. Some German employees remained in September 1944, including Hermann Mittler as manager of the Constanţa branch. In February 1946, Romanian Schenker em180

Romania

ployees informed Schenker Rotterdam that they had already founded a successor company in 1944 in order to revive the old Schenker tradition in the new spirit of the times. This new company was named Organisation, Diogen L. Evanghelide, International Forwarding and Custom Clearance. Its namesake was the branch manager of the former Schenker branch in Giurgiu. The firm was intended to serve as a stopgap until a new company was founded, but had already obtained most of the government approvals. The owners were four leading employees and the Schenker company lawyer. Job opportunities were very limited, however, with transport links affected by the war  : only the port facilities were still intact. The railway, too, was heavily affected and transport to destinations abroad, with the exception of Bulgaria, had to be paid for in Swiss francs. The Dutch office forwarded the letter to Schenker Vienna, as the issue of representation in Southeast Europe could only be assessed properly from there. Only the Austrian office was familiar with the persons concerned, and was thus equipped make appropriate decisions. Therefore the next letter from the Romanians, sent in August 1946, went directly to Schenker Vienna. It announced the founding of the Comptoir de Transport International (CIT) as a successor to the Organization Evanghelide/Schenker Romania. CIT had a capital of 20 million lei and was led by former Schenker executives Jean Constantinescu, Julius Cozachievici and Joan Gutu. Diogen L. Evanghelide had power of attorney for the Giurgiu branch. They hoped for good cooperation with Vienna. In another letter dated December 1946, ten offices are mentioned, distributed throughout the country and themselves largely under the leadership of former Schenker employees. The letter also refers to customs clearance authorization at five sites. The Romanians had not reckoned with the Soviet Union, however. In August 1945 at the Potsdam Conference, the victorious Allies decided to annex German property abroad for reparations. The Soviet Union established its own management organ for its assets abroad. Schenker’s organizations abroad were affected by this as well. As early as February 1946, A. Poliaschuk, director of Juschnewtrans, Transporturi Internationale București89, based at Calea Victoriei 11, wrote to Schenker Vienna that Schenker Romania was in liquidation, and that they had commenced international business operations. They were certain to receive support from Romanian authorities, he wrote, and other friendly states would not deny them a concession. In 1947, Schenker Romania became part of Russian Sovtrans. In 1952, German property was transferred over to Romania, and the entire transport sector was nationalized as well. August 28, 1952 saw the founding of Romtrans, a monopolistic state-owned enterprise for transport and international freight forwarding with 127 employees under the Ministry of Foreign Trade. National transports were carried out by large companies themselves, primarily by rail. Romania was divided into 44 counties (districts). Because truck traffic was 181

Regional Headquarters South East Europe

limited and border-crossing by truck was not permitted, it could only be used for fairly short distances of 50 to 80 km. Longer transports were carried out by the railway. With its 17 departments, the organizational structure of Romtrans was similar to that of Schenker Frankfurt. Its first Director General until 1959 was Carol Safir. In addition to the headquarters in Bucharest, there were nine branch offices. For the maritime sector, another company emerged from Romtrans in 1966. In 1970, customs clearance was added and carried out by Romtrans at Bucharest bonded warehouses. In 1974, Romtrans joined FIATA   ; container traffic was commenced in 1979. At the height of its existence, Romtrans had 2,500 employees. During this time, collaboration was already underway with Schenker Austria through barter transactions, which were common at the time. In 1970, a general agreement was entered into between Schenker Vienna and Romtrans, as State Company for International Transports, Bucharest, Calea Rahovei90 196. According to Valeriu Dascalu, the atmosphere following the change to a market economy was initially like a jungle. He had come to Romtrans as early as 1978 as a consultant following university studies in transport and foreign trade. With the end of the planned economy came an expansion of Romtrans’ business permissions to cover the entire freight forwarding spectrum. The very first privatization act of 1990 was heavily criticized, and signaled the beginning of a long and difficult process. It provided for just 5 % private ownership of the major state monopolies. Nobody wished to purchase 5 %, of course, since such a small share meant no influence, and no one believed in the future of state-owned enterprises. After much persuasion, Romtrans employees finally purchased this 5 % in 1992. But everyone was pessimistic – there was no future for such a gargantuan organization. With the second stage came a law allowing the privatization of the management and staff. Now, 30 % of the shares went to the staff, while 70 % remained in a state fund. It took one and a half years, however, to investigate whether the management would be able to accomplish this task at all. Finally, in late 1994, came the transfer of property. The management and staff formed their own company, which managed the shares and was able to take responsibility. This company took out a loan of 1.5 million dollars  ; the remainder was paid as shares. In 1996, everything was ready. By 1999, the employees’ share grew to 70 %. With full privatization, these, along with the state-owned shares, were transferred to the company’s stockholders. Romtrans had a certain number of starting advantages. It owned real estate and land, and had experience in freight forwarding and contacts abroad. The company was successful, but it was no longer the sole contender in this arena, and some competitors had already emerged. Some came from the export organizations of various sectors, where some employees were opening their own businesses. There was never 182

Romania

enough capital, however. Transport by truck was simple, but not the freight forwarding business. Romtrans, on the other hand, had been a broker and had reserves of foreign currencies from earlier years. The company was thus fairly liquid and in possession of hard currency. For example, at the time, one could say  : “I’ll be paying in dollars – not in lei  ! ” and so receive a 30 % discount. However, being positioned as a monopolist was not always an advantage, as it meant taking on all business, even that which was not necessarily profitable. In 2002, on its 50th anniversary, Romtrans had 2,000 employees at nine offices and 100 workplaces, large storage areas, 120 trucks, a strong presence in rail traffic, as well as 9 joint ventures at home and 10 abroad. Schenker’s first reaction to the transformation concerned aid deliveries. In 1989, four drivers at the Ried/Austria Schenker office agreed to transport aid supplies to Romania. Red Cross Linz had assumed leadership for groceries, medicaments, etc. A convoy of Romtrans 32 trucks owned by Upper Austrian transport companies, including four belonging to Schenker, made the four-day trip to Timişoara. Once there, the drivers witnessed an unimaginable level of poverty. The year 1990 also saw a truck travel from Schenker Vienna to Bucharest with food that had been donated by employees for their 800 colleagues at the partner companies Romtrans and Fructexport. A customer in the fruit industry participated as well with a four-ton donation of oranges.  Schenker regained a foothold in Romania not long after the system change. On July 1, 1992, Schenker Germany founded a representative office headed by Petru Szügyi, a German-Romanian, with a secretary. The representative office was only responsible for sales  ; transport was carried out by Romtans Bucharest and Romtrans Oradea. On April 21, 1994, Schenker-Rhenus AG founded Schenker Romania SRL (Limited Company) with a capital of 24.35 million lei under the management of Petru Szügyi, who hired two additional employees in August. Schenker’s headquarters remained, as with the representative office, an apartment at 142-148 Calea Victoriei, now the home of Managing Director Budinsky. In 1996, the company em183

Regional Headquarters South East Europe

ployed 18 in a 140 m2 office with 1,150 m2 of warehouse space. Turnover had risen from USD 0.2 million in 1995 to USD 0.5 million. In August 1994, Alexander Volintiru of the full charge department at Romtrans Bucharest offered his support to Schenker, as he felt these were “good guys, professional and serious”. Schenker sought to open a bonded warehouse to handle various customers’ needs. Respect for the work and the customer should come first, without the country’s usual “ciubuc”, or tip. From September to November 1994, all details were worked out, and the necessary documents and permits obtained. The own customs office was primarily intended to facilitate shipments from Austria. The best location for this was the customs site at Bucharest North Station. In January 1995, four other Romtrans employees came to Schenker to manage the bonded warehouse. The search for a new location began. The site chosen was a warehouse on Valea Cascadelor. Schenker remained there until 2000, when the company moved to Chijana. Initially, there were only 250 square meters of warehouse and 16 square meters office space which had expanded by 1997 to 750 m2 of warehouse and 3 offices. In the beginning, things were quite simple and required only a bit of personal imitative. First, the employees had to clean and paint the office themselves. Sanitary facilities had to be installed, the walls needed cleaning, the linoleum needed replacing, and the doors and windows had to be painted. Next, used typewriters were purchased and office equipment obtained. Logistical matters had to be organized, such as processing transports and documents between warehouse, office and customs. On March 15, 1995, the first trucks were unloaded at the warehouse. The loading list was signed by Albin Budinsky, who had come to Bucharest personally since he in Vienna was responsible for Eastern transports. The customs procedure was quite complicated. When the truck arrived with the cargo documents, an employee took it to customs at North Station. There, these documents were entered into a customs register book, all the necessary signatures were obtained and the head of the customs office personally came to the warehouse to oversee the unloading. Then the customs declaration could be made. An employee went to the customs office with all the documents, which were inspected there. Then, a customs official went to the warehouse to inspect the goods. Subsequently, he would return to his office to obtain the permit. The entire process took two days. The first unloading operations were carried out by all the employees together, with only a manual forklift available. And so a trip was made to the company across the street, which provided a forklift for a “tip” in the appropriate amount. For many months, there was no phone in the warehouse, and customer communication could take place only through the Director, which meant endless trips between the warehouse and the office. Later, a Motorola mobile phone was obtained. Weighing three kilograms and the size of a suitcase, it had a weak antenna that resulted in only sporadic functionality. Until 184

Romania

then, the company had worked with a Telex machine. Now, the new phone also enabled fax service. By 1996, there 10 people employed at the warehouse, and two motorized forklifts were purchased. The relocation from North Station to Basarab led to considerable difficulties with the head of the local customs office, who constantly impeded the workflow. If 20 customs declarations were submitted in the morning, just 5 or 6 would have been completed by the end of the day. The others were arbitrarily rejected – either the documents were not originals, the delivery conditions not indicated, or the tariff classification did not match. This situation continued throughout the year of 1996, and Schenker lost some customers due to excessive processing times. The parent company Stinnes often lamented the great difficulties brought about by the ever-changing legal requirements. In the country, much more could be done if only one had the chance. The economic and political situation was difficult, the infrastructure poor and problematic. It was hoped that a new reform-oriented government would lead to economic stabilization and an improvement in the conditions for the transport market. In 1998, 83 % of goods were transported by truck and only 12 % by railway. There was only one 114 km highway between Bucharest and Pitești, and the road network could not keep up with the traffic. The 11,000 km rail network was dense, but only half had electricity. There were not enough wagons, the transshipment facilities were inadequate, and long border wait times prevailed. Air freight had little significance, and ship transports over the Danube and the Black Sea had decreased significantly in position. In 1996, Schenker Romania had 16 employees, 80 m² of office space in Bucharest and 720 m² of warehouse space. The company was active in national and European transports, including customs clearance, but still did not participate in air and maritime activities. In 1995, eight people were employed in the warehouse  ; by 1998, this number had increased to 20, including 11 customs agents, 6 warehouse workers and 3 administrators. In the fall of 1997, Peter Szűgyi resigned from Schenker Romania, succeeded by Robert Lovin as Managing Director. In 1997, Albin Budinsky went to Bucharest for a year, after which he moved on to Croatia. He was tasked with developing the full-load department, as only groupage transport services and services had been carried out until that time. Initially, work was difficult because the customers demanded Western European customer service. They had no idea how much Schenker had to improvise on a daily basis. As before, the main source of problems was customs, which one needed on one’s side. Whether the transport itself lasted half a day longer was not the deciding factor, but the time needed to bring loads out from customs. The customer service setup was therefore important, but for a Western European who knew little about Eastern Europe, understanding these difficulties was a challenge. However, it made a huge difference whether you were a local Ro185

Regional Headquarters South East Europe

manian freight forwarder or had the full scoop, as Schenker did. The trucks from Schenker Vienna, Salzburg and Frankfurt of course arrived at Schenker Romania for customs clearance and forwarding  ; these transactions had been inherited from the network. In the beginning, sales were very meager, but the next incoming shipments were processed and forwarded in the best possible manner. Schenker had many advantages, such as groupage transports to Vienna twice a week. In Romania, groupage freight is associated with the name Schenker. In 1998, national distribution was outsourced to the company SC Wind Trans SRL . Laurenţiu Popescu, who was employed at this company, received half his paycheck from Schenker in order to maintain a relationship of loyalty with the company. In 1999 he joined Schenker and became head of national collective traffic. In 1998, the Bucharest office had 34 employees, 210 m2 of office space, 2,000 m2 of warehouse space, and a fleet provided by subcontractors. The Executive Board was at Schenker Vienna, and the executive team was comprised of Klaus Lippstreu and Elmar Wieland, with Robert Lovin as Manager and Emil Constantinescu as Deputy. Combined shipments took place twice a week from Vienna and Salzburg, and one each from Kelsterbach, Cologne and Holland. Air freight went through Romcargo at Otopeni International Airport in Bucharest. That same year, 10 containers were processed on a trial basis by the partner in Constanţa. In 1999 Robert Lovin was commissioned to build a site in Clui Napoca in the Western part of the country. Additionally, the warehouse at Valea Cascadelor no longer met the demands placed on it, and the company relocated to a warehouse and office building at Chiajna so that the two locations in Bucharest could be merged. In the year 2000, the Bucharest warehouse and headquarters was opened at 13 Soseaua de Centura91, Chiajna at the Mega Center, along with the Cluj branch. Cluj, in the northwest of the country, was designed as a hub for national groupage freight forwarding services, where a new 3,500 m² terminal was opened in 2005. Relocation took place without an interruption to business activities. Additional offices were opened in Timișoara, Constanţa and in Vaslui in Northwest Romania for cross-border traffic to Moldova in 2003. This year also marked the beginning of the maritime department and export business  ; until then they had processed only imports. In 2001 Albin Budinsky became Managing Director of the company. Albin Budinsky from Vienna had first studied sociology after high school, but broke off his studies. By chance, he discovered that Schenker was hiring, so he introduced himself. In 1986 he was one of the first graduates to start a two-year forwarding apprenticeship. After that, he spent two years working as a clerk in the Oriental Division  ; in 1990, he began working in the Eastern Europe Division, where he was given power of attorney in 1997. Starting September 1tg, 1997, he was employed as an “on the road” coordinator in Eastern Europe  : in 1997 he worked in 186

Romania

Budapest, 1997-1998 in Bucharest, and from 1999-2001 in Zagreb. He was very interested in the world of forwarding, and had arrived just at the right time after his apprenticeship. In early 1990s, Schenker was one of the first companies to understand that one had to penetrate Southeastern Europe. Schenker already had business in some countries, such as Hungary, but if a shipment was going to Romania, then it had to be passed on to another company. Starting July 7, 2001, Albin Budinsky became Country Manager of Schenker SRL Romania. In 2006, he took on the additional title of Managing Director of Schenker SRL Albin Budinsky in Chisinau, Moldova, and in 2007–2008 he assumed the role of CEO of Schenker EOOD Bulgaria as well. Since January 2010, he has served as CEO of Schenker Romtrans SA, which has been operating as Schenker SA since January 1, 2010. Since 2006, Albin Budinsky has served on the Board of the Austrian Business Club in Romania (Vice President). At the Austrian Embassy in Bucharest, Romania, Budinsky received the Gold Medal for Services to the Republic of Austria in 2010 from Austrian Ambassador Dr. Michael Schwarzinger. After Romania’s EU accession, Schenker SRL , Bucharest, located at Soseaua de Centura 13, saw a significant increase in business between 2005 and 2008. From 2002 to 2006, the number of employees grew from 63 to 98, the number of offices increased from 4 to 5, and the storage area increased from 2,000 m2 to 4,900. The number of customs offices had to be reduced from 17 to 4, however. The certifications 2002  : ISO SR-ENN 9001 and 2007  : ISO 9001  :2000 were obtained during these years as well. In 2006, two railway terminals were rented in Arad and Bucharest Castanilor with warehouse space, a ramp for direct loading and unloading, and a customer warehouse for import and export, with all freight forwarding services. The introduction of a toll road in 2008 was expected to make the railway attractive again due to competitive rates, shorter transit times and a reduced risk of theft due to missing stops or waiting times. In 2007 the Timișoara branch relocated to Arad, so that in 2008 there were 152 employees at four locations in Bucharest, Cluj, Arad and Constanţa. In 2002, Romtrans celebrated its 50th anniversary. At that time, the company had 2,000 employees at nine offices and 100 working points, but the event most 187

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resembled a graduation ceremony. Then, in December 2008, DB Schenker Vienna took over 99.2884 % of S.C. Romtrans SA , with 0.7116 % of the shares remaining with individual shareholders. Initially, the competent Romanian judges had refused Schenker’s acquisition application, but agreed at a second hearing on January 12, 2009. The competition authorities in Romania, Germany, Austria and Hungary had no objection, and so registration could take place. Schenker had worked with Romtrans since the 1970s and there had been talks underway with leading transport companies in the country since 2004. It was a very unequal partnership, as Romtrans brought in 1,500 employees at nine locations and 80 offices throughout the country, with 290,000 m2 of warehouse space, a turnover of EUR 81 million, and sales offices in Germany, Austria, Benelux, Hungary, Moldova and Georgia. With 145 employees at four locations, Schenker was approximately one-tenth the size, but more profitable with a turnover of 27 million Euros. The two companies remained legally separate for the time being, but the merge into one company had already begun. Albin Budinsky, Valerio Dascalu and Peter Rausch were now in the management position. Several working groups had been formed from both companies in order to secure the merger. Romtrans had a site for multimodal traffic on the Black Sea port of Constanţa. This was an independent operation providing handling services for bulk goods shipment. The port possessed a prime location connected to all modes of transport. Constanţa was to gain importance, as it was a hub for shipments by sea, over the Danube, and over road and rail. However, the local marketing company Transorient had several partners, which made the liquidation difficult. Romtrans had 290.000 m2 of storage space, while Schenker contributed experience in IT and contract logistics. Both companies were strongly anchored in rail traffic  : broad gauge railway connections were available in Iași and Galați  : with an annual railway transport volume of one million tons to and from Romania, Romtrans was exceptionally positioned. This meant an opportunity to strengthen the railways as an ecologically sensible transport carrier. Once the merger was complete, Schenker possessed 55.000 m2 of storage space with a railway connection meant to be set up as rail ports, or hubs for a downstream logistics concept. For this alone, 30 commercial staff were available. In 2009, Romtrans created a cargo network for Schenker for the Austrian bauMax at the central hub in Brașov, where it supplies seven of the company’s home-improvement stores on a daily basis. In 2010, Schenker established a nation-wide transport system (truckmeets-truck traffic) with a hub in Brasov, with a guaranteed transit time of 24 to 48 hours. Although the global financial crisis of 2009 made the economic situation in Romania problematic, the acquisition was viewed as a positive step by Romtrans. 188

Romania

5. 9. 2008: Signing of contract with Romtrans

Romania had a lot of catching up to do in terms of logistics, and the combination of Schenker’s international network with Romtrans’ dense national infrastructure was promising. Schenker was well developed in Romania, but was too small to fill the opportunities provided by this market. Romtrans was the leader on the market and had developed well in all areas since privatization. The merger made Schenker the number one player in Romania. The year 2009 also saw the relocation of Schenker Romtrans to the formal headquarters of Romtrans at Calea Rahovei, as well as the opening of the renovated logistics terminal in Chitila, Bucharest, and a central hub in Brașov. At a festive event held to celebrate the acquisition on December 1, 2009, at the Marriott Hotel in Bucharest, Romtrans General Director Jon Nan honored the historic moment. Five years earlier, the company had faced the decision to either to develop on its own or to be part of a strong international organization. The answer was clear. With the integration of Romania into the EU, the business environment had changed dramatically, making it necessary to connect to an international network. Of course, this was an emotionally charged decision – there was a sense of 189

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having to give up one’s own organization, but it was the best solution for the future. One hoped to overcome the global financial crisis in the best possible manner with Schenker. He ended with a quote from Goethe  : “Knowing is not enough  ; we must apply. Willing is not enough  ; we must do”. For Elmar Wieland, the transaction was justified in the coming together of Romtrans’ strength on the local market with Schenker’s global presence. He pointed out that in-country marketing was important for Romania as well, because each country organization had to work out its own place in the sun. The organization, had to adapt to Schenker’s structures, and new distribution structures would have to be created and linked to efficient marketing. Operational responsibility should be transferred to the local branches, as the head office took over primary responsibilities for planning, management and control functions. For Valeriu Dascalu, the merger had two reasons for Romtrans. Romtrans was very strong in Romania alone, without a large network outside the country. Although it served a large number of domestic customers, it had to work with the competition abroad. Secondly, the staff involved wished to finally see a profit. There was a conflict between the need for investment and the distribution of profits. The people were employees on the one hand and therefore interested in investing  ; but they were also shareholders, who wanted to see money. Good dividends were paid, but that was not enough for most. The discussion began with preparation for membership in the EU, which represented another reason for the merger, as a great deal of business had been lost through the abolition of customs. The first reaction came in 2007 with an attempt to further develop domestic business. The employees were told it was up to them  : the money, the equipment and the knowledge were in place, and if they wanted to keep their position, they would have to create it themselves thus secure a large portion of the jobs. Not everyone understood this, so they finally decided to sell, with a financial return for the employees involved. Some multinational forwarders were interested in Romtrans, but ultimately the decision was made in favor of Schenker. A ten-member commission was in charge of sales, led by the general manager. The commission obtained the sales negotiations mandate in a special meeting of shareholders. In his opinion, this was a good deal for the shareholders, who were not in a position to be cocky. “After all, we got the last train, the last rail car of the train.”  Joining forces with Schenker not only gave Romtrans a chance at survival, but it brought about a radical restructuring as well, reinforced by the general financial crisis. The number of employees at Schenker/Romtrans fell by 30 % from 1998 to 2011. After Albin Budinsky, Schenker Romania was established according to Western European standards, and also at the top in terms of profits. However, a merger with Romtrans within six months was a major challenge. On one side was 190

Romania

this huge company, Romtrans  ; and on the other, just 150 people at Schenker, who nevertheless had done a very good job. Even after the integration of Romtrans it was clear that work had to be carried out according to internationally accepted benchmarks, and investments had to be made. The newly added employees had to be given the right tools. For this purpose there was endless training, with a Schenker Academy similar to the one in Austria established just for Romania. Much could be carried over from Austria  ; it was not necessary to reinvent the wheel. What worked in Austria was adapted to the new context. Financial reporting procedures had to be adapted to meet Schenker’s global requirements, a time-management system had to be introduced, and salespeople from different divisions had to be brought together for an exchange of experiences. As in all countries, SAP was introduced, the necessary control and assessment systems were set up and a credit management system was implemented. Here, Peter Rausch earned great merit in his role as CFO. None of this was anticipated at Romtrans  ; there were people who had worked there for 20 years and did not know their colleagues who located just 100 km away. One could hardly expect this to be an easy transition for someone who had spent 30 to 40 years working in this system. Some of the Romtrans branch managers would not be sustainable  ; the Romtrans executive board was already aware of this. One simply had to press on, to send in young and motivated employees who had had been introduced to the task at hand, much as “the emperor sends out soldiers to battle”. Many branches now employ people transferred from Bucharest. A cordial farewell was said to the former Romtrans princes  ; otherwise no progress could have been made. The 2008-2009 financial crisis brought an intensification of the restructuring measures. Although Schenker Romania did see a drop in sales, this was only relative, since a large part of the lost sales affected railways and these only entailed a small margin. All in all, everything came out well in the end, although the first two years were quite difficult. For Valeriu Dascalu, too, working conditions changed with the acquisition by Schenker. At the beginning, everything was vague and uncertain. There were two teams, two philosophies and two ways of understanding the business. The reporting procedures differed  ; things were significantly simpler at Romtrans. But they quickly adapted, making the transition within three months. This transition was almost like a hurricane, where just about nothing was under control. But the rapid transition was necessary. Today, Romtrans is a well-known brand name in Romania. It will soon be abolished, since a study found retaining it would not make much difference. Staff training was a key component from the beginning. Romania does not have a forwarding education program, people must learn by doing. In the 1990s there was still no mention of Schenker Academy, but training gradually got off the 191

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Head Office

ground. Company loyalty in Romania is not comparable to that found in Austria. There is more employee turnaround  ; on a Western European salary, employees do not switch companies for just 100 or 150 euros. For those earning a gross salary of 300 of 400 euros, however, the standard of living changes if someone offers 100 or 200 more. During the “hump period” of the strong increase in business from 2005 to 2008, every company was looking to hire and every job switch meant an increase in salary. During the boom years in Romania, companies had no control over this. The only advantage of the crisis was that people had returned with lower expectations. Job security became important once again. Albin Budinsky had already been through the high inflation of the 1990s. As an exporter/importer, Schenker could charge in schillings and then in euros. This also had an impact on employee remuneration, which was adapted accordingly and thus saw no inflation-related losses. Many Western European countries did the same in Romania. There was, however, one year when the lei was stronger than the euro, which resulted in losses for the staff. This method is therefore no longer used today, as inflation is lower. Staff negotiations take place in euros, which is virtually a parallel currency. Payment does not take place in euros, but calculation does. Albin Budinsky spent a year and a half each in Bulgaria and Croatia. In terms of economic culture, Romania is more closely related to Austria, because Romanians understand the slightly insulting but friendly style of Austrian humor, or “Schmäh”92. The driving force behind the transition was not the Romanian compa192

Romania

Head Office

nies that emerged from state-owned enterprises, but Western companies who came to Romania and had trained their staff accordingly. Schenker Romania is one of the few companies that trains it apprentices themselves. There are 5 employees who are already fully trained, and 20 apprentices still working in the company. They speak good German and are sent to the vocational school in Mitterdorf, where they receive an Austrian Chamber of Commerce93 degree after three years. There is no real difference even in terms of customer contacts, because in Romania the international companies define the objectives. After 20 years of market opening, a big difference can already be seen today. This mainly affects urban centers such as Bucharest, however  ; 100 km away, the conditions are very different from European standards. One big difference is in purchasing power, since income and costs are not balanced. Schenker Romania organizes parties for its employees for various occasions, and has a soccer team. However, there is a difference between a party for the 80 employees of the original Schenker in one location and an event for the more than 1,000 people distributed across the country today. During the crisis there were no such occasions, but in 2012 Schenker hosted a Romtrans party with over 700 people. There are employee surveys, and socio-cultural engagement is particularly rewarded. At Christmas, special events are organized outside Bucharest as well. In 2011, on Tree Day, 60 employees of Schenker Romtrans planted over 800 trees in the area of Valea Lazunilor to transform the barren area into a green oasis. In addition, Albin Budinsky organized concerts by Georg Danzer and Ludwig 193

Regional Headquarters South East Europe

Chiajna logistics

Chiajna logistics

Arad Cefin Warehouse

Hirsch in Bucharest, jointly with the foreign trade office of the Austria Economic Chamber. In 2012, in addition to the head office in Bucharest, Schenker Romania has branch offices in Bucharest, Cluj-Napoca, Arad, Iași, Galați and Constanţa and an additional 60 offices with a total of 14,000 m2 of logistics warehouse space. The 1,150-member staff processed 345,293 shipments weighing over one million tons with a turnover of 74 million euros. Thirty-five regular groupage transports went out over the import line and 10 over the export line. The company was awarded the Best Logistics & Operational Excellence Award for innovative logistics ideas. The award-winning idea involved a solution whereby products are distributed rather than going through a single logistics center, saving time and costs. Branches with their own railway connections were established in Oradea, Curtici, Arad, Timișoara, Cluj-Napoca, Bucharest, Iași, Galați and Constanţa  ; the Iași and Galați branches even have Russian broad gauge tracks. In 2009, more than 194

Romania

Constanta-Mol Pier 1S, Schenker terminal in front Board Members: Valeriu Dascalu, Albin Budinsky, Adrian Crizbasianu, Adrian Crizbasianu, Peter Rausch

one million tons were processed in domestic and international rail traffic. On the Black Sea, Schenker played a key logistical role in the transshipment terminal at the port of Constanţa, which represents an integrated interface between the ocean, the Danube and Romanian land transport. The terminal specializes in the processing of steel, wood, grain and project cargoes. However, it was also the site of a staff reduction in the crisis, since the steel industry decommissioned a number of furnaces.

195

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Moldova From 1947 to 1991, the Republic of Moldova was part of the Soviet Union. Of the four million inhabitants, 70 % are Romanian, which is also the official language. It is still one of the poorer countries in Europe with strong emigration flows. The Joint Venture “Moldromuktrans” had been established in Soviet times, owned one-third each by Romtrans (now Schenker), Moldovan National Railways and a Ukrainian government fund. Due to the cultural proximity, in 2007 Schenker Romania opened a representation office in the capital Chisinau, which was to make Schenker known in the country. Since then the business has grown steadily and offers services in land, air and sea transport. In 2011, DB Schenker Moldova, led by Radu Cornea, had two branches in Leuseni and Tudora along with its head office in Chisinau, with 28 employees and a turnover of 792,000 euros.  Bulgaria Up to the Second World War, Bulgaria had been a successful agricultural export country. As in other planned economies, a process of industrialization was set in motion during the Communist period, with a strong focus on heavy industry. Within the framework of the Comecon, the country specialized in the chemical industry, machinery, construction forklifts and electronics, while the tourism, agriculture, tobacco and food industries were also well developed. The transition to a market economy was initially felt as a severe shock. The real GDP decreased by 40 % up to 1997 and in the same year currency devaluation reached levels of hyperinflation. After 1997, price levels could be controlled through positive growth rates, but unemployment remained high. The initially high levels of public debt also fell significantly. The GDP per capita more than doubled from 1990 to 2011. However, emigration and labor migration led to the loss of 1.37 million inhabitants or 16 % of the population in this period. For a period of five years after the transition in 1989, chaotic political conditions prevailed with frequent changes of government, which significantly aggravated the process of economic conversion. In 1996 the country experienced a serious banking crisis, massive currency devaluation and high income losses, with the value of the Bulgarian lev plummeting by 80 % against the dollar  ; in 1997 inflation soared to over 1,000 % while the economy shrank. In the 1990s, Bulgaria faced an economic situation comparable in its severity to the crisis of the early 1920s. Only as late as 1998 did Bulgaria experience a second turnaround, marked by structural reforms, privatization of state enterprises and price and currency stability. A certain level of stability was achieved 196

Bulgaria

in 1998, with the support of the IMF and by pegging the lev to the Deutschmark. Bulgaria’s most important foreign trade partners were Russia, Germany, Italy and Turkey. Year

Growth GDP real

Unemployment rate Annual average

1990

−8

–

29

Change ­Consumer prices

Public debt in % of GNP –

1991

−12

–

339

–

1992

−7

–

91

–

1993

−2

21

73

–

1994

2

20

96

–

1995

3

17

62

–

1996

−9

14

122

–

1997

−2

14

1.058

108

1998

5

14

19

78

1999

2

16

3

78

2000

6

17

10

73

2001

4

20

7

66

2002

5

18

6

52

2003

6

14

2

44

2004

7

12

6

37

2005

6

10

6

28

2006

7

 9

7

22

2007

6

 7

8

17

2008

6

 6

12

14

2009

−6

 7

3

15

2010

0

10

3

16

2011

2

11

3

16

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

8.718

 4.700

59

2011

7.348

11.400

36

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

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Übersetzung aus dem Bulgarischen Hiermit EMPFEHLEN WIR

Schenker & Cie

(Hofspedition Seiner Majestät Zaren Ferdinand I.)

Generaldirektion Wien

als das weltweit größte internationale Transporthaus mit Hauptniederlassungen in Plovdiv, Edirne, Belgrad, Bukarest, Galatz, Brăila, Konstanza, Istanbul, Alexandroupoli, Eger, Fiume, Hamburg, Lindau, London, Mannheim, München, Nürnberg, Passau, Prag, Rotterdam, Thessaloniki, Sofia, Steinschönau, Tetschen, Karlsbad, Antwerpen, Marseille, Belfort, Montreux, Bregenz, Brünn, Bux, Oderberg, Romanshofen, Rorschach, Amsterdam, Bordeaux, Brüssel, Florenz, Genua, Genf, Hof, Köln, Triest, Livorno, Mailand etc. pp. neben Vertretern in allen Großstädten weltweit.

HAUPTAGENTEN: 1. sämtlicher französischer, bayerischer, östlicher und niederländischer Bahnen; 2. der Zentrale der Transatlantischen Dampfschiffgesellschaft; 3. der Austro-Americana Reederei; 4. der Nederlandaise-Americana Reederei; 5. und der Anglo-Hungaria Steamship Company. Agenten der Belgischen Staatsbahnen und der Lehigh Reilford Bahnen. Vertreter der Österreichischen Lloyd und der Französischen telegraphischen Kabel etc. pp. Aufgrund der Größe seines Unternehmens ist dieses Haus in der Lage, zuverlässige Leistungen zu günstigsten Preisen vertrauenerweckend zu erbringen. Auszug aus dem Bulgaria Almanach, 1900 Die inhaltlich wortgetreue Übereinstimmung obiger Übersetzung (aus bulgarischer in deutsche Sprache) mit dem vorgelegten Original wird hiermit vom Unterzeichner Nicolai Kyrilloff K y r i l l o f f beglaubigt. Die Übersetzung besteht aus einer (1) Seite. Übersetzer: Nicolai Kyrilloff K y r i l l o f f

Letter of recommendation

Translation

Schenker can look back on a long and varied history in Bulgaria. The Schenker office in Sofia, “Schenker & Co. Königlich Bulgarischer Hofspediteur”94, Rakovska ulica95 No. 365, was established as early as March 1889. Schenker was therefore “hoflieferant” or purveyor to the Bulgarian tsar. Its first director was C. W. Eles, followed by Sigmund Neger and then by Leon Hand and Mr. Taget, who took over the helm in 1905. Branches were established in Varna and Alexandroupoli96. In Bulgaria, Schenker had agency contracts with the Bulgarian State Railways. It also collaborated with the Bulgarian Lloyd, established with the participation of Deutsche Bank and the Bavarian Lloyd in 1913 and which in 1917 had become a limited company (AG). The company not only engaged in shipping, but also in trade and insurance. As a result, it had close links to Naphila AG , a subsidiary of Deutsche Bank for oil imports from Bulgaria, and the insurance company Orel, a subsidiary of the Munich Reinsurance Company, as well as to Schenker Vienna. Schenker continued to maintain its business relationship with the Bulgarian Lloyd during the First World War. In May 1918, thus before the end of the war, an agreement was concluded to sell the Schenker offices in Bulgaria – Sofia, Philippopolis97 and Alexandroupoli – to Lloyd, a step taken with the hope of achieving a transport 198

Bulgaria

monopoly in Bulgaria. From 1921, the Bulgarian Lloyd acted as official representative of Schenker & Co. Independent activities were not possible in consideration of Deutsche Bank, which had a stake in the Bulgarian Lloyd and was one of Schenker Group’s main banks. However, in 1922 the Deutsche Bank suggested on its own initiative that Schenker should buy the Bulgarian Lloyd. Schenker Berlin initially acquired 50,000 mark shares and had the transaction – which did not quite meet Western European standards – audited by an employee posted from Vienna to Sofia. As a result, Lloyd’s director resigned and a Schenker employee from Berlin was appointed to replace him, to ensure that Schenker’s way of doing things was followed. In 1923 Schenker worked with “Eschaya Feres & Ronco” and in 1930 with “Maritima”, which were forwarding agents in Sofia. Vegetables, grains, oil cakes and machinery were the main goods transported. On December 26, 1934, Schenker & Co. Bulgarian AG for International Transports was reestablished in Sofia, at Legue ulica98, 4, with a capital of 2 million Bulgarian leva. The shares were distributed as follows  : • • • • • •

700 Schenker Vienna 150 Jacob Spielmann, Vienna 120 Anton Beber, Vienna 10 Beniamy Hailbron, Sofia 10 Todor Mihaylov, Sofia 10 Rashko Madzhardov, Sofia

Although Vienna held almost the entire capital and the company was accountable to Schenker Berlin, it was registered as a Bulgarian company. Moreover, a close cooperation was established with Bulgarian Express Ltd. for fruit transports to Germany. The “de-judification” program dictated by the National Socialist German Reich also took hold of the Bulgarian branch. In 1938, the company was forced to dismiss its branch head Benjamin Heilborn, who managed to emigrate to Haifa, where he set up an own shipping company, Translloyd, giving employment to other Schenker immigrants. By mid-1938 a total of 10 Jews had been dismissed from the Schenker organization in Bulgaria. The company was active under German management during the period of the Second World War. In 1941, its capital was increased to 5 million Bulgarian leva  ; by 1942 branches in Plovdiv, Svishtov, Skopje and Kavala had been opened, in addition to offices in the commercial centers and seaports. Schenker worked in the export, import and transit sectors and possessed a large number of trucks. Transports were channeled through the Schenker offices in the German Reich and Turkey. 199

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On August 31, 1944 Schenker had 90 employees, 62 of whom were housed in the Sofia headquarters  ; the remaining staff members were based in the branches  : 5 in Kavala, 7 in Plovdiv, 9 in Skopje and 7 in Svishtov. On September 1, 1944, Managing Director Josef Müller was dismissed along with six other German employees, who left the country. The company was reduced to 34 employees, all of which were Bulgarian citizens. The company however continued to operate under the name Schenker. Although Bulgaria had not been at war with the Soviet Union, the country was occupied by the Red Army on September, 9, 1944, and a Communist government was established. Once it had occupied Bulgaria, the Soviet Union claimed the right to seize German foreign property within their sphere of control as a form of reparation. As a result, Schenker Bulgaria passed into the ownership of the Soviet Union and was under the control of the Administration of Enemy Property in the Ministry of Commerce, Industry and Labor. Schenker’s business initially broke down completely. It did not pick up again until 1947, as a result of transport agreements with the Soviet Union, Bulgaria, Poland, Romania and other countries of the Eastern bloc. The company was managed by a six-member Board of Directors which was elected for one year by the General Assembly. On January 1, 1949, German companies were transferred to Bulgaria and nationalized. Consequently, Schenker was dissolved as a company and was absorbed by Despred on February 17, 1949. Despred (in English  : State Transport Company) was founded in 1947 and incorporated all transport companies in Bulgaria. It was under the control of the Ministry of Transport and also temporarily the Ministry of Foreign Trade. Despred organized all kinds of transportation, also with foreign countries. National transports were initially still performed by small private companies, often with horses, which were grouped together into a single organization. In the late 1950s this organization was transferred to Somat, which from then on became the sole carrier – also for foreign trade companies – in the individual industries, such as electronics, chemicals agriculture. Foreign trade companies were obliged to place all orders to Despred, which had these implemented by Somat, for which it received a share of the profits. The state-owned enterprise Somat had 5,000 trucks and was for a spell the largest freight carrier in Europe. An additional company had been established for river and sea freight. Schenker also worked with Despred during the period of planned economy after the latter had been appointed receiving agent for all imports. Privatization in Bulgaria was carried out by a state agency for privatization, whereby 25 % was transferred to state funds against privatization bills. The bulk of privatizations took place from 1997 to 2000. Somat was privatized and taken over by the German transport company Willi Betz already in 1993. Despred followed 200

Bulgaria

First Schenker office appartement of Minko Wassilewski

Minko Wassilewski

Vassil Atanassov

much later and still remained under political control in the 1990s. It was finally acquired on December 7, 2000, for DM 16 million by a “brass plate” company in Zug, Switzerland, which acted for a private Bulgarian bank. The relatively high price derived from the extensive properties owned by the company – including a prestigious building in the center of Sofia – and offices all over the country. However, the importance of Despred diminished drastically. Initially Despred had been optimistic, since it was the country’s only company with forwarding experience and contacts to carriers and customers. The company’s headcount of 650 in 1990 201

Regional Headquarters South East Europe

was slashed by half until 1997 and then by half again up to 2002, until the current headcount of 60 was reached in 2013. Almost all employees moved to private shipping companies. In 1992, Schenker erected a representative office in Sofia which was responsible for sales, while processing was still performed via Despred. Its representative and later Managing Director was Minko Vasilevsky, “Minko”, whose grandfather had already worked for Schenker. Like several other Schenker employees, he had graduated from the German Gymnasium in Sofia. 1993 saw the establishment of Schenker Bulgaria EOOD , Sofia, at ulica Narodno Sabranie99 21, with a share capital of DM 25,000. Already in 1991, International Transport Equipment (ITA ) had established itself in Bulgaria. The company was half owned by the Austrian Mr. Stift and half by Schenker. Mr. Stift had been President of Herbert Hausner South-East and had founded ITA after the transition. Not only Minko Vasilevsky, also the current head of trade fair forwarding services, Hristo Vasilev, was employed at ITA . With the establishment of a branch office, transfer orders were transmitted to Schenker while ITA focused on its core business of transportation equipment. The first customer and orders therefore still came from ITA . The establishment of Schenker Bulgaria was carried out by the head office in Frankfurt/ Kelsterbach. In the beginning, the company was housed in Minko’s apartment and in a rather desolate freight station in Sofia. The first employee brought onboard by Minko was Vassil Atanassov, an acquaintance from the German Gymnasium and who to this day is active for the company. He was actually a computer specialist who first needed to be trained in the business, but was given the support of another, female staff member with experience in freight forwarding. The company originally had a single car with which Minko drove to see customers  ; it did not have a computer, only a telephone, fax and telex. The implementation of transports was assigned to freight carriers. For some time the Schenker national organizations still worked with Despred on the basis of old contracts, but this was soon discontinued. In 1996, a second apartment was rented not far from the first, until the company moved to the vicinity of the airport in 1997. From the start, Minko wanted to offer all forwarding services, including trade fairs and removals. In 1996, Schenker Bulgaria EOOD in Sofia, led by Minko Vasilevsky, had 22 employees, offices comprising 150 m2 and warehouse space of 1,000 m2. The turnover had increased from USD 1.5 million in 1995 to 2 million. The company was active in domestic and European transport, including customs clearance, heavy transports, furniture transports and logistics. Overseas container shipments were handled through Varna, Burgas and the Greek ports. First steps had been taken in air cargo  ; in 1997 a modern warehouse was commissioned at Sofia Airport. 202

Bulgaria

Despite the positive development, in 1997 Stinnes Business Planning declared Bulgaria to be the poorest performer of all Southeast European countries in transition. The Bulgarian transport market suffered from unfavorable conditions for foreign trade, lack of economic stability, export weakness and poor infrastructure. Despite the European network Schenker only had a market share of 0.8 % in 1995 for cross-border road transport. Most important partner countries in road transport were Greece, Italy and Germany. Elmar Wieland also considered the economic situation to be difficult and unmanageable, with high inflation and strong devaluation. Schenker Bulgaria worked quite well in European overland transport  ; however, the situation in air freight was problematic because the major airlines had signed contracts with other forwarding agents. Sea freight was carried out via Salonica and the Black Sea ports, while the infrastructure in Sofia was inadequate. Foreign firms also complained about the country’s economic culture, which meant legislation was precarious and changed according to political interests. In addition, domestic companies were slow in the payment of invoices. Bulgaria itself is a logistical hub for the growth markets of Turkey, Central Asia, China and India. Five of the ten Pan-European transport corridors pass through the country. However, transport infrastructure is lacking, and roads, rail links and ports have not been sufficiently expanded. No highway to Turkey and Greece in the South existed  ; there was only one bridge over the Danube along the 400 km long border with Romania, while Budapest alone had seven. Since 1964, highways have been under construction  ; however, just 256 km had been built by 1989 and only an additional 100 km had been completed 20 years after the fall of the Wall. Incompetence and prestigious projects in other areas prevented the construction of roads, but not the traffic. This meant that Bulgarian roads were among Europe’s most dangerous in terms of accidents. Schenker is also pinning its hopes on the liberalization of rail transport, where the government however is not in a hurry. Despite the difficult environment, Schenker Bulgaria developed well, and in 1997 the company had DM 200,000 in current assets as well as 100,000 in liquid funds. 27 staff members worked in an office of 300 m2 and managed a storage area of 3,400 m2. Until July 1, 1997, the company was spread across three locations in Sofia  ; then a new facility near the airport of Sofia was rented with a customs warehouse covering 1,100 m2 and a logistics warehouse of 200 m2. Schenker Bulgaria thus offered the full range of freight forwarding services at market prices and had the will to be market leader in Bulgaria. Although the customs laws were constantly modified and customs officers and offices changed just as frequently, the company tried its best to resolve its difficulties with customs, as Minko Vasilevsky explained  : “How we do it  : we try to know the laws, follow the changes and new developments, and talk sensibly to customs officers and even invite them 203

Regional Headquarters South East Europe

to our office, where I always [offer] cigarettes and whiskey.” Schenker Bulgaria has shown that it is possible to operate and make a profit also in crisis-riven times. One problem proved to be the cooperation with Schenker’s global organization where long-term strategy prevailed over thoughts about the daily yield. In this context, Minko referred to Rudyard Kipling’s Jungle Book, in which the boy Mowgli lived together with the animals under the principle “We be of one blood, ye and I.”100 From 1998, Schenker Bulgaria was under the ownership of Schenker regional headquarters Southeast Europe in Vienna. Regular transports, full loads and groupage freight were already carried out on a weekly basis to and from Austria, Germany and Italy  ; 1,200 m2 of customs depot and 1000 m2 of railway warehouse were used for air, maritime and special transports as well as trade shows. New transport services were set up following Schenker’s acquisition of the Swedish BTL . Basically, BTL played no major role in Bulgaria  ; only business with Italy was stimulated. The BTL subsidiary Casteletti handed Schenker Bulgaria a list of their clients and charges, which could now be performed by Schenker. In 2004, the Schenker EOOD. Headquarters was in Sofia, Iskarsko Chaussee 7, and had storage areas of 6,150 m2. Alongside its headquarters in Sofia, it had the following offices  : • • • • • •

1997 Airport Office in Sofia 1998 Ruse, Danube port, only bridge to Romania 1999 Varna, port 2001 Plovdiv, industry and agriculture 2001 Sevlievo, industry 2003 Bourgas, port for bulk cargo

The company already served 2,000 customers and had the ambition of becoming the market leader. Schenker Bulgaria had showed a positive development, was able to achieve growth rates of up to 30 %, and was the region’s only comprehensive logistics service provider. Domestic transport services with guaranteed delivery times were introduced, next to standard products, additional services, such as trade shows and heavy transport. Schenker was the only service provider to offer regular groupage freight services under the project name “Sofia Hub on the Balkans” via connections with Romania, Serbia, Montenegro, Macedonia, Greece and Turkey. The Sofia Hub on the Balkans had been built at a high cost, but its services were not equally interesting to all neighboring countries. With the support of Germany and Austria, transports continued to Greece and Turkey two to three times weekly, servicing Macedonia as well, but no longer Serbia  ; with Romania various other combinations were available. 204

Bulgaria

Frank Markovits and Helmut Schweighofer

Schenker hoped that the Bulgaria’s accession to the European Union in 2007 would increase foreign investment. This year Minko Vasilevsky stepped back and Albin Budinsky temporarily took over the helm of the Bulgarian national company, alongside Romania. He came twice a week to Sofia until Helmut Schweighofer was appointed Managing Director in June 2008. Helmut Schweighofer faced the challenge of continuing the company expansion while dealing with the global financial crisis which emerged in 2007. Although the crisis struck Bulgaria with a time lag, in 2009 the real GDP shrunk by 6 % and stagnated in 2010. Not only the import of general cargo decreased, railway transports also dwindled as the construction industry collapsed. The construction of a new head office had started during the boom years. The purchase of a property with rail connection proved to be difficult. Minko Vasilevsky made a major contribution through his dedication, persistence and connections. In Bozhuriste, 20 minutes from Sofia on the road to Belgrade, a logistics terminal was built with an investment of 10 million euros. It was designed as a rail port with a track connection of 220 meters length. The relocation took place in 2010. It was the country’s most modern facility, covering an area of 48,000 m2, with 3,600 m2 of office space, 2,000 m2 of warehouse space, 30 loading bays and a logistics terminal of 3,000 m2 for 4,000 pallets. A hall was temperature-regu205

Regional Headquarters South East Europe

Terminal Sofia

Communication Workshop 2013

Opening Terminal Sofia

lated between 8 and 25 degrees, intended especially for the handling of chemical goods. Everything had been equipped with the latest safety equipment and fire protection, so that the TAPA standard could be achieved. The facility was energy efficiency due to solar and heat recovery and had its own sewage treatment plant. The 145 employees managed all forwarding and logistics services, as well as regular shipping services. In 2013 new buildings were built in Plovdiv and Ruse. The logistics terminal in the southern Bulgarian city of Plovdiv provided 2,000 m2 of industrial cross-docking and warehouse space and modern truck ramps. In the northern Bulgaria town of Ruse, Schenker had moved into a logistics park. The building provided 1,400 square meters of warehouse and office space. The site was located in a densely-built industrial and commercial area near the Danube Bridge. In the previous months, 206

Bulgaria

Schenker had already moved into new locations in the port cities of Varna and Burgas. The location in Varna provided 3,000 square meters for cross-docking and warehousing. The site was a hub for overseas shipment and new customer projects. Burgas distributed incoming sea freight, especially from Asia, in southern Bulgaria. In 2013, Schenker had some 2,400 Bulgarian customers. An own salesperson had already been recruited in 1996, and a marketing department has been in place since 2003. The importance of sales was therefore understood very early and the sales team was able to prove its worth also during the crisis. In a customer survey conducted by the Schenker headquarters in Essen 2012, Bulgaria achieved a customer satisfaction rate of nearly 80 %. At the beginning, some employees had come from Despred, the only company that had staff with forwarding experience – for example, the current head of marketing Galia Natcheva. Many employees had a university degree, and must speak at least two languages. An internship program also offers students the possibility to learn about Schenker and join the company after completing their studies. The turnover rate was rather low and was only a problem during the EU accession, when Western companies, especially in overland transport, established offices and occasionally paid much better salaries. The 173 employees, half of whom are female – also in the management – have the chance to attend 45 seminars a year. In order to strengthen cohesion, the Balkan Olympic Games of all Schenker national companies in the Balkans was organized. What’s more, a company football team trains twice a week. For, according to Minko Vasilevsky, a company is like a three-legged stool  : One leg is the satisfied customers  ; the second leg is highly motivated employees, and satisfaction with company management is the third. If a leg falls off, the chair will tip. Number of Employees Schenker Bulgaria   1992

3

1993

5

1996

22

2000

61

2004

117

2008  

151

2010

145

2012

173

Schenker Bulgaria is also active in sports logistics. In 2002, the national company was appointed official Logistics Partner for the Motocross World Championship in 207

Regional Headquarters South East Europe

Aqua Delia

High rank visitor

Logistics Partner in Bansko

Sevlievo with 190 participants, which was a promotional “Schenker Race”. In May 2006, the fifth annual street-basketball tournament was inaugurated by the Vice Chancellor and Minister of Education and Science. Since 2002, more than 5,000 young people have participated in the tournament, which runs under the name “SK Streetball Schenker” and receives extensive media coverage. In 2007/2008, Schenker was official Logistics Partner of the Ski European Cup in 2009 and the Ski World Cup in Bansko, Bulgaria. It had to take on 80 tons of equipment for bleachers, electronics, timing devices, and tents for journalists and guests. In 2012, DB Schenker delivered 500 tons of cargo to the ski resort 208

Bulgaria

Award by the Culture Minister

Heavy haulage

209

Regional Headquarters South East Europe

Sofia Customer event

area of Bansko for the Bansko Ski World Cup. Schenker Bulgaria was responsible for the entire logistics of the race, a task aggravated by the altitude of 2,000 meters. After the event ended, it also took over the return or onward transportation of the material. Minko Vasilevsky was ultimately present at all major events in Sofia in order to promote the Schenker brand by engaging in cultural sponsoring. For example, he supported a tour abroad of Aqua Delia, a Bulgarian church music choir. As a result, Schenker ranked first in the state register of cultural patrons. 210

Greece/Turkey

Customer Event Rafting 2005

SK Streetball Schenker

In customer events, the Green Logistics Event are held, golf tournaments and events are organized at the opening of branches, all of which are always extremely well attended. A Christmas party is also celebrated for customers and employees. In 2012, Helmut Schweighofer joined the Board of Schenker Austria and Southeast Europe with responsibility for Railway, Air Freight, Customs and Trade Shows. The management of Schenker Bulgaria was now taken over by the Austrian Frank Markovits, a qualified forwarder who had been active since 2000 for Schenker Vienna and the Regional Head Office Southeast Europe in the air freight division. Greece/Turkey Although these national companies also belong to Schenker Headquarters Europe Southeast, they are countries that have not experienced a planned economy and are therefore covered not here under the topic of transformation.

211

Regional Headquarters Europe East – Europe North/East

Finland Finland’s importance extends far beyond its national freight forwarding market. Due to its position as a transit country to and from the former Soviet Union, it plays a significant role in the international goods transport industry. In transport terms, Finland is of particular importance  : 95 % of foreign trade is carried out by sea  ; the country is flat and, except for a few northern regions, deliveries can be made within 24 hours. The climate is characterized by cold winters and hot summers  ; in the far northern summer, the sun does not dip below the horizon for 73 days straight, and in winter, the sun does not rise for 51 days. Wood remains Finland’s most important natural resource, but machinery and especially high-tech products (Nokia, etc.) are important exports. Finland possesses a highly developed infrastructure and a well-educated populace, and is one of the most developed countries in the European Union, which it joined in 1995, adopting the euro in 2002. However, it has also been marked by an eventful shared history with Russia and the Soviet Union and its proximity to Eastern Europe in general. This resulted in Schenker Finland being designated as Regional Headquarters for Eastern Europe. The story of Schenker’s involvement in Finland is so complex that probably nobody but a Finn can properly understand it. The company’s history is characterized by the acquisition of a series of assorted freight forwarding and shipping companies. Its experience in Finland was not dissimilar from Schenker’s rise in Germany in the 1920s, when a large organization was built through acquisitions and the establishment of new branches. In 1996 Schenker Kaukokiito Oy was founded in Helsinki  ; however, the company’s oldest roots date back to March 27, 1930, when the transport company Kiitolinja, Kuljetuskeskus Oy, was established by Leino Lahtikari from Tampere (1906–1987). 213

Regional Headquarters Europe East – Europe North/East

The 24-year-old sportsman was sufficiently bold and self-confident to build a fast and reliable transport connection at the start of the Great Depression, the worldwide economic crisis. Building on his experiences in the United States and in other European countries, he started offering a parcel service and eventually secured official approval for carrying freight between Tampere and Helsinki – no easy task, as nearly all the regulatory authorities initially opposed his application. The Second World War interrupted these plans  ; most of the employees were conscripted  ; his trucks were taken over by the military, and only horse-drawn carts remained. The warehouse and office building were hit by bombs and incinerated on March 2, 1940. Once the war was over, rebuilding began, and the Kiitolinja name became known for its large trucks and speedy deliveries Kiitolinja was entered in the commercial registry in 1954. The trucks and licenses were transferred to the drivers, who thus had a stake in the firm. The new company concentrated on developing a dense shipping network around the country, and grew rapidly. Lahtikari adopted the American tractor-trailer system, in which the load was carried in a trailer attached to the truck, rather than on a fixed truck bed. In 1961, Kiitolinja Oy and Finnexpress Oy entered into a cooperation agreement under which Kiitolinja took over domestic freight routes while Finnexpress concentrated on international shipments. By the end of the 1960s, the company maintained 38 scheduled freight routes between the cities of Finland. More modern equipment was gradually acquired and service improved. Major changes continued in the 1970s, with new facilities being built and the firm’s head office moving from Tampere to Helsinki. Reino Lahtikari introduced a share-based bonus system for his employees, further strengthening their investment in the future of the company. At the same time, efforts were made to improve service quality and marketing and increase the size of the transport units. The 1980s saw a wave of consolidation in the Finnish freight forwarding industry marked by numerous takeovers and mergers. Lahtikari transferred the overall capital stock of Kiitolinja Oy to the freight forwarder. New competitors entered the market, and a national marketing organization was launched in 1988. That same year, the Speditor group acquired a majority stake in Kiitolinja Oy, merging and rationalizing the operations of the two companies. Further concentration, now on an international scale, characterized the 1990s, which were also marked by an increased focus on quality and on environmental considerations. In 1990, Bilspedition (the predecessor of BTL) took complete ownership of Speditor, acquiring Kii­ tolinja as part of the bargain. The following year (1999), the company introduced a new product – Pakettillinja, a parcel service – and established a new Kiitolinja chain. Efforts in Finland concentrated on product development and IT systems. In 1998, BTL merged with Schenker, and Kiitoliikenne Saari Oy became Schenker Cargo Oy. Finally, in 2008, all of Schenker’s national branches were renamed DB 214

Finland

Schenker. Thus, in 2010, Schenker was able to celebrate 80 years of land freight service in Finland from the perspective of this company. Other than the Finnish companies themselves, Schenker’s growth in Finland was attributable primarily to Sweden-based BTL . Schenker’s first branch in Finland opened in 1996  ; the Swedes had been there considerably earlier. Schenker was acquired by Stinnes AG between 1989 and 1991 as part of the privatization of Deutsche Bundesbahn  ; Stinnes then merged Schenker with the freight business of its Rhenus subsidiary. From 1997 to 1999, Stinnes acquired BTL , with the exception of its Wilson subsidiary. In those countries in which both BTL and Schenker operated, the branches were merged as Schenker-BTL . In 2002, Schenker was reacquired by Deutsche Bahn as part of its strategy to become a global logistics service provider, operating under Deutsche Bahn umbrella as DB Schenker. Schenker’s strong position in Finland today thus has its origins in the fusion with BTL . Schenker Finland’s ancestors, Speditor/Scansped, at times seemed to function more as an investment company than as freight forwarders. Among the bewildering number of separate companies, Speditor/Scansped/Schenker were constants, with the remainder being run generally as brands for certain specific products. Speditor owned stakes in 53 different firms  ; of these, only three were actually operating companies, while the remaining 50 were actually simply asset management, as Henry Fagerström determined. The Finnish freight forwarding group was formed as follows (with no guarantee that this list is exhaustive)  : 1985 – Speditor Oy was established in Finland by the investment firm Spontel Oy, which grew rapidly by means of corporate takeovers. By 1990, the group owned stakes in 22 companies  : Oy Lars Krogius AB Oy Krogius Shipping AB Oy Hangö Stevedoring AB Merihuolto Oy T.I.E. International Transport Ltd. Oy Scantrail AB Oy Polar-Express AB Polar Aircargo Oy Tanksped-VTG Oy, Preussag Group Kiitolinja Oy Finnexpress Oy Oy Finnfrigo AB Helsinki Motorships Oy Juvanmalmin Terminaalite Oy 215

Regional Headquarters Europe East – Europe North/East

Oy EDI Management Finland Ltd. Oy TKN -Invest Ltd. Sundrouten AG Oy Nakutrans Ltd. Cargo Express Oy Oy Waski-Trans AB 1988  – The entire Saari Group (owned by Veikko, Heikki and Erkki Saari) was acquired. 1990 – A cooperation agreement was entered into with Finncarriers, and Speditor acquired 100 % of Cargo Express Oy. 1990 – In September, Bilspedition AB (BTL) acquired 100 % of the shares in Speditor and combined the two companies’ transport operations. Overseas activities were concentrated in Merihuolto, working closely together with Wilson & Co AB . Cargo Express, Polargarment and Oy Scantrail AB became fully-owned subsidiaries, Oy Datatrans Ltd. sold to Oy TKN -Invest Ltd., 20 % of ASG sold to Finnexpress, and Finnexpress in turn sold to Oy Polar-Express. 1991  – P. Salonan Oy and Oy Hellstrad & Co. AB were acquired by Helsingin Kaukokiito Oy  ; Scansped Oy bought Waski-Trans outright, and Oy Hangö Stevedoring AB was sold. 1993 – The company owned 99.2 % of the share capital of Kiitolinja Oy. 1994 – In February, Speditor Oy merged completely with Scansped Group. 1995  – On October 10, Oy Bilspedition Transport & Logistics BTL Öst AB was established as a new holding company by Scansped Group. 1996 – On April 22, the European operations of Oy Huolintakeskus AB and Wilson were taken over. On August 31, Frigotrans-Green Line Oy was acquired by Scansped Oy. Schenker-Kaukokiito Oy was established in Helsinki as a joint venture between Schenker-Rhenus AG and Varsinais-Suomen Kaukokiito Oy. 1997 – Schenker merged with BTL . 1998  – In October, Scansped Group was renamed BTL Equipment Oy, Oy Bilspedition Transport & Logistics BTL became Oy BTL East AB , and Scansped became Schenker-BTL Oy. 1999 – On December 28th, Oy BTL East AB became Oy Schenker East AB , Wilson was sold in April. 2000  – On December 29, Oy Schenker East AB took over Kiitolinja Oy’s entire warehousing business. 2001 – In January, Huolintakeskus divested itself of its real estate companies, which were sold to John Nurminen. At the end of the year, the subsidiary of 216

Finland

Schenker International (A&S), responsible for international air, maritime, and trade show operations and Schenker-Kaukokiito Oy were attached to Schenker BTL Oy. Schenker BTL Oy in term was renamed Schenker Oy  ; the service departments of Cargo Express Oy, Kiitojakelu Oy and Pakettilinja also merged and henceforth did business under the Schenker Express Oy name. 2002  – Schenker Cargo Oy’s entry in the commercial registry of this year made reference to Kiitoliikenne Hellberg, founded July 7, 1961, and after 1989, Kiitoliikenne Saari Oy, which had been founded by the Finns Aleksander Hellberg and Oiva Välimäki. In 1989, Speditor held 53 % of the firm, Finnish Cargo 35 %, and John Nurminen 12 %. In March, Kiitoliikenne Saari Oy was renamed Schenker Cargo Oy. In July, Deutsche Bahn acquired Stinnes AG , and with it its Schenker subsidiary. 1996 – Schenker-Kaukokiito Oy was established in Helsinki. 2008 – On June 6, JOT Logistiikka Oy and Jot Palveluvarastot Oy were acquired by Oy Schenker East AB . 2009 – Schenker Express Oy and 2010 JOT Logistiikka merged with Schenker Cargo Oy. Schenker Oy’s Transshipment business was now managed by Schenker Cargo Oy. 2010 – In July, Schenker Oy took over the Finnish operations of Hangartner Oy (Aarau/ Switzerland). On October 27, Oy Schenker East AB was acquired by DB Mobility Logistics AG , Berlin. Schenker Oy was entered in the commercial registry on September 30. This registration entry also reflected the historical evolution of the company name  : March 30 1961 – October 2 1990 Oy Polar-Express AB October 3rd 1990 – October 1 1998 Scansped Oy October 2 1998 – July 30 2001 Schenker-BTL Oy July 31 2001 Schenker Oy 217

Regional Headquarters Europe East – Europe North/East

Among the many parallel business names appeared the following  : • Polar-Sped, for customs clearance • Polar-Fair, for trade shows and exhibitions • Polarfrakt, freight business in the Scandinavian countries • Frigosped, refrigerated transport services. • Polar-Express, transports between Finland and continental Europe Oy Polar-Express AB , founded on February 28, 1961, with registered capital of 5 million markkaa, managing director was Seppo Eerikäinen, bought by Scansped on December 4, 1990 • • • • • • • • •

Autotransit-ATA , special goods shipments Scansped, freight shipments to the Baltic States HK-International, Motor Transport Service for Air Cargo Baltic Transport, special goods shipments between Northern Europe and the Baltic states Paneuropa Penta Group, scheduled freight service in Europe HK-Jakelu, freight service by truck into urban areas Frigotrans-Green Line, deep-frozen foods between Finland and continental Europe Coldsped, deep-frozen foods freight shipments by truck within Europe Hangartner, Intermodal Transports

2012 – On January 12, Oy Schenker East AB acquired full ownership of the Finnish transport company Suomen Kiitoautot Oy. Disregarding for the moment Kiitolinja Oy, the origins of Schenker Finland lie in the 1985 founding of Speditor Oy and its various holdings. The acquisition of the Saari Group initiated a reorganization of the domestic freight business  : a ferry service was established between Hanko, Kiel and Hangösteve  ; air cargo operations concentrated in Polar Aircargo  ; an equipment administration department set up as a cost accounting center  ; and real estate development (Castrum) launched. In 1988, Henry Fagerström was named Executive Vice President of Finnexpress, and in 1989 was appointed to the Board of Directors of Speditor Oy. 1990 brought a cooperation agreement with Finncarriers, as both firms had begun to operate in each other’s core business area. Speditor was an international freight forwarder with domestic warehousing and distribution operations, while Finncarriers was engaged in European liner shipping, with port terminal and distribution interests. However, Finncarriers had expanded its door-to-door service to the Baltic States, and developed terminal and distribution operations in Finland with an eye to the lumber industry and homogeneous goods. Conversely, Speditor had begun its own Baltic Sea liner service using chartered vessels, as a part of its 218

Finland

strategy of integrated transport chains between Finland and continental Europe. The immediate objective of the agreement was a two-year period of close cooperation, after which the relationship would be reevaluated. The two companies concluded a five-year agreement to offer each other favorable conditions and to avoid mutual interference. Speditor’s domestic traffic was bundled in Kiitoliikenne Saari, with Rahtia established as the national distribution company. However, Finnish operations were notably unprofitable, certain subsidiaries more so than others. Nonetheless, preparations went ahead for a terminal project in Vyborg to be operated as a joint venture with the Soviet Union. To this end, a 20-hectare parcel of land was purchased on the outskirts of Helsinki, and investment capital of 27 million markkaa earmarked for the venture. The collapse of the USSR shortly afterward brought these plans to naught  : the volume of business plummeted, Speditor failed to meet its budget numbers, and the company went into the red. As early as 1989, there had been strategic deliberations on the advisability of joining forces with a major international player, such as Bilspedition, Schenker, Kühne & Nagel, LEP or Panalpine. In the face of difficult market conditions, the search for a strong partner as a shelter in the storm gained in urgency. In February of 1990, a strategic alliance was proposed with the Scansped Group. All international truck transport would operate under the Scansped name. However, in September 1990, Bilspedition AB (the future BTL) purchased Speditor outright and combined the freight operations of the two firms. This year was characterized by significant efforts to improve profitability in the domestic freight markets. Foreign activities were concentrated in Merihuolto, which worked closely with BTL’s Wilson subsidiary. In September of 1990, Henry Fagerström was named CEO of Scansped Oy. In 1991, Finland was plunged into a deep recession in the aftermath of the dissolution of the Soviet Union. Nonetheless, the Finland-based company continued to focus on Russia and the Baltic states. The group was making losses, the domestic shipping business was unprofitable, and a strike in the transportation and port sector caused further difficulties. Despite this background, however, this was the year that Scansped Oy emerged as the market leader. The Kiitolinja chain was established, and new sectors introduced on the Finnish market – the Pakettilinja parcel service, Nordpak and climate-controlled goods shipment. On April 7, 1995, all Kiitolinja’s transports were certified as compliant with ISO quality standards. In addition to his duties as CEO of Speditor Oy, Henry Fagerström also took on the position of CEO of Kiitolinja Oy from March 1992. By this time, the group employed 1,740 people overall, and was turning a profit. BTL continued its program of investment, establishing new Scansped branches in Russia and the Baltic states. The financial news continued to improve in 1993  ; only the Finland domestic business remained unprofitable, but even this was operating in the black by 1994 – in 219

Regional Headquarters Europe East – Europe North/East

Göran Åberg

Henry Fagerstrom

Igor Stjerbakoff

Mikael Dalenius

Jouni Sopula

Petteri Nurmi and truck

220

Finland

part by cutting 347 jobs from 1992 to 1994. Finally, with the assumption of the 179 employees and the European operations of Huolintakeskus and Wilson in 1996, long-term profitability could be secured. The group expanded into new market segments, including Fashionet, rail freight, and lumber shipments across Finland’s eastern border. The warehousing business also grew significantly. In 1997 Kiitolinja’s service activities continued to expand. National and international operations were combined in Metsälä and administered jointly. In the west of Finland, Kiitolinja Saari broadened its regional presence. Then, in 1996, Schenker entered the picture. That was the year in which Schenker-Kaukokiito Oy was founded in Helsinki. Schenker was established for Western European partners, while domestic business was handled through Kaukokiito. In 1997, the company employed 28 people, with offices in Tampere, Turku, Lahti, and Pori. Under the management of Hannu Pesonen, it operated in the domestic land transport sector and the Russian cross-border transit business. The joint venture partner, the Kaukikiito Group, was a strong company with 2,500 employees, an annual turnover of 700 million markkaa, and a 38,000 m2 freight terminal, the Helsinki Logistics Center. With the merger between Schenker-Rhenus and BTL , those companies’ operations in Finland were also combined. In 1998, the 2,679 employees of ­Schenker-BTL Oy under the leadership of Managing Director Henry Fägerstrom racked up impressive earnings from the domestic freight business while continuing to grow abroad. With the conclusion of the wave of acquisitions and restructurings, Schenker’s network was stabilizing. Schenker Finland was elevated to the status of a regional headquarters for Eastern Europe, functioning as a link between the national subsidiaries to the East and Schenker headquarters in Germany. However, competition continued to be fierce, and maintaining profitability was a challenge. The acquisition of Kiitolinja Oy’s warehousing business and the inauguration of a new customs warehouse at the Kouvola Logistics Center, an important rail junction in the south of Finland, expanded capacities significantly. On a property of 64,000 m2, a warehouse measuring 10,000 m2 was erected in 1999, with 10 ramps, climate-controlled storage spaces ranging from –23º to 15º C, and the requisite goods moving equipment and security systems. The center greatly simplified and accelerated shipments to and from Russia. In October 2000, Schenker was awarded the shipping contract for the Finnish copper firm Outokumpu Poricopper Oy. This presented a particular logistical challenge, since 85,000 tonnes of goods had to be moved a year, more than 90 % to other Western countries. Schenker had already collaborated for many years with the company, which had decided to centralize all its freight operations. The copper company now concentrated on its core business, and Schenker, with its worldwide network, dealt with all matters of transportation. 221

Regional Headquarters Europe East – Europe North/East

A significant restructuring of the business in Finland began in January 2001. By the end of the year, Schenker BTL Oy was renamed Schenker Oy, and the services of Cargo Express Oy, Kiitojakelu Oy and Pakettilinja were combined under the name Shenker Express Oy. In 2001 Schenker was the market leader in all sectors of transportation and logistics and was the symbol for the entire Finnish freight industry. Schenker was the leading transportation company in Finland, with daily groupage shipments from and to all of Europe. Environmental considerations were taken seriously, and the quality, environmental and safety system was certified in April 2001. In the year 2000, Schenker Finland had the following structure  : Land transportation and logistics Turnover

1.2 billion markkaa

Employees

430

Equipment

1,650 units

Shipments

517, 000

Tonnes

2,690,000

Offices

11

Domestic Network Turnover

1.05 billion markkaa

Employees

2,200

Equipment

920

Bulk shipping

3.7 million

Pakettilinja Shipments

1.5 million

Tonnes

3.7 million

Terminals

18

Domestic express parcel service Turnover Employees

140

Equipment

240 units

Shipments Terminals

222

94 million markkaa

2 million 1 in Helsinki

Finland

In July 2002, Deutsche Bahn acquired Stinnes, and with it, its subsidiary Schenker. In 2003, the Finnish group had an operating profit of 26.2 million euros. In March 2002, Kiitoliikenne Saari Oy was renamed Schenker Cargo Oy. In the same year, a 14,500 m² Logistics Center was opened in Kouvola  ; its proximity to the Russian border and the Trans-Siberian Railway made it ideally situated for transportation, warehousing, and logistics services. This gave Schenker 40,000 m² of transit warehousing capacity at this location, connected directly to a container terminal with an area of 7.1 hectares. On November 26, 2004, the Finnish Olympic Committee signed a 5-year cooperation agreement with Schenker, making it the official logistics partner of the Finnish Olympic team through 2008. Schenker had a previous history of support for the Committee, and, in keeping with Schenker’s corporate policies, Schenker Finland sought to actively support athletics in the country. In 2006 a new terminal was inaugurated in Oulu, 620 km north of Helsinki. Although the share of freight transported by rail was also declining in Finland (from 10.4 % in 1991 to 8 % in 1999), multimodal transportation offered both time and cost advantages on this route. 60 % of the road shipments over this long distance were switched to multimodal shipments, with some 5,000 trailers moved annually in both directions. Schenker Group in Finland Year

Turnover EUR ­(millions)

1989

98

7

2,164

1991

92

–14

2,246

1994

264

22

1,393

2000

445

9

2,528

2006

548

32

2,685

Operating Profit

Employees

With the acquisition of JOT Logistiika Oy and Jot Palveluvarastot Oy in 2008, Schenker expanded its delivery service, including installation and recycling of products. Jot Logistikka, established in 2003, specialized in full-service home delivery under the trade name Jot Kotijakelu. This included the transportation, installation, and return of goods, primarily white goods (refrigerators, etc.) and furniture, directly to customers. The company carried out about 50,000 deliveries a year with its 90 employees, all of whom were retained. On September 30, 2010, Schenker Oy was registered  ; Göran Åberg was appointed to Managing Director and Chairman of the Board, while Mikael Dalenius 223

Regional Headquarters Europe East – Europe North/East

2007 Opening in Turku

DBSchenker-Viinikkala

Ilvesvuori Warehouse Aerial

Turku Logistics Hub aerial view

Metsälä aerial view

and Jouni Sopula were appointed board members. Originally from Finland, Göran Åberg had studied at the Swedish School of Economics and Business Administration in Helsinki. After gaining some occupational experience, he became a director of Oy Polar Express AB in 1987 and of Scansped Oy in 1990  ; promoted to Deputy 224

Finland

Managing Director of Scansped Oy-Schenker-BTL in 1995 and Managing Director in 1999  ; he also served from 2006 as CEO of Schenker East AB , functioning as Regional Director for Eastern Europe. Among his other positions, he also became Chairman of the Board of the Finnish Forwarding Association. Mikael Dalemus had been the finance director of the Kiitolinja Chain since 1990. From November 1995, he was responsible for controlling of the Scansped group in Göteborg. In 2010, the company broke ground on a new logistics facility in Kila, near Helsinki. The existing facility in Metsälä had reached the limits of its capacity for expansion, and the property was reclassified by the local government for a new housing development. At the same time, work began on a new Finnish hub and corporate office in Vanta, near the Helsinki airport. With a total investment of 45 million EUR , it was by far the largest such project to date. In the first stage, a warehousing and logistics complex with a length of 280 m and covering 25,000 m2 was built in Kila. Land transport activities were concentrated in Tikurilantie, near the airport. Planning was still underway for a 41,000 m² logistics center for national and international land transport , air and maritime freight, and package service. 700 parking spaces for cars, trailers and containers were available on an area of 15 hectares. Schenker Cargo opened the first Finnish logistics center for multimodal service on April 17, 2007 in the harbor of Turku. The construction covered 30,000 m², with a building of 22,000 m² and an investment volume of EUR 14 million. Schenker entered into a long-term lease agreement for the terminal. The temperature-controlled facility accommodates land, sea, and rail transport modes, and permits freight cars arriving by ferry to be unloaded directly at the warehouse. The facility was laid out for both the standard and Russian railway gauges, thus saving considerable transshipment effort and expense. The center played a key role particularly for traffic to and from Scandinavia, Russia, and the Far East, and was also intended to stimulate traffic along the Trans-Siberian Railway. In general, it was hoped the center would provide a boost for European rail transport. In January 2008, the appliance manufacturer Miele outsourced its logistics to Schenker Finland. Miele’s own warehouse in Hanko was transferred to Schenker’s facilities at the port of Turku. From there, Miele spare parts were distributed throughout the country via Schenker’s own parcel service, Schenker Express Oy. In 2009, the Turku Distribution Center (TDC) was expanded by another 10,000 m² and equipped to handle heavier goods. That same year, Schenker took over the logistics for the Karelia-Upflor Oy wood flooring plant. To cope with the additional volume, a new 15,000 m² logistics center was opened in Heinola, on the highway north of Helsinki. On January 12, 2012, Oy Schenker East AB acquired full ownership of the Finnish shipping company Suomen Kiitoautot Oy. Established in 1959, this largest fam225

Regional Headquarters Europe East – Europe North/East

ily-owned land transport firm in Finland had sales of 50.5 million euros in 2010 and employed 441 people. The Schenker Group now owned two-thirds of the Kiitolinja chain, which specialized in domestic procurement and distribution. Kiitolinja Oy in Lappeenranta, a city in South Karelia, profited greatly from trade with Russia due to its location near the border, and particularly from the export of consumer goods to the Russian market. Some 220 km from Helsinki, Lappeenranta is “only” about 1,000 km from Moscow. Schenker’s growth in Finland must thus be seen not only in terms of its leading position in the domestic market, but also with regard to the countries of the former Soviet Union. The transit traffic to the CIS countries increased significantly from the early 1990s. The relatively short distances from the Finnish border to St. Petersburg (190 km) and Moscow (850 km), Finland’s high safety standards and good roads, and its efficient customs clearance procedures all facilitated this position. The border formalities took only from one and a half to two hours  ; thus modern border crossing stations were built at Torfjanovka101 and Brusichnoe. As early as the 1990s, Schenker BTL was offering full-load freight service with trailers, containers, and refrigerator units, plus daily groupage shipments to St. Petersburg and Moscow and weekly shipments to Ukraine. The security of the trucks was guaranteed by the practice of convoy systems, secured overnight accommodations for drivers, monitoring by the military or reliable Western security companies, and a satellite tracking system. Proper packing of the goods was important, as manipulating equipment in Russia did not always conform to Western standards. Customs duties were to be paid by the recipient of the shipment on time in order to avoid delays. Rail transport had also significantly improved. Huolintakeskus had been shipping freight to Russia by rail since 1951, facilitated by the fact that both countries used the broader Russian gauge. Due to the great distances and extreme environmental conditions in Russia, many destinations were not accessible by road. There was tracking of the location of the goods, and Huolintakeskus had a direct link to the computer system of the Russian state railway in Moscow. As Finland was for many years the only EU country to border Russia, international companies made use of the shipping facilities it offered. The long and stable political relations between Finland and Russia also ensured an absence of political hurdles for traffic between the two countries. The logistics services offered through Finland were advertised with the tagline “The key to your success in the Russian market” . Schenker BTL had begun offering warehousing services for trade with Russia in the early 1990s. Since then, several multinational companies had entrusted it with their logistics activities. Finland’s geographical position permitted rapid delivery by land, by air and by sea. As Finland and Russia shared the same railway gauge, shipments could be loaded directly from the warehouse onto the rail. With a warehousing capacity of 150,000 m², 35,000 m² of which were for Russia and the other CIS follower-countries, Schenker 226

Finland

BTL could offer its clients custom-tailored solutions. In addition to clearing customs, goods for the Russian market had to be adapted for local standards, requiring labeling, instruction manuals, quality control, repackaging, and sometimes a different product mix, as specified by the customers. By shipping via Finland, an EU member state, financial and operating risks could be minimized and “ just-in-time” transactions made possible. This period of the development was characterized above all by two personalities whose importance extended far beyond Finland. These were Henry Fagerström, also known as “Fagu”, who described himself not as a freight forwarder, but as an organizer-supervisor and responsible for structure. He was one of the crucial figures responsible for building up the company’s operations not only in Finland, but also in the Eastern European countries now subordinate to the headquarters in Helsinki. His name appeared regularly not only in the discussions of corporate strategy, but also on the management or supervisory boards of the corresponding companies. “One must always have a second option”, he said, as he had learned from the investors of Speditor. He had already experienced the difficulties involved in the merger with Speditor, and the forcing out of the company’s management due to the associated financial losses. He was named to CEO in 1994, and brought the company back to profitability by 1996. From his position, the changes in Finland occasioned by the transition from BTL to Schenker were relatively minor. While the language switched from Swedish to English, the mentality in Sweden in comparison to Germany was very similar. The transition was eased by numerous meetings, in which managers from the two companies got to know one another. The finance department was in for something of a shock, as Stinnes used a different and more complicated system than BTL . Employee fluctuation in Eastern Europe was fairly low. In Russia there were no major changes  ; the staffs were loyal to and identified with the company. In the Baltic countries, too, employees tended to stay with the firm, appreciating the investments the company was making and the resultant growth, and grasping the opportunity to work for an international enterprise. Some of Schenker’s employees in those countries have been there since day one  ! In 2004, Henry Fagerström was honored with the title “vuorineuvos”. This title, which means “mining counselor”, is awarded by the Finnish president to leading figures in the business world. The second key figure, particularly important for Russia, was Igor Stjerbakoff. A Russian-speaker, his father had emigrated from Russia to Finland in 1909. After his military service in Finland, he intended to study architecture  ; instead, through a friend of his father’s, in 1964 he found himself working for a shipping company, dealing with road transport to and from the Soviet Union and in the business of shipping furs. In 1965, the company’s representative in Moscow suffered a heart attack, so Stjerbarkoff headed to go to Moscow to organize an international trade 227

Regional Headquarters Europe East – Europe North/East

fair there. This was his first experience in this field  ; everything was new to him, and he found himself working with Western shipping companies. For seven years, he organized international expositions in Russia. In 1967, negotiations started with Glavmeshavotrans concerning international freight shipment, as no company had yet been established for this business  ; the result was the creation of Sovtransavto102. In 1968, Finland and Russia concluded a road transport agreement, and Stjerbakoff and his company were awarded a first contract with Sovtransavto. In the 1970s and 1980s he organized larger exhibitions in Moscow. Most exhibitors came from Scandinavia and USA , while some German companies transported their exhibits over Finland. This could take up to 60 truckloads. The regulations and control at the time were still very strict  ; all information concerning the imported goods had to be provided in advance and in great detail. The Danes arrived at the show, but had provided only rather vague information about their vehicles. One truck was declared to be a kitchen, another “sample goods”, etc., without exact specification. What was he supposed to do about customs  ? The customs agents opened the first truck, which was packed full of kitchen equipment, but also cognac, beer, and so on, while the second contained cigarettes. The customs agents threatened to confiscate the lot  ; a solution had to be found. Finally, the chief customs officer came in person  : from each truck, a portion of the cigarettes, cognac, aquavit, etc. was offloaded, and the customs agents turned a blind eye to the rest. It was the only option  ; this had been the practice since before Soviet times, and was very widespread. The workers in Russia also demanded vodka – a quarter liter per man, every noon and evening. In those days, the pallet drivers were often drunk, as were the customs agents. The shipping industry in the Soviet Union consisted of a number of state-owned monopolies, with Sovtransavto responsible for land transport, Sojusvneshtrans the official domestic forwarding agent and Sojustransit the forwarding agent to third countries. The Trans-Siberian Railway had a certain economic significance, as Finland had the same railway gauge and the transit business flourished at times. However, the Russian railroad was often expensive, and thus freight was always shipped through Sojustransit by truck. Russian high-value exports initially involved carpets, which went from Moscow to Helsinki and then farther into Europe. Furs and carpets went by air, wood and paper by rail. The goods imported via Finland included consumer products – meat, eggs, juices, textiles and paper – but also machinery and ships  ; no high-tech products were imported, as these were on the ISA restrictions list. As early as 1969, there was regular, scheduled freight service between Helsinki and Moscow with Sovtransavto as a partner. With privatization, Sovtransavto became a holding company in which 14 shipping firms operated almost independently of one another. All of this began to change in the 1989s with the collapse of the Soviet Union. From his office, Scansped’s Moscow agent could hear the gunfire. In Russia, the specialization imposed by central planning evaporated  ; previously, each factory 228

Finland

had produced only a single product, which was then exchanged for those made by other plants. Privatization and the associated massive structural changes in the economy created something of a gold rush, in which anything was possible with sufficient cunning and the right connections  ; it was, at times, truly the “Wild East”. There was a major economic boom, with a significant increase in freight volume. From a baseline of 100 trucks per month, Scansped was soon dispatching 224 trucks to Russia a week. Regularly scheduled freight service to St. Petersburg and Moscow was offered from the early 1990s, extending to Murmansk and Timashevsk on the Black Sea in 1994. By 1996, Scansped was the number one provider of freight forwarding services to Russia. The acquisition of Huolintakeskus also strengthened its position on the Russian market. In St. Petersburg, a two-room office in an apartment building was purchased from Sovtransavto in 1994, and then expanded in 1996. Three separate Schenker/Speditor companies were operating in Russia but not cooperating together. Mr. Hartmann, a Russian citizen and Managing Director of Schenker Russia, resisted the influence of the headquarters in Helsinki. He had good connections in Moscow, but it was simply impossible to work with him, or to merge the separate companies as had been done in other countries. In 1996, Stjerbarkoff was given responsibility for Schenker Finland’s Russian operations, and made an advisor and supervisor for Schenker in Russia. There were many discussions with the board in Germany about the situation in Russia, yet Hartmann managed to hang on. For Finland, the effects of the transformation were entirely positive. At the start of the 1990s, business increased sharply  ; there were major structural problems in the Baltic States, however, where the question arose of which of the earlier contracts were still valid. There, the Army was suddenly lost as a consumer, while electricity, previously supplied by Russia, was no longer being delivered. Industrial plants were configured to produce for customers in the East  ; that market had now evaporated, since Western products were both considerably less expensive and of better quality. Finland felt a certain neighborly responsibility for the Baltic States. Estonians were able to receive Finnish television broadcasts, and thus also spoke Finnish. The company started operations in Estonia with three young employees. The timing was good, as facilities could still be acquired at a reasonable cost. The Baltic countries differ from each other culturally  ; Estonia is located on the shores of the Baltic Sea  ; in Latvia about 45 % of the population are ethnically Russian and Orthodox Christians, some of whom emigrated as early as the 19th century. Lithuania has a long history as part of Poland  ; it is Catholic and rather Central European populace and a language somewhat similar to Czech. All of this determines the behavior  ; these are small countries, with corresponding infrastructural problems. BTL Schenker East was “his baby”, and then Poland was added to his responsibilities, though it differed significantly from the other countries. At the 229

Regional Headquarters Europe East – Europe North/East

Buddy Bear event in Helsinki 2010

beginning of 1990, the group had two companies in Poland, Schenker BTL for international and Spedpol for domestic transport. Poland is a large country, close to Germany, and the domestic freight business is mainly road-based. In January 2002, Igor Stjerbarkoff, Schenker East’s Director for Russia and Ukraine, stepped down from some of his responsibilities and partially retired. He continued on as representative for project development and customer relationships for Russia in Helsinki. Operations in Ukraine were now reorganized by Kari Peltonen, Managing Director for the Baltic countries. Schenker Finland 2011  : • • • • • • • • • • 230

Schenker Oy, European land transport, worldwide maritime and air freight Schenker Cargo Oy and Suomen Kiitoautot Oy Domestic warehousing and logistics services Kiitolinja domestic land transport Express parcel service Full-service home delivery Rengaslinja Oy Logistics for Nokian Tyres plc Oy Schenker East AB Regional Head Office East for the global DB Schenker Group

Finland

2012 Ilvesvuori day for families

2008 Salpausselkä Skiing

• Domestic land transport and logistics services • Daily collection and distribution • 1,270 vehicles, 20 terminals, 5 service points  ; turnover of 315.6 million EUR Management of three operations regions by • Schenker Cargo Oy • Suomen Kiitoautot Oy • Vähälä • Schenker Cargo Oy (responsible for Kiitolinja’s domestic shipments) International operations  : • Turnover  : EUR 282.3 million • Employees  : 350 231

Regional Headquarters Europe East – Europe North/East

2000 Recreational day Metsälä Helsinki

2012 Joulupuu Presents for kids

• • • •

Equipment  : 1,500 units Shipments  : 510,000 In tonnes  : 2,730,000 Offices  : 10

Domestic operations • Turnover  : EUR 289.0 million • Employees  : 1,355 • Equipment  : 1,460 units • Consolidated bulk shipments 4,290,000 • Parcels   : 2,870,000 • In tonnes  : 5,010,000 • Terminals  : 17 On January 1, 2014 the national company Finland was separated from the regional headquarters. Under the direction of Göran Åberg, the Headquarters Europe North/ East was established in Gothenburg, which were allocated to Finland and the Eastern states, as well as Sweden, Norway, Denmark, Great Britain and Ireland. 232

Estonia

Estonia In the Baltic countries, business opportunities were closely linked to the political situation. Until the First World War, Estonia, Latvia and Lithuania were part of Tsarist Russia, attaining independence after its defeat in 1917. But their independence was short-lived. The Hitler-Stalin Pact in 1939 assigned these states to the Soviet zone. The German-speaking population left the region, which was occupied by the Red Army in 1940. In 1941, after the attack on the Soviet Union, the region came under German rule for a brief spell which lasted until 1945, when the Soviet Union annexed the country again. In 1989, they regained its independence. The human suffering caused by these political changes – war, murders, displacement, expulsions and forced labor – was significant and had a strong impact on the population structure of the Baltic States. After the secession of the Baltic States from Russia in 1917/1918, the region’s location on the Baltic Sea raised hopes of great business opportunities with Russia. Schenker Berlin seized the opportunity to establish own offices in these countries as soon as possible. The first office was opened in 1920 in Memel (now Klaipėda), a port city in Lithuania  ; Estonia Tallin, Rataskaevu No. 22, followed on February 23, 1921  ; Tartu in 1924  ; Valga in 1925  ; Latvia Riga was opened in 1926 with branch offices in Liepāja and Daugavpils. However, the establishment of a separate company did not appear necessary in Lithuania, as the country could be co-supervised by the branch office established in 1920 in Memel. The Baltic subsidiaries had a staff of about one hundred, of which forty alone were Reval employees. About 100 employees were working for Schenker in the Baltic States, especially in rail and sea transports, warehouse and customs clearance. As a bridge to Russia, Schenker became market leader in these countries, in close cooperation with Schenker Germany, France and Czechoslovakia. From 1933, with the National Socialists seizure of power in the German Reich, the “de-judification program” was also forced upon the Schenker offices in the Baltic countries. In addition to all the human suffering involved, business performance was also strongly impaired, as long-serving employees often had to be replaced by new and inexperienced recruits. There was namely a lack of native “Aryan” forwarding agents, especially at second-tier level, but in some cases also at management level itself. Parallel to the spread of Germany’s sphere of influence, the Schenker organization also expanded, in particularly towards the East.­As early as 1939, the “Reich Commissar for the East” suggested the establishment of new offices in the Baltic States, in Reval, Riga, Liepāja, (a port city in western Latvia on the Baltic Sea) and Ventspils, a port city in western Latvia at the mouth of the river Venta in the Baltic Sea). Before the outbreak of hostilities with the Soviet Union, the Baltic ports­were mainly used for the transshipment and storage of grain cargo, which ran 233

Regional Headquarters Europe East – Europe North/East

under the German-Soviet Commercial Agreement until June 1941. Other transit merchandise in the Baltic States were soybeans from the satellite state of Manchukuo, occupied by Japan. These were transported over the Soviet Union by train to Latvia­and then by ship to Hamburg, where they were processed into oil. After the outbreak of hostilities with the Soviet Union and the German invasion of the Baltic Sea region, an additional branch office was set up in Liepāja in July 1941, which processed primarily cargo and military transports, but also handled railway service coal in shift operation. With the advance of the Red Army, the positions were gradually abandoned  : however, the branches in the Baltic States kept operating until the very end.­During the war’s final stage, war material supply, return transports and evacuations were handled through the Baltic ports­. In late 1944, the Reich Commissar for the East awarded Schenker the title of “Trusted Freight Forwarder”. Countless goods of the German authorities, but also tens of thousands of refugees and their belongings were brought to the German Reich over the Baltic Sea ports.­A Schenker employee described the situation in Latvia, where Ventspils was inundated by a flood of clearance goods and refugees. The port operated day and night, and the Schenker office was open 24 hours a day. Refugees volunteered to help without pay and in return were given preferential treatment during the evacuation. Only the sea route via Liepāja and Ventspils was still open. According to data of the Reich ­Commissioner, after the fall of Riga there were still 78,000 cars and 38,000 rail cars and locomotives in Courland, which all had to be evacuated. In Ventspils, all warehouses were full of valuable material  ; storage places with road building equipment and dismantled railway bridges were waiting for clearance. Shortly before the end, the company succeeded in shipping back to the “Reich” 293 baggage pieces of Wehrmacht members, whose owners however fell into Russian captivity. Schenker remained as the last forwarding agent in Ventspils until April 18, 1945, when the head of the branch was flown to Lübeck by air force carrying the company’s most important documents. The Latvian employees were not able to get away and were taken to a forced labor camp in Siberia. Estonia formed part of the Soviet Union from the end of World War II until the 1990. Its separation from the USSR began with the entry into force of the Law on Economic Autonomy of the Baltic Republics on January 1, 1990, and the country’s formal declaration of independence followed on August 20, 1991. Estonia was admitted to the United Nations on September 17, 1991. The country joined the European Union in 2004  ; Estonia’s currency had already been pegged to the deutschmark since 1993, and the country adopted the euro in 2010. Today, its GDP per capita is around half that of Germany’s. Despite 50 years of integration into the Soviet system, Estonia’s reorientation toward the West and a market economy was relatively rapid. The government em234

Estonia

braced free-market principles and quickly privatized smaller state-owned companies  ; larger firms were offered in later rounds of privatization. Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1990

−8

1

23

–

1991

−14

2

202

–

1992

−14

4

1.076

–

1993

−9

7

90

–

1994

−2

8

48

–

1995

5

10

29

8

1996

6

10

23

8

1997

12

10

11

7

1998

7

10

8

6

1999

0

12

3

7

2000

10

14

4

5

2001

6

13

6

5

2002

7

10

4

6

2003

8

10

1

6

2004

6

10

3

5

2005

9

8

4

5

2006

10

6

5

4

2007

8

5

7

4

2008

−4

6

11

5

2009

−14

14

0

7

2010

3

17

3

7

2011

8

13

5

6

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

1,569

1991  : 5,500

1995  : 41

2011

1,296

15,700

38

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

The country recovered quickly following a severe economic decline in the years up to 1995 and high inflation that peaked in 1992. Economic growth rose to 12 % with 235

Regional Headquarters Europe East – Europe North/East

relatively low inflation, though admittedly with relatively high unemployment and a chronic trade deficit. Foreign trade is carried out primarily with the neighboring countries of Finland, Sweden and the other Baltic states. After 1989, the country faced a significant decline in population. Prior to the end of the Soviet Union, Estonia had a population of 1.6 million, today it is only 1.3 million, as 300,000 Russians, including the Soviet soldiers formerly stationed there, left the country. Nevertheless, Russians still comprise a third of the population, with most having arrived in the past 50 years. In the time of the Soviet Union, there were only transport companies, no forwarders and no groupage freight services. Individual government ministries, such as those for transport or agriculture, each had their own transport companies, and the individual companies had their own trucks. Freight traffic to or from the West was the exclusive province of Sovtrans or Sovtransavto. These transport companies were very large  ; in Tallinn, all deliveries were carried out by a single firm with more than 1,000 trucks, and the port of Tallinn was very important for exports to the West. Lada cars were sent to Africa and South America from Tallinn, but shipments to Scandinavia were also handled here. In those days, all decisions were made in Moscow, which awarded Tallinn this activity  ; the locals had nothing to say  – as was discovered by Henry Fagerström and Igor Stjerbakoff, formerly responsible for operations in the CIS . For Estonians, the collapse of the Soviet Union was only a matter of time. This was partly explained by their proximity to Finland, giving them access to uncensored radio and television news. The transformation to a market economy was primarily a change in thinking. Many companies went bankrupt in the transition period, unable to adapt to the new conditions  ; the Soviet Union withdrew their companies, and Soviet customers fell away. Business collapsed almost completely. It was a time of great hardship  ; at times, even the heating stopped working, as Russia interrupted the energy supply for political reasons. When Estonia introduced its own currency, every Estonian received the equivalent of 10 euros, which at the time equated to about an average monthly salary. In addition, inflation at the time was in double digits. The transition period was a tricky time. The new owners of the freshly privatized firms changed frequently, and managers were often primarily interested in diverting any promising business into their own pockets. Privatization was simple, as the acquisition of a company was eased by the high inflation. One needed only to take out a bank loan, the real value of which was rapidly eroded by inflation. The freight forwarding business started from zero. In 1992, there was just one groupage shipment a week from Finland, and even that was considered a success at the time. No regular ferry services had yet been established. Finally, Finnish companies entered the Estonian market, bringing with them business and know-how. Until the 236

Estonia

mid-1990s, traffic consisted mostly of imports, with Estonia running a large trade deficit. In tonnage terms, exports predominate today, as imports tend to be of higher-priced goods. For Schenker the path to Estonia led through Scandinavia. Given their geographical and cultural proximity, it was obvious that developments in the Baltic should be managed from Scandinavia. Along with a new local company, the key players were Sweden’s BTL , its Eastern European subsidiary Scansped, and Huolintakeskus, the market leader in Finland. First Huolintakeskus was taken over by BTL in 1996/8, then BTL merged with Schenker, and their existing operations in Estonia were incorporated into the Schenker Group. To cut a long story short  : • In 1991, AS Auto Ekspress was founded in Estonia. BTL acquired a stake in the company in 1994, taking it over completely in 1995 and renaming it Scansped Eesti AS in 1996. • In 1992, OY Huolintakeskus AB of Finland established Balti Transport AS as a joint venture with AS Inko Projekt, but took full ownership of the firm in 1993. • In 1996, BTL acquired the Finnish company Huolintakeskus OY, which led to cooperation between Scansped Eesti AS and Balti Transport AS . • In October 1996, Schenker Kaukokiito Eesti AS was established at Tähetorni 21, Tallinn. Toomas Termäe was appointed General Manager, with 9 employees, 200 m2 of office space and 900 m2 of warehouse space. • In 1997/8, Schenker acquired BTL in those countries in which both operated  ; the name of the company was changed to Schenker-BTL . • Schenker Kaukokiito Eesti AS was thus absorbed into Scansped Eesti AS by 1998, its name changing first to Schenker-BTL AS , and then in 2001 to Schenker AS . • In 2004, AS Balti Transport also merged with AS Schenker  ; by this point, the company already had become the market leader. Schenker’s growth in Estonia was thus as tempestuous as that of the Estonian economy in general  : On February 22, 1991 AS Auto Ekspress was registered as a subsidiary of ­E TKVL Koondis “Auto”, with a capital of 30,000 rubles, originally intended primarily for rail freight shipments. Its shareholders/owners were eight Estonian citizens. On March 26 1991, Peep Kütt was elected Chairman of the Board, and the company commenced its land transport operations in November under the leadership of Tiit Pahapill. In January 1992, it was officially licensed as a customs broker. In March 1994, OY BTL ÖST AB acquired a 25 % share in Auto Ekspress, taking over the remainder in November 1995. In February 1996, Auto Ekspress with its 237

Regional Headquarters Europe East – Europe North/East

Schenker in Estonia

two offices was renamed Scansped Eesti AS   ; Henry Fagerström and Jack Björklund were members of the board. The Finns followed a short time later. On March 27, 1992 OY Huolintakeskus AB and AS Inko Projekt established Balti Transport AS as a joint venture, which was registered on April 13 of that year. Huolintakeskus OY held 65 % of the share capital of 9 million rubles, while Inko Projekt owned 35 %. Erik Byman was the first Managing Director, while the first employee and Deputy Managing Director was Meelis Arumeel, who in 1995 cofounded the Estonian Freight Forwarder Association. The company’s activities included land , air and maritime freight transport as well as trade fair activities, and provided air freight forwarding services at Tallinn Airport for Finnair, SAS and Lufthansa. Five Finnish employees were there from the start, bringing with them their business connections, which immediately began to bear fruit in the form of shipping contracts. In 1993, Huolintakeskus OY finally assumed full ownership of Balti Transport. Heikki Eerikäinen remained Chairman of the Board and Kari Peltonen served as Managing Director. In May 1996 the Finnish freight forwarding company Huolintakeskus OY was acquired by Swedish BTL   ; the work then began of merging the two firms’ Estonian subsidiaries, Scansped Eesti AS and Balti Transport AS . Legally, both companies remained for the time being. The new supervisory boards were elected in June  : 238

Estonia

Meelis Arumeel

Peep Kytt

Kari Peltonen

For Balti Transport, the board comprised Pentti Kuortti, Kari Peltonen, Henry Fagerström and Björn Illman, with Heikki Kullervo Laine as Chairman. For Scansped Eesti, Henry Fagerström served as Chairman, with Heikki Kullervo Laine and Jack Björklund as the remaining members. In August 1996 AS Balti Transport and AS Scansped Eesti started joint operations in Möigu, under the leadership of Kari Peltonen. Balti Transport, with just 8 employees, specialized in sea and air freight, while Scansped Eesti and its staff of 100 or so provided land transport services. The two companies operated differently in many ways  : Balti Transport worked with agents and costly Finnish staff, which kept profits low  ; Scansped leased trucks and employed local personnel, a more profitable business model given the lower wages in Estonia. In the wake of the merger, the companies’ various operations had to be combined. Balti Transport retained responsibility for maritime freight, while Scansped handled land transport and warehousing. As is often the case with mergers, not everything went smoothly, and thus in September 1996, Managing Director Toomas Teramäe and six other executives left Scansped Eesti. His replacement as Managing Director was Meelis Arumeel. This was actually the beginning of Schenker’s presence in Estonia. On behalf of Schenker Sweden, the former Estonian management of Scansped founded Schenker Kaukokiito Eesti AS in October 1996 under the leadership of Toomas Termäe, commencing operations in 1997. Prior to this, Schenker had only operated in Scandinavia through agents. The company operated with 9 employees, an office of 200 m2, and 900 m2 of warehouse space. This episode did not last long. In 1997, the German Schenker took over the Swedish BTL , merging the companies’ operations under the name Schenker-BTL 239

Regional Headquarters Europe East – Europe North/East

in those markets in which both had been represented. Initially, the Baltic countries were managed by BTL . In April 1998, operations in Estonia were taken over by Schenker-BTL and Peep Kütt appointed Managing Director. On July 22, 1998, Schenker Kaukokiito Eesti AS officially ceased business, and in October 1998, Scansped Eesti AS changed its name to Schenker-BTL AS . As a result of the merger, the Schenker organization in Estonia grew from 9 employees to 150, with its headquarters in Tallinn and a branch office in Tartu, 7,200 m2 of warehousing capacity, and a turnover of 24.5 million Deutsch mark in 1997. On January 1, 1996, the Tallinn office was recognized as an IATA Cargo Agent, the first freight forwarder in the Baltic States to be awarded this distinction, and operated as the largest air freight forwarder in Estonia. Leif Ilander, of Schenker International in Göteborg, found on a visit in October 1998 that Scansped/Schenker’s facilities in Tallinn and Tartu were very modern and well equipped. The largest organization in the Baltic States had been active in the air freight business since 1992, employing 15 people plus one person responsible for maritime freight, collectively producing a turnover of around DM 5 million. It was the number 1 in the Estonian air freight business with a market share of more than 50 %, and was also the General Sales Agent for Finnair and Air Baltic. Air freight was unloaded at the airport and brought to a dedicated own terminal just 5 minutes away with its own customs clearance facilities. For maritime freight, the company continued to cooperate with Wilson. Land transport comprised the majority of its business, and the status of licensed customs broker conferred a major advantage. A customs warehouse and terminal of 7,000 m2 with climate-controlled storage and proper security systems was available. Logistics services included international freight transport, customs clearance, sorting, packing, delivery, and goods tracking information, for sectors including automobile logistics and hanging textiles. Domestic freight service was provided under the Esti Kaubaliinid brand. In 1998, the company had 154 employees and a turnover of 27 million DM . In December 1998, Sky Partners OÜ (SP) was founded as a subsidiary of BTL . Sky Partners assumed Schenker’s air freight business, operating as its exclusive agent. In January 2006, airport air freight forwarding was transferred from Schenker to Sky Partners. Öst AB , Schenker’s Regional Headquarters for Eastern Europe, was founded in Helsinki in 1999. That same year, the decision was made to conduct all business under the Schenker name. This meant that Balti Transport was now nothing more than a property company. In April, Schenker Kaukokiito Eesti AS was renamed Schenker-BTL AS . In 1999, a new company, Huolintakeskus OÜ, was formed specifically for hanging textiles, with Huolintakeskus OY as the sole shareholder. In January 2001, Finntransport OY, part of the BTL Group, became the new owner of Balti Transport. The company now 240

Estonia

had offices in Tallinn, Tartu and Jöhvi, 186 employees, and warehousing capacity of 23,000 m2. In June 2001, Schenker-BTL was renamed Schenker AS , and in June 2004 AS Balti Transport merged into AS Schenker. Henry Christer Fagerström had been Chairman of the Supervisory Board of AS Balti Transport, while Mikael Dalenius had this function for Schenker AS . In September 2003, Henry Fagerström assumed this position for both companies. Upon Fagerström’s retirement in May 2006, Stig Göran Åberg, Director of Schenker’s Regional Headquarters for Eastern Europe in Helsinki, succeeded him as Chairman. The investments in infrastructure of course involved all the companies which were ultimately absorbed into Schenker. As early as 1992, Balti Transport rented a cargo terminal in Lagedi, opening its first customs warehouse of 540 m2 that October and commencing its operations in the field of automobile logistics. In May 1993, Balti Transport relocated its headquarters to Möigu, near the airport in Tallinn, where Schenker is today. It acquired its first building there in October 1994, a former workshop, which was converted into a terminal and warehouse for hanging textiles. The customs warehouse also moved there from Lagedi. In November 1995, the company bought an office building, continuing to expand considerably in the following years through the acquisition of land and the construction or leasing of office and warehousing space. Today, Möigu is the hub for all the company’s logistics services in the country. The various branches also expanded, with a sales office and terminal opening in Tartu in 1995, a new facility purchased and remodeled to serve as a terminal in May 2001 and yet another terminal of 710 m2 in operation from September 2011. A leased 1000 m2 warehouse for hanging textiles was added in 1995 in Suur Söjamäe, Tallinn, and a sales office and domestic terminal in Pärnu in 2002. In 2000, a new two-story office and warehouse complex with 1,000 m² of office space and 3,900 m2 of storage capacity was opened in Tallinn. Therewith all activities were united under one roof. Until then, Schenker-BTL had 7,000 m2 of warehouse space and 20,000 m2 of paved exterior storage space. In 2004, Schenker had 190 employees at four locations. In February 2005 an additional 7,350 m2 warehouse was rented in Liiva, a district of Tallinn. In 1999, a sales office and domestic terminal were opened in Jöhvi, and air freight RFS (Road Feeder Service) was initiated in Arlanda for business in the Baltic countries. Also that year, the company inaugurated a new line of business – PDI (Pre-Delivery Inspection) for new cars. In 2006 the new cars logistics ended, and construction of a new terminal building in Jöhvi began in 2012. Although the organization in Estonia at first with worked primarily with Scandinavian software, it was quickly integrated into the Schenker systems. In 1998, the new CIEL transportation management system was introduced for land trans241

Regional Headquarters Europe East – Europe North/East

Schenker Warehouse

ports, followed in 2003 by bar code labels for groupage freight and electronic archiving. In 2005 the new OPERA software for domestic freight was introduced, and the company was awarded the TAPA Security Certificate. In 2006, the company introduced the new SAP finance software system, while Schenker’s new TANGO air/ sea global software went live in June 2007. In 2009 Schenker Estonia was certified as an “authorized economic operator”. For some time, the company continued to use the Swedish systems, the Schenker system coming only after 2000. The BTL system continued in partial use for long period, as Schenker’s global system was not fully ready. In 2012, Schenker Estonia is led by Meelis Arumeel, who had occupied various management positions with Schenker and its predecessor companies for more than 242

Estonia

Eurotransport 2010

20 years. Before entering the freight business, he had completed a degree in automotive engineering at the Tallinn Technical University, also studying at the Estonian Business Managers School and training in Finland, Germany and Denmark. After stints working at a car factory and as Managing Director of an Estonian 243

Regional Headquarters Europe East – Europe North/East

transport firm, he joined Balti Transport in 1992 before moving on to Scansped Estonia, finally becoming Managing Director of Schenker Estonia in 1997. The company has branches in Tallinn, Tartu, Pärnu and Jöhvi, a turnover of 46 million euros in 2011, warehouse capacity of 22,000 m2, 4,000 m2 of terminal space, and is number 1 in domestic land transport, air freight, and logistics, and number 2 in international land transport and maritime freight. It offers a full range of freight forwarding and logistics services, and is ISO 9001  :2008 and ISO 14001  :2004 quality certified. Particular attention is paid to the security features, which are documented by TAPA FSR 2001, Authorized Economic Operator and Regulated Agent for Air Cargo. In November 2009, two months before Estonia joined the European currency zone, Schenker transported banknotes in the value of 44 million EUR from the printers’ in Finland to Tallinn, in five heavily guarded trucks. In September 2001, the Schenker League was launched, a volleyball championship for the Baltic States. It continues to be a major source of awareness for the Schenker brand to date, and features nine teams from Estonia, Latvia and Lithuania. Schenker was the official logistics partner of the Estonian Olympic Committee for the 2002 Olympic Games in Salt Lake City and the 2004 Paralympics in Athens, having already been responsible for supporting Estonia’s athletes at the Sydney Olympics in 2000. One milestone of Schenker’s first 10 years in Estonia was the company’s designation as the exclusive logistics partner of the Eurovision Song Contest in Tallinn on May 25th, 2002. In addition to the equipment of the 23 participating countries, Schenker had to handle the logistical arrangements for the sound and lighting systems and stage decorations. The equipment, mostly from Sweden, Finland, and Germany, had to be imported and cleared through customs, then repacked and returned within 2 days. The two-hour show meant four long and hectic weeks for Schenker Estonia, with support from their colleagues from Sweden. The team handled 15 truckloads of equipment, five broadcast vans, and assorted air freight with a total value of 24 million euros. Latvia Being part of the Russian Empire since the 18th century, Latvia gained its independence after the First World War. Schenker & Co. thus established a Latvian subsidiary in Riga in 1926, opening branches in Liepāja and Daugavpils, which were then closed in 1940. After the Second World War, Latvia was forcibly incorporated into the Soviet Union, not regaining its independence until 1990. 244

Latvia

Year

Growth GDP real

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

1990

3

–

–

–

1991

−13

–

172

–

1992

−32

–

951

–

1993

−11

–

109

–

1994

2

–

36

–

1995

1

19

25

15

1996

4

20

18

14

1997

9

15

8

11

1998

6

14

5

 9

1999

3

14

2

12

2000

6

15

3

12

2001

7

13

3

14

2002

7

12

2

14

2003

8

11

3

15

2004

9

10

6

15

2005

10

 9

7

13

2006

11

 7

7

11

2007

10

 6

10

 9

2008

−3

 8

15

20

2009

−18

17

3

37

2010

−1

19

−1

45

2011

6

15

4

42

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

2,663

 7,200

32

2011

2,059

14,800

38

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

The economic development in the early years of the transition to a market economy was chaotic. The country remained dependent on Russia for raw materials and energy. Between 1990 and 1993, real GDP shrank by 48 %, and inflation peaked at 951 % in 1992. With the introduction in 1992 of the Lats (LVL), the new national 245

Regional Headquarters Europe East – Europe North/East

currency, inflation was tamed, and has remained low since 1997. From the mid1990s, economic growth was encouraging  ; however, the unemployment rate often remained close to 10 %. Though EU accession in 2004 had a noticeably positive effect in the following years  ; the country was hit very hard by the global economic crisis. State finances went into difficulties, and the unemployment rate rose again to double figures. Real GDP shrank by 3 % in 2008 and in 2009 the economy shrank again by 18 %  ; real GDP in 2009 was just 101 % of that of 2000. After the financial crisis GDP remained stagnant at a low level, recovering somewhat to 106 % of 2000 levels in 2011.

Population

1935

1989

2011

1.9 millions

2.7 millions

2.1 millions

Latviana

77 %

52 %

62 %

Russians

  9 %

34 %

27 %

Since independence in 1990, Latvia’s population has declined by some 600,000 people, or more than 20 %  ; amongst other reasons this is the result of the emigration of a sizable proportion of its former ethnic Russian population, which had grown substantially during the Soviet era. Nevertheless, at 27 % of the population, Russians continued to comprise an important minority. Schenker did not arrive in Latvia until the mid-1990s, again in parallel with BTL . Baltic Transport SIA was registered on October 25, 1995, owned by the Finnish freight forwarder Oy Huolintakeskus AB . The first employees were Normunds Aspers, Andris Jurgevics, Dace Markevica and Aivars Taurins. In 1995, SIA Scansped Latvia was registered by BTL Ost AB , Finland with the board consisting of Henry Fagerström and Jack Björklund. After Huolintakeskus was taken over by BTL in 1997, Baltic Transport SIA merged with ScanSped SIA under the leadership of Matti Suonvieri. The company now had two offices in Riga. Since 1997, Scansped had been cooperating with Wilson in the air and maritime freight business, and maintained a staff of three employees at the airport to handle customs clearance as well. In 1993, Schenker also arrived on the scene. In that year, an agreement was reached between Schenker and LatCargo SIA and signed by Maris Lacis and Claes Lantz. Schenker Kaukokiito Latvia was registered on January 18, 1996, under the joint ownership of Aulis Lindros, Agris Kaneps and Claes Lantz. Located at Bullu Str. 74 in Kaukokiito, the firm had five employees in an office of 90 m2, with 11,000 m² of warehouse space. 246

Latvia

Advertisement in newspaper in 1935

In 1997, Schenker took over BTL , the two freight firms merging their operations in those countries in which both were represented. Accordingly, ScanSped SIA and Schenker Kaukokito merged and began operating as Schenker-BTL in Latvia on November 18, 1997. At that time, the company had 60 employees under the management of Matti Suoniveri, operating from an office in Riga and another at the airport. Aivars Taurins served as marketing manager and remains a leading figure even today. Schenker’s growth came in waves, as the business previous conducted through agents was gradually taken in-house. In addition, the company based its rates on an international air freight-oriented price list, which was rather too expensive for land transport. The company also had to first focus its efforts on building its own distribution organization with a customs clearance terminal. Schenker established its terminal in the “state prison”, a quite modern structure despite its origins in the Soviet era. Unusually for a warehouse, it had three floors, despite the availability of additional land for construction. It was heavily guarded and surrounded by a high fence, and did give the impression of a prison. In 1998, Schenker acquired this building on a plot of 20,000 m², including the rail siding of the former Pļavnieki cement factory in Riga, at 11c, Katlakalna Street. The three-story, 2,000 m2 office building offered sufficient space for 50 employees. The factory was converted into a warehouse with 7,500 m2 of warehouse space and 28 loading bays. Kravu Pasaule was the most advanced transportation and logistics terminal in Latvia, constructed in 3½ months for 2 million US dollars in the first phase. On November 16, 1998, an additional warehouse of 6,000 m² was established in Cargo World (Kravu Pasaule) for customers such as Michelin and Skanska, employing some 30 Schenker staff. In November 1998, Schenker-BTL became the first customs broker for transit shipments to the Baltic States. On the second floor of the office building, the company set up its own customs point, a bank office 247

Regional Headquarters Europe East – Europe North/East

Matti Suonvieri – Managing Director at Scansped from 1998 till 2001.

Kari Rauno Peltonen – Managing Director at Schenker BTL from 2001 till 2004.

Aivars Taurins – Managing Director at Schenker BTL (further DB Schenker) from 2004 till 2013.

Aivars Taurins is giving a new start for a life of DB Schenker Latvia in 2005.

and the Schenker CIEL system was introduced. Over the following years, Schenker continued to expand the facility. The old factory buildings still standing on the property were demolished in 2005, amid great public interest. Through 2008, Schenker invested some 2.2 million lats in the Logistics Centre, which dispatches regular Cargo Lines from the Far East, North America, Europe and the CIS states in the Baltic countries using the DB Schenker 24 hour distribution system. 248

Latvia

Maris Kleinbergs – Managing Director at DB Schenker Latvia from 2013 till now.

The explosion of the old building of former factory “Pļavnieki” in 2005

The opening of Schenker BTL office building in 1998.

By 1998, Schenker had grown to 79 employees under the management of Managing Director Matti Suonvieri. That was also the year that the full effects of the economic crisis in Russia struck Latvia. There was significant excess truck capacity on the market, sharply depressing prices. In 1997, exports from Latvia to Russia comprised 20 % of total volume, but this figure dropped to just 16 % in the first half of 1998. Previously, as much of 40 % of food exports had gone to Russia  ; most 249

Regional Headquarters Europe East – Europe North/East

Latvian factories were forced to drastically reduce their output  ; the fish processing industry almost completely ceased operating, and some 4,000 workers were laid off. 30 % to 40 % of the country’s truck fleet was idle, and operators accepted orders at rock-bottom prices. Freight prices sank to 30 % below usual levels. Some Latvian carriers began to return their leased trucks. Nevertheless, Schenker continued its course of expansion, establishing a branch in Liepāja, the third largest city in Latvia, where Schenker had had a presence as early as the 1920s. Until 1994, the port of Liepāja was reserved for the use of the Russian military, and was a prohibited area. When the Russian troops withdrew, the city faced a crisis, which was only overcome in 1997 with the establishment of a special economic zone of 3,000 hectares. Companies settling there enjoyed reduced customs duties and a 20-year tax exemption. Since processing transit shipments was also faster and cheaper, it made sense for Schenker to establish itself there. Liepāja is located in the middle of the Baltic States, with good transport links including RoRo ferry connections to Sweden, Denmark and Germany  ; it could be expected that the port would compete with Finland for transit traffic. Customs inspections in Latvia were very strict. The slightest discrepancy in packaging or paperwork was enough for the customs authorities to suspect that they were dealing with a smuggler. Entire shipments would then be stopped. EU accession significantly eased this problem. In 2002 the customs authorities in Riga started a customs clearance project with Schenker in order to gain experience of EU customs standards and procedures. Visiting EU experts judged this project a model for the modernisation of Latvian customs procedures. After Latvia joined the EU in 2004, this office was closed. In 2000 Kari Peltonen became the new Managing Director, with Aivars Taurins staying on as his deputy. In that year, Schenker-BTL acquired its own facility with a rail connection, employed 70 people, and introduced the ISO 90001   :1994 quality management system  ; on November 1, 2000, it became an IATA Cargo Agent. In 2004 Schenker SIA began operating its Environment Managing System in accordance with ISO 140001  :2001, as well as TAPA (A). The three Baltic States are neighbours, but do not really cooperate closely, as they differ greatly with regard to history and geography. Nevertheless, a “Baltic solution” was launched in 2000, a “tender management and key account organization”. Its aim is to meet the needs of important customers by having one single contact person for the Baltic States. This was coordinated from Riga, with regional Key Account Managers in the other two countries. As in other regions, this solution was also planned to coordinate the logistics activities, as pointed out by Kari Peltonen, Helsinki, who was responsible for the development of Schenker’s activities in the Baltic States. The organization in the Baltic States was very strong, 250

Latvia

with experienced personnel in all areas of freight forwarding and logistics. However, Schenker International made it known that the national subsidiaries would be responsible for generating their own national and international sales, and could not rely on external initiatives. In 2001, the name of the company was changed from Schenker-BTL to Schenker SIA . By this time, the firm had 82 employees in its three offices and managed 38,600 m2 of warehousing space  ; it had been the Latvian market leader since 1999. Turnover in LVL (in millions) 1997

1,364

1998

2,154

1999

3,205

2000

3,830

2001

4,631

2002

5,394

Schenker-BTL then adapted the site of the former Būvdetaļa state-owned enterprise and constructed a new 1,800 m² hangar supplementing its existing 7,000 m² of space. The property resembled a rubbish dump, and the most pressing task was to clear away the mess. Schenker’s goal was not to ready the site as rapidly as possible and erect lovely new warehouses and office buildings, but to develop it gradually in accordance with customer requirements. In 2003, the company gained the Finnish department store Stockmann as a client, offering a 24-hour delivery service to all the Baltic States. The number of employees had risen to 100. In 2004, a new terminal for land transport was built in Riga, with 1,000 m² of warehouse space and 14 loading bays. In 2004, Aivars Taurins was appointed Managing Director of Schenker SIA . He had studied road transport management and economics at college before switching to agriculture and starting work on a dissertation. Needing to earn some money on the side, he started working in 1995 for Palhali, a Finnish international freight firm selling textiles in the Baltic States. The company’s Finnish female manager in Latvia was facing a lot of problems, and needed an assistant and driver with a basic knowledge of English. Though it turned out to be a time-consuming job, with hours often running from early in the morning until late in the evening, Taurins gained his first experience in international management. The importance of the Latvian agricultural sector began to decline in the mid-1990s, and he was forced to consider a career change. He read in a newspaper that Baltic Transport was looking 251

Regional Headquarters Europe East – Europe North/East

for an employee  ; he applied, was interviewed by the firm’s first manager, Markowitsch, and joined the company in 1996 as its third hire. His first major customer was Palhali  ; no longer an employee, he was now the company’s partner for transport, delivery and customs matters. He remained with the company throughout the various mergers, working for Schenker since 1997. Aivars Taurins’s role in the Latvian freight forwarding industry goes beyond his work with Schenker. In 1997 he founded the Latvian Customs Broker Association. In this position, he worked for the opening of the logistics market to Europe. As a small country, after its separation from Russia, Latvia was a fairly isolated market concentrated largely around Riga. The Association saw its task as explaining that logistics was more than just the actual movement of goods, and encompassed collection, packaging, purchasing, sales, and implementation of workflow processes of raw materials and goods. Prior to that point, 90 % of all freight shipments in Latvia were carried out by producers themselves, evidence of how insignificant the logistics market remained. The market was highly segmented  ; none of the large European logistics companies had a market share exceeding 2.3 %. The turnover of the five leading forwarders in Estonia was some LVL 100 million, and in Lithuania 150 million, but just LVL 20 to 30 million in Latvia. With accession to the EU, the time had come to consider how the logistics potential could best be used. Latvia could act as a bridge between East and West, as previous expertise from the long-standing connection with Russia had not been forgotten, yet the country was already familiar with the new Western market conditions. The Latvians are a flexible people, able to learn from and correct past mistakes. However, in the Association’s view, the state and bureaucratic institutions reduced this advantage. The geographical position of Latvia as a transit state was an advantage, but the country’s failing had been its previous inability to take advantage of this. The causes were to be found out in foreign politics. Nationalist political ambitions would have better been ignored in favour of the pursuit of economic advantage, as the country’s independence could only be secured with sufficient economic power. Even a truck driver in transit through Latvia was required to have a visa, a time-consuming bureaucratic hurdle. However, the ministry refused to issue a Schengen visa as it did not have a list of “saboteurs”  ! How such a list might be obtained remained unclear. The bureaucracy of the state was thus continuing to hinder economic activity. Those demanding stricter monitoring and control were failing to consider the millions of lats in lost economic activity. The Association recommended that no value added tax be levied on transit shipments through Latvia, and thought it absurd that even empty vehicles should require costly permits. It was thus hardly surprising that companies chose to route their freight around Latvia. The Association thus called for changes in the tax regimen, and the introduction of an occupational standard 252

Latvia

for logistics specialists. Europe did not expect the emergence of a Latvian “tiger” in the logistics market, it also did not want Latvia to “act as a fly” disturbing the open market. It needed to show that it was not lagging behind, and was making good use of its opportunities. Henry Fagerström retired in 2006, and Stig Göran Åberg, the director of Schenker’s regional headquarters for Eastern Europe in Helsinki, became the new Chairman of the Supervisory Board, the remaining members of which were Mikael Dalenius and Peter Hult. In 2007, renovation of the warehousing facilities began, with a distribution system for food products being set up. A new, modern cross-dock terminal for domestic and international operations was constructed in 2008. In 2008, the global financial crisis also hit Latvia. High fuel prices forced many transport companies to curtail their activities. Although the previously tight labour market had now loosened considerably, the credit crunch, increased VAT, and the introduction of road pricing inflated the cost of operations in the transport sector. While, in 2007, an average of some one thousand trucks was waiting to cross the Latvian-Russian border, this had dropped to just 200 to 300. Container shipments from the Latvian ports dropped by 70 % to 90 %  ; rail shipments declined from their previous level of 500 containers per week to 200. In 2009, Schenker was also forced to cut its staff from 112 to 70. The crisis therefore necessitated that adjustments be made in terms of costs, new markets, projects, and improving Latvia’s attractiveness as a transit country. According to Aivars Taurins there were three necessary steps to overcoming the crisis  : • First, new resources had to be deployed for marketing activities in order to win new customers and while retaining existing ones  ; • Second, ruthless cost-cutting of administrative and bureaucratic activities was needed in order to channel the resources into sales  ; • Third, the state needed to carefully assess with which countries it could work together profitably. This was primarily directed at Russia. It had taken almost 20 years for Latvia’s leaders to understand the stupidity of ignoring a market of 140 million people. Thus, in December 2010, Latvian President Valdis Zatlers travelled to Moscow with a business delegation including representatives of 112 companies with the aim of improving economic relations, and also to reach accord on a double taxation agreement. In 2009 Schenker Latvia was named an “authorized economic operator”. This had been a costly designation to achieve, and had placed high demands on quality management and security. This position reduced the frequency of customs inspec253

Regional Headquarters Europe East – Europe North/East

The renovated DB Schenker Latvia office building from

DB Schenker official logistics partner in the International

2008 till now.

Song Contest “Eurovision 2003” in Riga.

tions, and moved the company to the front of the line when inspections were unavoidable. In 2011 environmental management was introduced. A conference held by the Ministry of Environment took place in Schenker’s conference hall  ; experts viewed the company’s facilities as exemplary with regard to energy efficiency and renewable energy use. On the basis of an agreement with the subsidiary of Russian Railways, TransContainer and a rail container depot were established in 2009. In 2011, Schenker SIA became an official “rail carrier” and acquired its first locomotives. The following year, Schenker SIA continued to further develop its rail business, beginning construction of an intermodal terminal. A further problem was the different gauge of the Russian railway. Unless narrower, standard gauge (1,435 mm) tracks were laid to the port of Riga as part of the “Rail Baltica 2” project, investment in new rolling stock would be pointless. In 2011, there were 728 km of such new rail systems in the Baltic countries, with 229 km in Estonia, 235 km in Latvia and 264 km in Lithuania. Today Schenker Latvia has around 100 employees, training is carried out on the job, knowledge of Russian and English is necessary, and recruits have to cope with a challenging and hectic pace of work. Workers’ pay is on the order of EUR 200 per month, in line with the national average. Schenker Latvia’s business is now mainly directed to the EU, with international land transport comprising 60 % of turnover, domestic transport 10 %, logistics 25 %, and air and maritime freight 5 %. Trade with Russia still accounted for 30 % of sales, consisting largely of beverages, paper, and machinery. Very little was imported from Russia, so trucks usually returned empty. The journey to the Russian border was more than 300 km, and Russian customs clearance took two days, which was used as rest time for the drivers. On 254

Latvia

Rail logistics and forwarding, DB Schenker bought the

DB Schenker Team in Nordea Riga Marathon 2011.

first shunting locomotive in 2011.

the return trip, with no cargo, drivers could pass straight through customs without delay. It was a 24-hour drive from the Latvian border to Moscow, done in one go, as the road led almost entirely through forest. Drivers did not stop for breaks, as it was too dangerous  ; even at gas stations, entire trucks had been stolen. In the Baltic countries the distances are short, so the drivers can always rest in the terminals. With valuable cargo, such as merchandise from Nokia, two drivers with GPS systems were always together on trips. Net profit in LVL 1,000 2000

92

2001

127

2002

195

2003

207

2004

273

2005

250

2006

228

2007

254

2008

202

2009 2010

44 (loss) 106

In 2003, Schenker was the logistics partner for the Eurovision Song Contest in Riga. This involved transport and customs clearance for all equipment. 255

Regional Headquarters Europe East – Europe North/East

In 2005, the Latvian and Estonian Volleyball Federation signed a sponsorship agreement for the Schenker league with the relevant Schenker subsidiaries in the Olympic Center. The first matches took place in October. Schenker Latvia had a long history of supporting sporting activities, primarily motor sports. In order to increase public interest in volleyball, the clubs were obliged to provide cheerleaders and DJs during the matches, and to announce the results within half an hour of the end of each match. Lithuania Lithuania gained independence from the Soviet Union in 1990. The first few years in independence were marked by political instability and economic recession, with falling GNP and high budget deficits and inflation. Through 1994, the turmoil associated with the transition to capitalism resulted in a dramatic decline in economic output, with industrial and agricultural output dropping by a quarter and unemployment hitting 18 %. Making matters worse was severe inflation, which reached 1,020 % per year in 1992. Through 1995, consumer prices rose 70-fold. After independence, many state-owned enterprises were shut down or sold off to private investors, with some 80 % out of state ownership by 1998. Traditional commercial ties unravelled, and were hindered by the new borders. The IMF and World Bank provided support to Lithuania as it embarked on a course of economic reform, part of which involved the introduction of a new national currency, the litas, in 1993. The country turned the corner in the mid-1990s, achieving continuous economic growth through to the end of 1998. Up to that point, Russia remained the most important foreign trading partner, accounting for 25 % of Lithuania’s external trade. The economic crisis that hit Russia thus also hit Lithuania hard, forcing it to turn more and more toward Western Europe  ; today, only about 10 % of Lithuania’s foreign trade is carried out with Russia. EU accession in 2004 triggered a boom which came to an end only with the onset of the global financial crisis in 2008. Lithuania’s labour market is characterised by its high level of education. However, emigration rates increased after the EU accession. Together with a low birth rate, the population of the country decreased from 3.7 million in 1992 to 3 million in 2012. Schenker’s original presence in Lithuania dated to the interwar years, having opened its first office at Börsenstraße 13 in Memel (today’s Klaipėda) in 1920. However, the Soviet occupation of Lithuania in 1940 forced the company to withdraw. The economic and political uncertainty of the early 1990s meant that the flow of foreign capital into Lithuania started out as a mere trickle. Initially, the country’s economic policies were not conducive to foreign investment, remaining stuck in the 256

Lithuania

habits of the past. Schenker/BTL was thus a relatively late arrival in the country. This made for a difficult start, as the company faced entrenched competition. Year

Growth GDP real

Unemployment rate Annual average

1990

−3

–

8

–

1991

−6

–

225

–

Change ­Consumer prices

Public debt in % of GNP

1992

−21

–

1.020

–

1993

−16

–

411

–

1994

−10

17

72

–

1995

3

18

40

12

1996

5

16

25

14

1997

8

14

9

15

1998

8

13

5

17

1999

−1

15

1

23

2000

4

16

1

24

2001

7

17

2

23

2002

7

14

0

22

2003

10

12

−1

21

2004

7

11

1

19

2005

8

8

3

18

2006

8

6

4

18

2007

10

4

6

17

2008

3

6

11

16

2009

−15

14

4

29

2010

2

18

1

38

2011

6

15

4

39

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

1990

3,698

 7,200

1995  : 34

2011

3,029

16,600

37

Public debt in % of GNP

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

257

Regional Headquarters Europe East – Europe North/East

In April 1997, almost too late, Scansped came in Lithuania. After merging with Schenker, it built a complete network in the Baltic States. Scansped was registered at Labdariu g. 5 in Vilnius on 8th May 1997, commencing operations with six employees under the direction of Esa Nieminen. Scansped had previously operated through shipping agents, maintaining a warehouse protected by watchdogs and submachine gun-toting guards. At first, Lithuania was not overly welcoming of foreign investors, and the three local agents were in a strong position, though regarding one another suspiciously. At this time, Schenker had no office of its own in Lithuania. Instead, it had been working since 1992 with an agent, Klaipedos Litranspedas of Klaipėda, which was also an owner of UAB Vilksta in Vilnius. Managed by Nicole Balakauskiene, Litranspedas had 35 employees, an office of 150 m2, and an off-site warehouse. In 1994, Leif Ilander of Schenker Transport AB Stockholm was appointed as the coordinator for freight traffic to and from the Baltic States. Here the local agents were  : Litansped for Lithuania, MPW & Co. for Latvia and AS Tallinna Autoveod for Estonia. In the wake of the BTL –Schenker AB merger, the companies’ national subsidiaries were also merged. Thus Scansped in Lithuania was folded into Schenker-BTL’s UAB founded in 1997, Lithuania Vilnius, at Kirtimu g. 51, with capital of 200,000 litas. Ownership was later transferred to the regional headquarters in Helsinki, Oy Schenker East AB . The new company began operations in May 1997 with ten employees and 6,000 m2 of warehouse space in Vilnius, plus a branch at Veiveriu g. 150 in Kaunas with two employees and 2,000 m2 of warehouse space. Schenker concentrated on domestic and international land transport, warehousing, and terminal and customs clearance services  ; logistics and air freight services were offered in conjunction with Wilson and Schenker International. In 1998, Edmundas Daukantas was named Managing Director of the firm. Rather than training in the freight forwarding business, he had studied industrial economics at the University of Vilnius, graduating as a transportation engineer, which was still during the Soviet Era. In 1988 he began work in the paper industry, becoming manager of a production unit, which also exported to Finland. As he had a basic knowledge of English, he was also responsible for international communications. Edmundas Daukantas was very active in Lithuania’s strong independence movement. On March 11, 1990, the declaration of independence was signed, but the Soviet Union still refused to accept it. It was thus important that this declaration be sent to as many countries as possible. His international contacts ensured that he was able to secretly ship entire bundles of this signed declaration to various Western countries such as the Netherlands. One of these bundles went to Moscow, landed in the hands of the only international news agency, which also passed along the document. These activities won him an offer from the agency to open an express service in Vilnius  ; accordingly, he opened TNT Express in 1993. 258

Lithuania

Edmundas Daukantas and Esa Nieminen 1997

This was not a subsidiary of the international shipping company TNT, but a private express shipping firm. It grew rapidly to more than 40 employees by 1997, the same year Scansped opened its office in Vilnius. His first contact with Schenker was in 1996, as a competitor for a logistics order for Electrolux, won by Schenker’s German subsidiary. At the time, though, Schenker in Essen was not all that interested in Lithuania. Schenker’s first manager in the country came from Finland in 1998, tasked with taking over the business previously conducted by the company’s local agents. It was not an easy task  ; and a local manager would be best suited for it. Thus it was that in 1998, Edmundas Daukantas received an offer from Scansped, starting with a staff of five. Business was slow at first, and not easy. Eventually, however, a customs clearance facility was established and a new warehouse leased in 1999, finally providing independence from the agents. The young company was a small firm with just nine employees, but with good future prospects. For legal reasons, the name had not yet been changed to Schenker. As yet the company provided no maritime or airfreight services, but work was underway to change that. At times, airfreight was received, moved to the company’s warehouse for customs clearance, and delivered on the same day. For destinations outside Vilnius, the goods had to be taken to the nearest customs office. Customs procedures remained rather elaborate, with much importance attached to original documents, all of which had to be signed with the proper blue or red ink  ; a sig259

Regional Headquarters Europe East – Europe North/East

nature in black ink meant no customs clearance. Compared with other countries, Lithuania still had to develop its export duty procedures and guarantee system. The company still had no maritime operations and no office at the port of Klaipeda. A scheduled land freight route ran twice a week from Göteborg to Vilnius. There was considerable interest in the possibilities offered by trade fairs, as Edmundas Daukantas had already had some experience in this area. In 1999, two years after the merger of Scansped and Schenker, the economic crisis in Russia also hit Latvia. Industrial output dropped by 8 %, and GNP by 4 %. Schenker was able to respond flexibly and find alternative business opportunities. Also Edmundas Daukantas realised that every crisis had its positive side. In this case, industrial customers faced with the economic crisis focused more on their core business and outsourced their transport operations, a positive outcome for the freight industry. Previously, Schenker had only imported full loads twice a week, but now began to deliver smaller loads on a just-in-time basis. After the rapid growth of recent years, the company’s focus was now on improving quality. This was the case for land transport , but also airfreight, the volume of which was doubling every month. The crisis in Russia also benefited the existing groupage traffic with the European countries. Since the merger, more and more business was coming from Germany, with high demand for smaller shipments, and only a handful of companies had specialised in this area. Trade with Russia continued to decline, but flourished all the more with the West. Thus, in 1999, Schenker was voted the fastest-growing company in Lithuania. Despite the Russian crisis, Schenker was able to double its number of employees and nearly triple its turnover in 2000. Baltic International was established in 1999, an overnight express service between Tallinn, Riga, and Vilnius, with a direct connection from Vilnius to Minsk and Kiev following in 2000. Minsk is only some 200 km from Vilnius, and knowledge of the customs regulations of both countries was a distinct advantage. The route ran once a week, with goods delivered within 24 hours. In February 2000, the company opened a new logistics centre at Kirtimu str. 47b in Vilnius. 30 employees moved into the new facility, which offered 4,000 m2 of logistics space. The centre had offices, warehousing and terminal space, a customs office, and a rail siding, and was intended as a hub for freight traffic to Ukraine and Belarus. The in-house customs clearance represented a major advantage for customers. 53 employees worked in Vilnius and the Kaunas and Klaipeda branch offices, with access to more than 5,200 m2 of warehousing space. ISO 9002   :2001 certification was achieved in 2002, and TAPA certification in 2004. In 2008, the company received ISO 9001  :2000 and ISO 14001  :2004 (Environment) certification, and was designated an authorized economic operator (AEO) in 2010. In 2002, Schenker Lithuania was the official freight forwarder for the Winter Olympic Games in Salt Lake City. 260

Lithuania

Kirtimu

Year

Number of Employees

1997

6

1998

12

2000

34

2001

52

2002

60

2004

61

2008

65

2010

54

261

Regional Headquarters Europe East – Europe North/East

Sausiai office terminal

When Lithuania joined the EU in 2004, the company’s customs clearance business evaporated. This was not just a matter of losing the income from customs clearance services  ; many of Schenker’s customers had first been attracted by its efficient customs clearance procedures. On the other hand, trade volume rose, and the country’s economic development benefited. In 2007, Schenker leased a new and more modern facility with better access to transport routes, and opened new locations in the western part of the country. Lithuania is unique among the Baltic States in that its capital is located inland and not on the sea, and its commercial centres are distributed around the entire country. Thus UAB Schenker, was headquartered at Savanoriu str. 4 in Vilnius, and operated with 60 employees in Vilnius, Kaunas, and Klaipeda. Board of Directors  : 2001 Henry Fagerström, Jack Björklund, Mikael Dalenius 2002–2005 Henry Fagerström, Kari Peltonen, Mikael Dalenius 2006–2007 Fagerström replaced by Göran Aberg 2010–2011 Kari Peltonen replaced by Peter Hull  ; Peltonen moved to Helsinki as coordinator for the Baltic States While Schenker initially withstood the most recent financial crisis, the company ran up losses in 2008 and 2009, only returning to profitability in 2010. Today, Schenker’s Lithuanian subsidiary provides national and international land freight transport services, is active in the fields of air and maritime freight, and offers secure and climate-controlled warehouses and customs clearance facilities. It provides logistics services, including sports logistics. The company operates a dense 262

Poland

national distribution system and maintains regularly scheduled shipping routes with 22 countries. In addition to the head office located on the main highway between Vilnius and Kaunas, Schenker has branch offices in Klaipeda and Siauliai, more than 10,000 m2 of warehouse space, and a turnover of LTL 36 million. Net profit in Litas 2000

404,489

2001

176,561

2002

414,330

2003

204,954

2004

565,821

2005

723,090

2006

756,622

2007

–

2008

(–) 177,137

2009

(–) 827,459

2010

382,351

Poland Poland lies on the Baltic Sea and today shares borders with the Russian Kaliningrad territory, Belarus, Ukraine, Slovakia, the Czech Republic and Germany. Its location in the heart of Europe goes a long way to explain its history, which cannot be surpassed in terms of drama. It lost its independence in the 18th century and was partitioned between Prussia, Russia and Austria-Hungary103. After the First World War, the state was reestablished covering a larger area, a fact which, accordingly, brought conflicts with it. World War II began with an attack by the German Reich on Poland, which was followed by the occupation of eastern Poland by the Soviet Union. Both occupying powers acted with unspeakable brutality, making Poland one of the countries suffering the greatest losses of population and destruction in the Second World War. In 1945, the country’s borders were shifted westward in favour of the Soviet Union and to the detriment of the German Reich. Millions of people fled, were expelled or forcibly relocated. The now established communist-planned economy system was not necessarily trusted by the country’s inhabitants. Recurrent riots flared up which were often triggered by price increases for staple foods. The Soviet Union therefore regarded 263

Regional Headquarters Europe East – Europe North/East

Poland with a degree of mistrust, which was not wholly unjustified. Since the early 1980s, there were widespread calls for democratisation and mass trade union movements. Poland was therefore one of the countries which pushed for the political changes of 1989. Year

Growth GDP real

1990

−12

Unemployment rate Annual average

Change ­Consumer prices

Public debt in % of GNP

–

586

–

1991

−7

–

70

–

1992

3

14

43

–

1993

4

14

35

–

1994

5

14

32

–

1995

7

13

28

49

1996

6

12

20

43

1997

7

11

15

43

1998

5

11

12

39

1999

5

14

7

40

2000

4

16

10

37

2001

1

18

5

38

2002

1

20

2

42

2003

4

20

1

47

2004

5

19

4

46

2005

4

18

2

47

2006

6

14

1

48

2007

7

10

3

45

2008

5

7

4

47

2009

2

8

4

51

2010

4

10

3

55

2011

4

10

4

56

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

1990

38.119

4.600

35

2011

38.530

16.200

44

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

264

Poland

Poland also enjoyed a certain level of economic growth under the planned economic system. Real per capita GNP nearly doubled between 1950 and 1988. Foreign trade was carried out almost exclusively in the Comecon area. Industrialisation shifted to mining, shipbuilding and heavy industry, while agriculture, which retained its small-scale economic structure, was neglected. The 5 million workers in this sector contributed just 5 % to the GDP. In Poland, the transition to a market economy was a shock. Real GDP fell by 18 % from 1988 to 1991  ; from this year the country progressed on a continuous growth path, tarnished however by a relatively high unemployment rate. In 1989, the first privatisation law was passed, although previously about 20 % of the enterprises were already privately owned. In October 1989, the “Balcerowicz Plan”104 for the transformation to a market economy was put forward. This success was due largely to stable, cautious economic policymaking, with the national debt being paid off, a new national currency introduced in 1995 at an exchange rate of 10,000 old zloty to one new zloty, and speedy privatisation of state-owned enterprises. By 1997, the private sector was already producing 65 % of GNP. The structure of the country’s economy continued to be problematic, with the one-quarter of the labour force employed in agriculture contributing only 6 % to the GNP. 62 % of foreign investment in the first half of the 1990s went to the industrial sector, of which onethird was directed to the food industry and 19 % to financial services. Two-thirds of external trade was with the EU, above all with Germany. This success was also confirmed by the accession to the European Union in May 2004. Poland, with 38.5 million inhabitants, is one of the largest EU Member States and ranks among the most successful transition countries. After Poland was reestablished as an independent state after the First World War, this business area was transferred to Schenker Berlin. However, Vienna also wanted to preserve its influence. While Berlin took it for granted that Schenker should progress in a very short time to the leading freight forwarder in eastern business, the Vienna management advocated a more cautious approach. Cooperation was worked out with Polish Transport AG , which enjoyed a monopoly over some government contracts – for example, the company organized the emigration of Galician Jews to Palestine. In addition, Vienna tried to establish a joint Swiss company together with Gondrand & Mangili and the Warsaw-based forwarding agent Karl Kaiser, named Expediteur Reunis, which operated in Poland and was to have a neutral character, out of political considerations. Based on this agreement, Schenker branches in Poland had been instructed to work together with both parties. However, the cooperation broke up due to constant new demands by Kaiser. In 1920 the Vienna headquarters therefore concluded an agreement with the Polish Bodenkreditbank in Lviv, according to which a Polish Schenker & Co. AG would be established with 60 % of the shares going to Schenker and 40 % to Bodenkredit265

Regional Headquarters Europe East – Europe North/East

bank105. The domestic equity stake was deemed essential in view of the high capital requirements and Polish national sentiments. However, Schenker Berlin did not consider this sufficient. Without consulting Vienna, the forwarding company Blum Wolf AG Warsaw, a branch operation of A. Blum & Popper, Hamburg, was acquired along with offices and warehouse space. Vienna finally relented and in 1921 the Aktiengesellschaft für Internationale Transporte Schenker & Co.106 was established in Lviv, into which the company Blumwolf in Warsaw was merged. In addition, the forwarding companies of Oswald Rappaport in Lviv and Roman Liban in Krakow were purchased and incorporated into the Polish Schenker organization. The headquarters of the company were transferred to Warsaw  ; 60 % of the initial capital – 50 million Polish marks went to Schenker Berlin and 40 % to the Bodenkreditbank, which also granted a loan of 200 million goldmarks to develop the business. Overall, the funds tied up in Poland amounted to 450 million Polish marks until 1923, which Vienna deemed to be more than enough, given the political uncertainties in Poland. As a result, partial layoffs and closures of branch offices followed. The real problem faced by the executives in Berlin was to find a reliable local management. It was extremely difficult to find someone who, alongside the necessary sense of initiative, also possessed the degree of company inclusion and honesty needed for the task. In view of prevailing nationalist tendencies, it was essential that the managing director be a Polish citizen. In 1930, the number of employees in Poland was 203. New difficulties arose from the acquisition of Schenker by the German Reichsbahn (Railways) in 1931. The transaction had initially been kept secret, which led all the more to rumours and reactions. In 1931, Schenker’s tariff concession was withdrawn by the Polish Treasury ministry. The real reason for the action was not a disagreement on customs matters, but was based on the accusation that Schenker was carrying out spying activities as part of the Reichsbahn. Therefore Schenker itself pushed for prestigious personalities of the Polish economy to be appointed to the Supervisory Board of the Polish AG . These considerations ended with Germany’s military occupation of Poland. The long-term Schenker Director Moritz Safir – a Jew – managed to emigrate abroad in time. In the so-called “Generalgouvernement” Schenker took over the official rail cartage business in Warsaw and Krakow. This was previously a division of the forwarding agency C. Hartwig & Co. AG in Poland, which was majority-owned by the Polish Treasury through the participation of a Warsaw bank. From the fall of 1939, the forwarding agency was initially run by an acting manager and eventually acquired by Schenker in 1941 for the amount of 1.25 million zloty. The Hartwig company had offices in Warsaw and Krakow and additional offices in Kielce, Lublin, Radom and Czestochowa. To organize extensive food shipments from Ukraine 266

Poland

for which Schenker had been engaged over the Central Trading Company East107, own branches offices were founded in 1943 in Kiev and Rivne108 as well as five offices in Znamenka, Zhmerinka, Sinelnikovo, Pjatichatki and Kovel. At the end of the war, the Schenker organization was nationalized. Foreign trade was in the hands of some 50 large companies, which covered practically the entire range of products. C. Hartwig or PSK were the freight firms that handled international trade, while Pekaes dealt with domestic transport. The state railway PKP 109 – today the country’s tenth largest company – played a pivotal role. In 2001, this was converted into a Holding AG for 24 companies – including Cargo, but remained in state ownership. In 2008 the railway was liberalised, passenger transport was transferred to the voivodships and further privatisation of subsidiaries was carried out, owing to losses. Despite Poland being a transit country, the infrastructure was also precarious for rail, road, river and sea transport, as well as the port facilities. However, it must be conceded that Poland has made major efforts, mainly in road construction, and the European Football Championship 2011 hosted together with Ukraine has led to an expansion of the infrastructure. The supply of transportation services soon outstripped demand by a factor of more than two. A political response was not long in coming  ; a state licensing system was introduced in 1991. The number of licenses was limited, and the issuing of a license depended on several conditions, including adequate financial backing. This rapidly consolidated the market. However, other teething troubles of the early market economy remained. Communication with other countries via telephone or telex remained difficult for some years  ; even a reliable phone connection to neighbouring Germany was a challenge. Insurance was expensive, and did not meet the needs of the transport industry. The quality of the vehicle fleet remained low, with many vehicles unsuited for use outside Poland. Inexperienced drivers constantly caused problems, resulting in significant fines if a shipment failed to conform to EU regulations, to say nothing of reimbursements for damaged and uninsured freight. Shipments to customers that avoided customs duties are a tale in themselves. The Polish banking system of that time was not known for its customer service, and was a hindrance as much as a help. Bank transfers took days to complete. Many companies thus soon encountered difficulties  ; liquidity problems resulted, and the owners of the leased vehicles were unable to make their loan payments. The vehicles were then repossessed by the banks, which had little use for them. Some of the new companies streaked across the market like comets, appearing abruptly and then flaming out, never to be seen again. Some companies imploded spectacularly. The surviving state-owned enterprises, with their hidebound structures and management, also had a difficult time of things. The market underwent a restructuring in the mid-1990s. Companies which had restructured themselves early and responded flexibly to customers’ needs began to 267

Regional Headquarters Europe East – Europe North/East

turn a profit. The overall economic situation also gradually improved as inflation declined, resulting in increased foreign investment and thus increased demand for transport services. Foreign direct investment also drew in foreign logistics firms, which offered services previously unavailable in Poland. These companies expanded their service palette with the aid of logistics specialists trained both in Poland and abroad. This was also true of Schenker and BTL . Within Schenker, freight traffic with Poland had traditionally been within the purview of the Germany subsidiary, if for no other reason than geographical proximity. These contacts even survived into the planned economic system, albeit on a limited basis. As far back as the 1980s the Stinnes subsidiary Rhenus AG had operated a joint venture with the Polish state-owned firm C. Hartwig, specializing in freight shipment to and from Poland and the Comecon countries. This Poltrans Internationale Speditionsgesellschaft GmbH110 was headquartered in Cologne. After 1989, Schenker had three roots in Poland  : Schenker, PSK , Pekaes and BTL . • In December 1990, Schenker Polska sp. z o.o.111, was established in Tarnowo Podgorne and commenced operations as an international freight forwarder. • In 1991, then-competitor Bilspedition (BTL) established Scanspol as a joint venture with Transmeble International, each holding a 50 % stake. Transmeble was founded in 1963 as a subsidiary of PSK , the Polish state-owned freight forwarder, and mainly transported containers by rail and engaged in shipping furniture. The real partner was thus PSK , one of the largest state-owned transport firms in Poland. • In 1994, Scanspol, founded three years previously, merged with Transmeble International to form Scansped. Container traffic was transferred to the department in Łódź and Spedcont was established, which focused on trade fairs and is today 100 % Polish. Scanspol continues to operate. • In 1999, after the merger of Schenker and BTL , Schenker Polska and Transmeble-Scansped merged to form Schenker-BTL . • In 2001, the company name was changed to Schenker. • On 30th November 2004, Spedpol was taken over by Schenker. In legal terms, Warsaw-based Spedpol, as by far the larger company, acquired Schenker’s Polish subsidiary via a share exchange, then renamed itself Schenker DB Logistics. With only a few employees, Schenker Polska was initially rather small and had a difficult time asserting itself, as its largest partners, Schenker Austria and Schenker Germany, were already collaborating with Pekaes. The Polish organization attempted to compensate for this deficit by developing land shipping routes to other European countries and overseas. Since 1992, sales were managed by the head office at Osmańska 5 in Warsaw, in cooperation with Pekaes. In 1994 an office was opened 268

Poland

Schenker History Poland

at Warsaw airport, which handled all airfreight and also customs clearance. Some 130 km away, Biała Podlaska provided an airport capable of handling charter flights. Schenker had its own sales agent at the port of Gdynia, cooperating with the port agent as needed. There Schenker operated with four employees, including a customs clearance agent, and leading airfreight forwarding specialist, an own purchaser in Gdynia cooperated with the port agents. The company offered the full spectrum of air and sea freight services, concentrating particularly on European routes. Piotr Sikorski and J. Dietrich served as Managing Directors. In 1996, the company employed 45 people in some 400 m2 of office space  ; in addition to the headquarters and the airport office in Warsaw, there were branches in Słubice, Gdańsk, and Poznań, as well as a total of 2,000 m2 of warehouse space. Turnover climbed from USD 1.5 million in 1995 to 2.8 million USD in 1996. In 1996, cooperation was initiated with Pekaes Multi-Speditor sp. z o.o. This international freight transport company under the management of Piotr W. Krawi­ ecki had split off from Pekaes in 1988, and had 19 offices, 640 employees, and more than 20,000 m2 of warehouse space under its control. This partnership made Schenker “the number one” with Air France and Lufthansa. On 1st March 1997, 269

Regional Headquarters Europe East – Europe North/East

the company was granted the full rights of an IATA agent, and attained ISO 9002 quality certification in 1999. The merger of Schenker and BTL resulted in the two firms combining their operations in those countries in which both were active. Accordingly, on 23rd November 1999 Transmeble-Scansped sp. z o.o. (BTL) and Schenker Polska merged to form Schenker-BTL sp. z o.o., headquartered in Poznań. Jacek Machocki served as Managing Director. The owners of Schenker-BTL sp. z o.o. were Oy Bilspedition Transport & Logistics BTL Öst AB

86.5 %

Spedpol

11.8 %

Private Polish transport companies

1.7 %

The new company boasted 302 employees, 12 offices, and 1,650 m2 of office space and 20,000 m2 of warehouse capacity, with branches in Gydnia, Kraków, Łódź, Poznań, Warsaw, Świebodzice, Słubice, Rzepin, Świecko and Świnoujście. Domestic shipments were carried out using Spedpol’s network. In 2001, the company name was changed to Schenker sp z.o.o., and that same year a terminal opened in Tarnowo Podgórne, located directly on the highway 20 km west of Poznań. This facility consisted of two buildings with 4,000 m2 of warehouse space, 18 loading dock gates, and 800 m2 of office space, located adjacent to the sister company Spedpol sp. z o.o., and with access to its warehouses. In 2002, the logistics centre in Nadarzyn, near Warsaw, was opened. On an area of 170,000 m2, it provided 16,000 m2 of working space, 115 loading dock gates, 12,000 m2 of warehousing space, and 3,900 m2 of offices. Schenker and Spedpol immediately started working alongside one another in the same facility. Finally, in 2004, the 289 employees of Schenker Poland merged with the 1,307 employees of Spedpol, giving Schenker a complete new position in the Polish market. As a state monopoly, PSK went through a difficult period and was on the verge of collapse. It was a large company, but one whose operations were almost exclusively confined to Poland, and which had no experience of a competitive market environment. After years of negative experiences, its customers were happy to make use of its new competitors’ offers  ; and many of its employees also jumped ship. The new freight forwarders and carriers looked around for their own foreign partners and formed their own competitive network. Despite its strong infrastructure, with a dense network of facilities across the entire country, PSK could no longer survive on its own. Its managers and the owner, the Polish state, found in a 270

Poland

Spedpol

partner BTL which would ensure its survival. Thus, Spedpol sp. z o.o. was founded jointly with the Polish Ministry of Transport in 1991, with the Swedish company and the Polish state each owning 50 %. Access to Bilspedition’s advanced systems was crucial to the further development of the company. A national distribution structure like that already tested on the Swedish market was rapidly introduced. PSK regional branches were run as independent companies  ; some did not go along with this, and were instead taken over by their local managers. They soon vanished from the market. The company’s director at the time, Warsaw native Janusz Górski, personally experienced the dramatic transition to a market economy. Górski is without doubt one of the managers of the Schenker Group with the most desire to learn  ; having completed a degree in the Transport Faculty of the Technical University of Warsaw in the 1980s and a postgraduate executive MBA at the Warsaw School of Economics and the University of Illinois, as well as dozens of courses in change 271

Regional Headquarters Europe East – Europe North/East

management, logistics, and personnel management in Poland and abroad. After finishing his university degree, he joined Pekaes, then the largest Polish transport firm with a fleet of 1,200 trucks. Working in the international division, he came to treasure the open and cosmopolitan nature of its employees, who handled international freight transport to many different countries. Schenker was already one of the most important customers, with contacts to Volvo, Mercedes, and other major firms. After leaving Pekaes, in 1991 he took up a position as commercial director of Rondine Ruffoni, a private Polish-Italian freight forwarder counting Fiat among its customers. From humble beginnings, the firm grew rapidly from the start and was a perfect training ground for Górski, as he was responsible for everything. In 1993, Spedpol offered him the post of CEO. By this point, there were numerous freight forwarders and transport firms with international operations, but none offered such a broad spectrum of services domestically. Backed by its Swedish owners, PSK had potential  ; other state-owned companies lacked this foreign input. One example was C. Hartwig, formerly the central provider for international freight forwarding services, which had once been responsible for the lion’s share of international shipments. The company had been in operation for a century and a half, and the name even survived almost half a century of planned economics, but it has now almost vanished from the market. Though a very large company, PSK ran only domestic freight routes, and consequently did not attract the most talented employees. It was in a difficult situation, as its poor service quality had driven many customers away. Fortunately, Prof. Jerzy Tarkowski of BTL Sweden entered the picture. Tarkowski, a logistics expert, had worked in government ministries before emigrating in the 1960s, rising to become a member of the Swedish Academy of Sciences. Jerzy Tarkowski had good contacts with the Polish Transport Ministry, the owner of PSK , and on January 1, 1991, negotiated with the ministry the founding of Spedpol with 3,700 employees. The Polish government took a 50 % stake in Spedpol, with the other half owned by BTL . The state offered PSK as an investment in kind, while the Swedes pumped in 5 million USD in much-needed cash, as well as computers, some 40 trucks, and, most important of all, Western know-how. The company was represented in 9 regions and had 192 locations with rail connections, but the ownership of the company’s property was initially uncertain. Fifteen percent of the turnover was via container transport  ; however, 1,700 Spedpol containers never returned from Russia and finally had to be written off. The Managing Director of Spedpol was Gregorz Kaczanowski, Leif Persson, Thomas Eriksson and Stefan Sjöström served in the Supervisory Board, and Jerzy Tarkovsky was Chairman until 1993, when he passed the baton to Stefan Eriksson for reasons of age. Without a doubt, the Swedes were the company’s rescuers. They set up a training centre in Lodz, where three to four Swedish experts taught over the years. Due to the lack of workshops, an own truck workshop was built in Pozan together with 272

Poland

Volvo. In 1993, Janusz Górski (BTL) and Bogdan Frąckowiak (Polish State) were appointed to the new management board. In 1996/1997, the Polish State also transferred its 50 % share to Spedpol. Until then, the company had not really been able to develop, as Schenker/BTL was not willing to invest while there was state involvement. Due to the wave of privatisations, the shares of business enterprises were passed from the Ministry of Transport to the Ministry of Finance, whose only interest was to sell them. However, this was not without its difficulties and the two joint venture partners met only in the presence of lawyers. In preparation for Janusz Gorski the privatisation process, the government insisted on exclusive management by representatives of the Ministry. The Transport Minister himself was present in the negotiations, in which the Swedes consistently rejected this – in itself legal – solution. Finally, it was agreed that Grzegorz Kalcor would take over the management role as state representative and Janusz Gorski would be appointed deputy. In 1998, the state officials returned to the ministry and Gorski was re-instated at the helm while Piotr Stefanczky stepped into the deputy position. In 1997 10 % of the shares held by the state-owned enterprises were transferred to the employees as prescribed by the privatisation law. Spedpol thus had around 4,000 shareholders. These could only be purchased in 1999, together with the shares of the Polish state. Spedpol thus focused on domestic transport. This was initially a fairly small niche, but one which grew rapidly. Initial losses were unavoidable, but operating profits eventually rose to as much as 10 %, an impressive result for the sector. Spedpol now concentrated on “logistics flow”, an entirely new concept in Poland. This new standard for Poland was taken over by Sweden. Shipments could be carried out from any corner of the country within a single day, which required a very capable IT system and strong commitment on the part of the employees. Stefan Eriksson was responsible for much of this, importing Swedish experts every month to explain every last detail of the firm’s operations. Initially, this expertise came from Sweden, then from Schenker’s regional headquarters for Eastern Europe in Helsinki. In this way, Henry Fagerström also became Chairman of the Supervisory Board of the Polish subsidiary. The company was able to tap the intellectual potential of Poland itself hiring professors from the University of Warsaw as consultants, with a female professor working as the company’s marketing director for two years. This 273

Regional Headquarters Europe East – Europe North/East

focus on marketing made the company more customer-focused. Further assistance was received from the Warsaw School of Economics, as they were able to provide an outsider’s perspective, unconstrained by the horizons of the company. One example of this cooperation was the focus since 2006 on IT security, which will continue to gain in importance in the future. Spedpol’s other strategic emphases were on information technology, its terminals, and employee development, all of which led to major increases in productivity. In just seven years, performance increased 17-fold and reached the levels of Western countries. This achievement was based on market research conducted by external market research institutes, which took customer satisfaction and expectations into account. On this basis, the training of relevant personnel was intensified, reaching a level of five days of training per employee in 1999. A further impulse came from a change of ownership. In 1998, Schenker-BTL , one of the largest firms of its kind in Europe, took over a majority stake in the company. Internal cost-cutting pressures resulted in the reorganization of the network and a reduction in the number of terminals. In its place, a network was erected that was based on daily direct connections between terminals. The effect was a reduction in the number of shuttle trips and the ability to accept customers’ shipments later than before. 2000 brought something like a revolution, traceable ultimately to pressure from Stinnes, Schenker’s owner  ; 50 locations were closed and 200 employees let go. These locations were operating at a profit, so the closures were met with incomprehension by the employees affected  ; however, they were simply located too close together. Accordingly, in the next few years, the whole transport system was completely reorganized. Logistics costs were lowered by establishing a single central warehouse and closing the small local ones. A system of daily freight connections was initiated, based on a central transshipment point in Lodz. This made it possible to deliver a large number of grouped shipments from multiple senders to multiple recipients at low cost within 24 to 48 hours, and could not have been done without the large network acquired from PSK . Investments were also made in employee training and in information technology, and a quality measurement system introduced. As a general matter, Polish industrial firms now concentrated on their core competencies and divested themselves of peripheral operations. This also affected companies’ in-house transport operations, which never operated at capacity and were thus handed over to the more efficient freight forwarding sector. Spedpol embarked on a course of investment, building its first terminal in 1993 and adding a second in 2002. These investments were paid for from the company’s own cash flow, as Poland levied a tax on dividend payouts of nearly 50 %. Nonetheless, there are still some antiquated sites in the country which one would scarcely believe are 274

Poland

Schenker facilities, particularly in Eastern Poland, much of which is still underdeveloped. The IT network also required considerable investment in order to effect the transition from the originally regional systems to a single national network. Spedpol introduced a track and trace system in 1998, the first company in its sector to do so. This also permitted the introduction of “flow logistics”, a just-in-time system. Previously, logistics was generally associated with warehouse management  ; now, the central hub was abandoned, and direct connections established between the terminals. With flow logistics, warehouse time is minimized and deliveries are largely made directly from production to sales. In this way, goods from a few hundred suppliers could be delivered to their recipient within 24 hours. Computerisation also allowed better cost analysis to be performed. The integration of the Spedpol IT system with that of its Schenker-BTL Polska sister company also provided access to the European IT network of the Schenker-BTL Group. In 2004, Spedpol then formally took over Schenker’s Polish subsidiary, the merged company henceforth using the Schenker name. In 2005, Schenker AG acquired a further 29 % of Spedpol, giving it ownership of 99 % of the company’s shares. The merged companies now had 1,312 employees working at 23 separate locations, all under the management of Janusz Górski. Spedpol sp. z o.o. Jahr 1991

Scansped/Schenker Turnover in Zloty

Turnover

Employees

Turnover

Employees

 35,026

3,558

  2,096

 25

1992

 37,946

2,648

  4,652

 48

1993

 45,410

2,060

  9,980

 86

1994

 57,993

1,644

 27,514

149

1995

 75,606

1,576

 40,109

169

1996

107,667

1,542

 50,090

279

1997

145,219

1,507

 76,015

293

1998

181,825

1,497

106,949

302

1999

210,392

1,254

118,742

316

2000

252,556

1,057

148,783

341

2001

295,164

1,248

140,761

370

2002

346,067

1,203

173,737

343

2003

407,983

1,257

227,239

342

2004

474,117

1,307

254,255

289

275

Regional Headquarters Europe East – Europe North/East

Schenker, after merging with Spedpol 2005

728,702

1,312

2006

861,915

1,339

2007

1,015,960

1,443

2008

1,090,509

1,620

2009

1,021,689

1,577

2010

1,174,056

1,602

2011

1,290,513

1,708

In 2004, Schenker’s turnover per employee was 880 Złoty, while Spedpol managed only 363  ; this was traceable in part to the fact that Schenker operated primarily in the international air and maritime freight sector while Spedpol focused on domestic land transport, with its lower profit margins. By 2011, the turnover per employee had grown in the merged company to 756 zloty. The number of employees at Spedpol declined from 1991 to 2000 by 70 %. The drop in personnel in the year 2000 was made up in the following year. In 2009, DB Schenker Rail Polska SA also gained a foothold in the Polish market. With 1,259 employees, 32 offices, 52,573 m2 of warehouse space, and the requisite rolling stock, it offered comprehensive rail freight services across the country. Schenker Poland’s path to success was rocky and full of obstacles. Despite starting with an obsolete state infrastructure, it had been possible with help from Sweden, Finland, Germany, and not least Poland’s own intellectual resources to build a logistics company that had no need to fear international comparison, and the staff of Schenker Poland today know this. With its 1,700 employees, DB Schenker Logistics is one of the largest companies in its sector in Poland. It provides its customers the full pallet of logistics solutions, from road, rail, sea, and air to warehousing logistics, including logistics projects and import/export for leading international manufacturers from a wide variety of sectors. Its success is based on its 17 cross-docking terminals and IT-integrated logistics warehouses, and on its 400 regularly scheduled domestic and international transport routes. The company’s strategic goals reflect the objectives from its time under Stinnes and continued development by Deutsche Bahn since 2002. They are characterized by responsible management, sustainable development, ethical business relationships, and local corporate responsibility. This is expressed in the form of social and environmental initiatives such the employee volunteer program and the promotion of scientific research. A sustainable Development Strategy (CS R) was developed specifically for Schenker sp. z o.o. in 2010. 276

Poland

Warsaw Branch

Warehouse

Terminal Mlochow

Terminal Mlochow near Warsaw

Schenker’s corporate culture is oriented toward cooperation, the promotion of innovation, and efficient processes. In 2001, a “Personal Book of Spedpol” was published, describing its organizational culture, fundamental values, and job responsibilities, and thus a transparent organization with efficient communication and clearly defined responsibilities. A special management program was introduced for the maritime freight division, and the School for Leaders and a Performance Appraisal System were also implemented. In order to ensure the highest ethical and professional standards among employees, the “Code of Ethics” was introduced in 2007, the “Compliance Policy and Ethics – Code of Conduct” in 2010, and the “Dignity and Respect in the Workplace Policy” in 2011, all of which apply to the entire Deutsche Bahn Group. In 2009, the latest corporate vision was  : “We deliver the future”, with the tagline “We add value. We release resources”. The objective of Schenker sp. z o.o. was to support customers in achieving market success and thus ensure the ongoing development and growth of the company’s employees and suppliers. 277

Regional Headquarters Europe East – Europe North/East

Based on a comparison with its competitors, the company launched a strategic program in 2008 with the goal of attaining a leading position in all sectors of the market. The lean management program introduced in 2011 served to set new standards with regard to high quality, low costs, short transit times, and stable employment conditions. These efforts were recognized with certification of the company’s compliance with various quality standards, including ISO -9002, ISO -9001, ISO -14001, ISO 18001 and OHSAS 18001, among others. In 2004, the company instituted an information security policy, and in consequence was the first Polish logistics firm to receive ISO 27001  :2005 certification. Among the company’s numerous awards were the following  : Polish Business Leader, Investor in Human Capital, Benefactor of the Year, the European Medal and Fair Play Award. DB Schenker Logistics in Poland has won two awards in the Responsible Companies Ranking compiled by the Polish business publication “Dziennik Gazeta Prawna”112, a first place in the special section and a second place in the general category. In 2008, the firm was awarded a four-star ranking in the EFQM European Quality Award (R4E EFQM), and the highest possible five stars in October, 2011, recognizing Schenker sp. z o.o. as one of the world’s best companies. Schenker Poland has now unquestionably overcome its teething troubles from the early days of Poland’s economic transformation, and is now entirely the equal of its fellow Schenker companies in Western countries. Russia Russia cannot be compared with the other countries of Eastern Europe. Spanning 11 time zones and 17,000,000 km², it is the largest country in the world in terms of land area. About 83 % of its 148 million inhabitants are ethnically Russian, with 85 % of its population concentrated in the European part of the country. No other 278

Russia

country can rival its wealth in natural resources, with oil and natural gas playing a particularly important role. The vast distances – in similarly barren and resource-rich Australia, one speaks of the “terror of distance”  – and sometimes harsh climatic conditions make any economic activity more difficult. Russia is also the country with the longest experience of a planned economy. After being an agricultural country with a tendency towards industry until the time of the revolution in 1917, it developed in accordance with the tenets of Communist central planning into a powerhouse of heavy industry and military technology through to the end of the 1980s. The Soviet Union was a military superpower, but never achieved comparable economic success, and comparisons with the United States were only propaganda. It eventually collapsed under its own economic inefficiency, triggering the avalanche of political independence that swept across Eastern and Southeastern Europe. While in the People’s Republic of China, the Communist Party retained its monopoly of power, in Russia by liberalizing the economy already in the 1970s, all areas of society in Russia were affected by the changes, resulting in initially chaotic conditions. Influenced not least by American advisors, it was first believed that a market economy would arise spontaneously if only all economic restrictions were eliminated. It eventually became obvious that even the transition from a planned to a market economy still required some degree of planning. This was made more difficult  – again, in comparison to China – by the fact that the country was not building an economy from scratch, but had to modify an existing structure. Privatization was carried out by distributing 148 million privatization vouchers to citizens, resulting in the partial privatization of more than 100,000 enterprises, including 20,000 large firms. By 1997, 70 % of Russia’s industrial potential was in private hands, more than 40 % of the population owned shares, and a handful of business magnates had amassed vast fortunes. However, this voucher privatization had the significant disadvantage that neither additional capital nor foreign know-how entered the country. This was only possible by way of foreign investment, which the Russian government restricted in economically significant sectors in order to avoid becoming dependent on foreign countries. Russia has thus survived three crises in the past 20 years. The early 1990s were a disaster, with Russians standing in lines for hours to obtain basic foodstuffs. Ration cards were even introduced in 1993/1994, and even then food was not always available. The fragmentation of the Soviet Union was accompanied at first by a drastic economic decline. The centrally planned economy fell apart, and with it the steady, familiar economic relationships between the various regions. The newly formed Russian Federation and 11 former Soviet republics then combined to form the Commonwealth of Independent States (CIS), an economic community of equal states. 279

Regional Headquarters Europe East – Europe North/East

CIS (Commonwealth of Independent) Former Soviet Union

Russia

Population

Capital

148

Moscow

Ukraine

52

Kiev

Belarus

10

Minsk

Moldova Kazakhstan

4 17

Kyrgyzstan

4

Uzbekistan

20

Chisinau Astana Bishkek Tashkent

Tajikistan

5

Dushanbe

Turkmenistan

4

Ashgabat

Armenia

4

Yerevan

Azerbaijan

7

Baku

6

Tiflis

Non-members  : Georgia Baltic States  : Estonia

1.5

Tallinn

Latvia

2.6

Riga

Lithuania

3.7

Vilnius

Thus, Russia’s GNP declined from 1990 to 1996 by more than 40 %. Even if one assumes that the economic statistics published by the Soviet Union before 1990 were somewhat over-optimistic, the drop in wealth that accompanied the first years after its dissolution was staggering. The prices had reached levels of hyperinflation  ; therefore stabilization measures in 1992 redenominated the ruble 1,000 to 1. After that, the Russian economy recovered by reducing domestic production costs, with the recent rise in oil prices being a contributing factor. A tentative economic recovery began in 1997, but was thwarted by the collapse of world petroleum prices in 1998. As a result, export income and government revenues plummeted. The Russian government was unable to service its foreign debt, and was forced to abandon the ruble’s peg to the dollar and devalue the currency, and it was not until 2007 that Russian GNP exceeded the 1990 level. Then, in 2008, the global financial crisis that had initially started in the United States reached Russia. Capital fled the country, share prices collapsed, and interest rates on foreign loans spiked. However, the economy recovered rapidly, though exports continued to be dominated by energy and raw materials, while Russia imported much of its food products. Today, Russia’s most important trading partner is the EU, and Germany in particular. 280

Russia

Year

Growth GDP real

Unemployment rate Annual average

1990

−3

–

1991

−5

1992

−15

Change ­Consumer prices

Public debt in % of GNP

5

–

–

93

–

5

1.527

–

1993

−9

6

874

84

1994

−13

8

307

73

1995

−4

9

198

46

1996

−4

10

48

51

1997

1

12

15

57

1998

−5

13

28

143

1999

6

13

86

94

2000

10

11

21

57

2001

5

9

22

43

2002

5

8

16

37

2003

7

8

14

29

2004

7

8

11

22

2005

6

7

13

15

2006

8

7

10

9

2007

9

6

9

7

2008

5

6

14

6

2009

−8

8

12

8

2010

4

8

7

9

2011

4

7

9

9

GDP per capita ­Purchasing power in EUR

Public debt in % of GNP

147,913

 7,600

23

142,961

13,200

37

Year

Inhabitants In 1000

1990 2011

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

281

Regional Headquarters Europe East – Europe North/East

Russia, real GNP compared to 1990 Year

1990 = 100

1989

103

1990

100

1991

95

1992

81

1993

74

1994

65

1995

62

1996

60

1997

61

1998

58

1999

61

2000

67

2001

71

2002

74

2003

80

2004

85

2005

91

2006

98

2007

107

2008

112

2009

103

2010

107

In the past Gottfried Schenker had played with the idea of establishing branches in the Tsarist Empire as well – Moscow, Riga, Saint Petersburg, and Kiev – and sent employees to carry out a market survey in Russia. After all, with the new European Paris-Berlin-Warsaw-Moscow rail link, which went on further to Irkutsk, Vladivostok or Beijing, Tsarist Russia was increasingly attractive for business. In 1903 there were again concrete plans to establish Schenker branches in Moscow, Riga, Saint Petersburg and Kiev and in 1910 the then famous Schenker travel agencies also had offices in Moscow, Saint Petersburg, Kiev and Odessa. However, the financial resources required in such a large and underdeveloped country were deterrents to major investment, since loans, long payment periods and the significant risks involved were not in line with the earning potential. However, there were some exten282

Russia

sive business connections. From 1886, groupage freight shipments were carried out under the management of Schenker and during the Boer War 1899–1902 Schenker transported 50,000 horses from Russia to South Africa via Fiume (now Rijeka). Russian business was therefore carried out with the appropriate partners. Since 1899, transports to and from Siberia and Manchuria – the use of icebreakers made ship departures to Vladivostok and Port Arthur possible already in February  – were organized with the forwarding agent Hermann Kobritz in Moscow  ; in Kiev Schenker worked with the local forwarding agent Oskar Weihe. The partners in Galicia – the Austrian part of Poland, which was then divided into three parts – also played an important role. From 1882, cooperation with Goldlust & Co. in Brody, Krakow, Podwoloczyska, Lviv and Chernivtsi had been agreed to for the handling of all shipments with Russia, where, in addition to wood, silkworm cocoons were taken via this route from China and Persia to France and Italy. Goldlust organized the transports from Russia and the Far East and Schenker forwarded them to Western Europe. A further agreement concerning Russia had been concluded with the customs agent H. Reicher & Co. in Granica, Sosnowice and Alexandrowo. During the First World War, traffic with Russia was interrupted. In 1919, the Russian market was entrusted to Schenker Berlin, which led to tensions with the headquarters in Vienna. Schenker Berlin had people who already had close ties to Russia in the prewar period and knew the situation there well. The head of the Directorate-East in Berlin, Carl Schiller, and the branch head in Estonia, Alphons Dankmann, both had previously worked for the forwarding company Gerhard & Hey – heavily involved in business in Russia – and had adequate language skills. In 1921 the Soviet Union launched the “New Economic Policy”, which led to a loosening of the planned economy by introducing elements of a market economy. As a consequence, Schenker now tried to build up its own organization in the country. However, expansion to the East was restrained by Vienna, and Schenker Berlin was only able to set up a small delegation in Saint Petersburg in 1922. Carl Schiller was in Moscow several times, gaining access to high government circles. Vienna, however, felt that “for hundreds of years Russia has been waiting for us and we for Russia”, and therefore there was no need to rush things. First, the ravaged traffic conditions had to be rebuilt. To conquer Russia with peaceful means meant opening up transport routes, which could only be done with foreign aid. Therefore, establishing a large-scale company was not feasible and a careful, gradual approach was required. In 1923 a correspondence relationship was concluded with the transport company belonging to the Soviet Ministry of Transport, which led to transport assignments to Berlin and Gdansk. Since Vienna handled its Russian transports via the Soviet Dobroflot113, a Russia meeting was held in September 1923 in Vienna, where the establishment of small representative offices in Moscow and Petrograd 283

Regional Headquarters Europe East – Europe North/East

was decided. These were to enable the company to gain a foothold there as soon as the conditions allowed it. The difficult development of business in Russia was also attributed to the Soviet Deutsch-Russische Lager- und Transportgesellschaft mbH (Deruta), which attracted all transport business and dominated sea freight in particular. Nevertheless, after laborious efforts Schenker Berlin succeeded in achieving a virtual monopoly in Russian land transport to destinations abroad. This success was attributed mainly to its special customer care. Companies able to offer customers a service in a special field marked by a high level of professionalism and knowledge of the country are able to outperform their competitors. Schenker Berlin maintained extensive relations with the Russian trade office and representatives of the large Russian cooperatives, was well acquainted with the situation in Russia and had a staff that was knowledgeable both of the country and its language. With the end of the New Economic Policy and Stalin’s seizure of power, however, relations cooled rapidly. Only the Schenker employee Dankmann was permitted to continue his activities in the Dobroflot office. In 1924, he also had to give up his position and the two branch offices in the Soviet Union were abandoned. While transport business with the Soviet Union had experienced a significant increase in the three years of the New Economic Policy, with the Baltic and Polish branches being the backbone of the business, no progress had been made in the Soviet Union itself. The prudent investment policy had therefore proved to be expedient. Nevertheless, extensive livestock and agricultural shipments were carried out until 1941. After the Second World War, starting in the 1950s, Schenker resumed its business relationship with the Soviet Union. Transit trade comprised one element of this, as shipping goods to China or Japan via the Trans-Siberian Railway was often cheaper than using the sea route to the Far East. As a subsidiary of Deutsche Bahn, Schenker had numerous contracts with the railroad companies involved. Schenker also had a strong presence in the market for art transport for exhibitions, and was particularly active in the field of trade shows and expositions. In those days, long convoys of trucks rolled from Western Europe to the trade show grounds at Moscow-Shcherbinka, and to other locations in the Soviet Union. From the late 1960s, Schenker was one of the two representatives of Sovtransavto, and assisted in the development of the Soviet road freight business to and from Germany and, later, Western Europe. This involved some 15,000 trucks a year, for each of which the necessary permits had to be acquired and road taxes paid. A dedicated dispatch office was established in Hamburg for this purpose. Many trucks were loaded with shipments for Schenker customers, and others were handled for competitors. In the 1970s and 1980s, Schenker was involved in providing transport services for major investment projects. After the “transition”, Schenker was involved in transporting aid shipments to the former Soviet Union, such as the German-funded project to build 36,000 284

Russia

Schenker Eurocargo Russia

housing units for Soviet soldiers returning from Eastern Europe. This construction project involved the shipping of massive quantities of materials, and presented a correspondingly large logistics challenge. Many other logistics projects followed, such as the construction of the Moscow Olympic Penta Hotel, which opened in October 1991. The transition to a market economy at the start of the 1990s was marked by poor economic figures and infrastructural problems. For security reasons, Schenker Austria worked with Sovtransavto. Smaller steps were taken regarding maritime and airfreight shipments. Schenker International’s partner ITS Japan handled most air and maritime freight for the company. From 1992, Schenker Sweden maintained a scheduled freight service to Russia, cooperating with Transco Ltd. in Saint Petersburg from 1994. This Schenker partner offered a full range of facilities for domestic and international transport, including its own customs warehouse, a 6,000 m2 general warehouse, and a full range of related services. Schenker’s return to Russia started with the Swedes. On September 29, 1992, Scansped Russia was founded in Saint Petersburg, with BTL Göteborg as its sole shareholder. The document establishing the company was signed by Vladimir Pu285

Regional Headquarters Europe East – Europe North/East

Свидетельство о внесении Сканспед в гос. Регистр

Certificate translation

tin as “Chairman of the External Relations Committee of the Saint Petersburg Mayor’s Office”. For tax reasons, ownership was transferred in 1994–1995 from BTL in Sweden to the firm’s Finnish subsidiary, and then later transferred again to BTP East Oy in Helsinki, with the head office in Saint Petersburg. On February 12, 1997, Scansped also became a registered company in Moscow. After BTL’s acquisition by Schenker, Scansped was renamed Schenker-BTL Russia in 1998, with 6 offices, 85 employees, and 16,000 m2 of warehouse space under General Manager Mikhail G. Smolkin. Anatoly Gvozdev114 was the Sales Manager of the Moscow branch. Besides Saint Petersburg and Moscow, the company also had branches in Timashyovsk, Krasnodar, Nizhny Novgorod and Vyborg. The Logistics Center in Moscow had more than 4,000 m2 of standard and 2,000 m2 of customs terminal space, loading gates, and was partially climate-controlled. A further 6,800 m2 were in preparation. Adjacent was a secure parking area for 150 trucks and a 20,000 m2 container depot. A railroad siding permitted the simultaneous unloading of four freight cars, with a crane capacity of up to 50 tonnes. The entire facility was monitored 24 hours by armed guards and electronic security systems. 286

Russia

On October 31, 2000, Schenker-BTL was renamed Schenker Russia, a fully owned subsidiary of the regional OY Schenker East AB headquarters in Helsinki. In 2005, a 5,000 m2 center entered service in Moscow, intended to act as a hub for the entire country. The company built up a network of scheduled freight routes connecting twenty major cities. Number of employees, Schenker Russia 1999

94

2002

117

2004

148

2005

223

2006

378

2007

530

2008

408

2009

370

2010

506

2011

658

However, Schenker was also represented in Russia by a second company, Schenker ZAO Russija, a subsidiary of Schenker Germany. In November 1993, Schenker/ Rhenus established this as a joint venture with the state-owned firm Sovtrans Expandize, with 95 % of the shares held by Schenker. Richard Hartmann was the General Manager of the new company, which had its main office in Sharikopodshipnikovskaya Street in Moscow. Further offices were opened in Brest, Kiev, at the Sheremetevo Airport in Moscow and in Saint Petersburg, which was headed by Stephan Piper as manager for sea freight. Initially, the company had no own warehouse capacity, instead using external facilities belonging to Sovinteravtoservice and Sovtransavto Exp. Turnover increased from 2.1 million US dollars in 1995 to 3.9 million U.S. dollars in 1996. Moscow May–July 1994 August 1994

Office space

Employees

Hotel rooms 32 m2

3

December 1995

130 m2

9

December 1996

180 m2

16

December 1997

215 m2

22

December 1998

250 m

28

2

287

Regional Headquarters Europe East – Europe North/East

The company was a part of Schenker Germany, performing groupage freight services to Germany, Austria, Holland and Belgium, conducting air and sea freight operations, providing warehousing services for clients such as Philips, Du Pont, and BASF, and carrying out customs clearance. Thus far, the organizational development of Schenker in Russia reflected that in the other countries of Eastern Europe with regard to Schenker’s fusion with BTL and its Finnish subsidiary. For the most part, the national subsidiaries in Mikhail G. Smolkin Europe had been merged in 1998 and rebranded as Schenker-BTL in those countries in which both operated. Russia was an exception  ; Schenker Rossija and Schenker Russia existed in parallel for a dozen years. Schenker Russia reported to the regional headquarters of Schenker OY Schenker East AB in Helsinki, while Schenker Russija reported for certain reasons to Schenker Deutschland in Kelsterbach. Schenker Rossija focused mainly on transport services to Germany, Austria, the Netherlands, etc., while Schenker Russia concentrated primarily on logistics and domestic transport services, so the two Richard Hartmann 2009 firms generally did not compete directly against one another. Schenker Russia often raised the matter of the positive effects a merger would produce, but was unable to get its way, for reasons it did not then understand. Richard Hartmann was a “German-Russian”, and others said of him that he thought “half German and half Russian”. He was thus excellently suited to manage the company’s operations in Moscow. However, he had his own ideas of how the business should be run, and refused to cooperate with Schenker Russia, with its Swedish and Finnish roots. He was supported in his stance by Hans-Jörg Hager, the director of Schenker’s German organization. Frustrated in its efforts to combine the two Schenker companies in Russia, Schenker Head Quarters in Essen applied pressure and sent an audit team to Moscow but failed to find anything of significance. However, Hartmann’s work was made increasingly more difficult until he found a surprising solution. While Schenker headquarters prepared to install new management at Schenker Rossija, Hartmann abruptly resigned from the company and founded his own freight forwarding company together with his former managers. When Schenker Rossija’s newly-appointed manager arrived at New Year 2010, he found the office completely empty – not even the furniture remained  ! This was not the way the transition had been pictured. The material losses were negligible, but the new company took most of Schenker’s former local customers with it, and had powerful connections in the Russian business and political worlds. 288

Russia

2010 was thus a turbulent year, and it was necessary to explain to the public market what had happened. This was accomplished by the long-planned official merger of Schenker’s two Russian subsidiaries in 2010. As the infrastructure of both companies was retained, Schenker was now one of Russia’s leading logistics providers, operating 60,000 m2 of warehouse space in 20 locations with more than 500 employees and 250 trucks. Finally, all freight operations, land, air, and sea, were under the same roof once again. The capacity of the terminal at Lvosky, south of Moscow, was increased significantly to Anatoly Gvozdev - Managing Director 25,000 m², with a Logistics Center of 5,400 m², and the SAP software used worldwide by Schenker was introduced. After the two Russian Schenker subsidiaries merged in 2010, air and maritime freight services had to be developed from the ground up. In 2012, these operations accounted for 10 % of turnover, with domestic and international land transport comprising 70 % and logistics making up the remaining 20 %. The corporate office and one other office were located in Moscow, which, along with Saint Petersburg, had a particularly strong company presence. A total of 900 employees worked at support branches in 22 cities. Today, the entire truck fleet is leased  ; the company only owns some 200 trailers. The current Managing Director, Anatoly Gvozdev115, had been with the Swedish Scansped from March 1993. He studied at the Moscow Transport and Road Institute, and started work in the Soviet period in the Northern European department of Sovtrans, a state-owned transport firm. The underlying ideas of the Soviet economy were specialization and integration. In freight forwarding, there was a truck company for the whole country able and permitted to offer cross-border freight shipping services, one in the West and one in the Far East. Soyuztrans was the only freight forwarder allowed to work with Western companies, Soyuztransit had a monopoly of transit traffic, and a third company handled all maritime transport. Everything was concentrated in these enormous concerns. This was shown by the quantity discounts provided to Western companies, no discount being offered for one to 500 trucks, 2 % for 500 to 1,500 trucks, and 5 % for 1,500 to 3,000 trucks. These discounts were applied for each individual customer  ; and transactions such as these were routine. Then came the gradual transition to a market economy. These huge state-owned firms were largely privatized into the hands of their former managers. Sovtrans was one of these large monopolies handling an enormous volume of freight. The company had 6,000 trucks and 15 depots at the Soviet Union’s western border 289

Regional Headquarters Europe East – Europe North/East

Lvovsky Terminal Moscow

290

Russia

Terminal Gorigo St. Petersburg

alone, and more depots in Central Asia and the Caucasus. This countrywide network would have been well-placed to compete, but when the firm was privatized, individual depots were instead sold to the local management, thus the company dissolved itself. These private entities still exist today, but, lacking the central office once capable of dispatching up to 600 trucks in a matter of days, they have been reduced to insignificance. From 1992, foreign companies were also permitted to operate in Russia. The Swedes of Scansped concentrated on Saint Petersburg, the most important base for trade with Scandinavia, as freight forwarders would be able to serve both markets from this central location. Consideration was even given to acquiring Sovtrans in Saint Petersburg, though this plan was ultimately abandoned. With the integration of Scansped into the Schenker organization, Schenker Russia also profited from its know-how and from the exacting standards of its international clients. Initially, this primarily meant the Metro Group, a German-based international retail giant, which today has some 2,200 locations and 291

Regional Headquarters Europe East – Europe North/East

280,000 employees in 32 countries. The Metro Group had a major influence on Schenker Russia, demanding a hitherto unknown level of logistics performance for its freight shipments and warehouses. Schenker Russia was only one of the firms bidding for the Metro contract, and not even the lowest bidder, but its backing by the global Schenker organization, and with all its financial security and reliability, meant it won the contract. Negotiations concluded with a positive outcome in November 2004, but not all of Metro’s requirements could immediately be implemented in the Russian market. For example, trucking costs were deliberately understated, as it was hoped that, through pressure from Metro, additional shipments and returns would lead to the recovery of costs or even a profit. Metro taught Schenker Russia the groupage freight business. The contract expired after three years  ; the business relationship was extended for another eight months, this time on the basis of reasonable market conditions and under no false assumptions, before ending in 2008. By that point, Schenker had built up a highly effective system that it could also offer to other potential customers. Including Metro, Schenker Russia had moved 4,000 pallets a day, a number which had now dropped to around 3,000  ; profits, however, increased. Schenker Russia’s profitability waxed and waned  ; after encouraging results through 2004, the Metro project dragged down returns until 2009, after which profits rose again. However, the various economic crises to hit Russia also affected Schenker, forcing the company to sharply cut its workforce around 2008/2009. Nonetheless, 2008 was a very good year for Schenker, the full impact of the economic downturn only reaching Russia later. In Russia, too, the economic crisis prompted a rationalization of production and processes. Steeled by the previous crisis, however, Schenker coped well with the changes. An ongoing problem in Russia is the unbalanced nature of freight traffic  ; economic activity is concentrated in the center of the country, and trucks returning from the peripheral regions are largely empty. A guaranteed daily freight service from Moscow to other regions was offered, but returns trips were only made on some weekdays. No deliveries were possible at weekends at all, as they are not working days. Currently, 80 Russian cities representing 85 % of the consumer market are integrated into the Schenker network  ; the remaining 15 %, particularly in the Far East, are also eventually to be added in the future. Nearly all freight is moved by truck, using containers and heating equipment for goods that must not be permitted to freeze. In the winter, transit times are increased by the extreme cold, snow in the mountains, and slower speeds necessitated by icy roads, even on the gentlest slopes. Combined transport using the railways is one option for the winter and long distances, but is not very efficient. Guaranteed delivery times are only possible for road transport, not rail. The Russian railway requires a separate form for each order in a groupage shipment, which is both 292

Russia

Trade fair

Buddy Bears

Customer event

Schenker soccer 2010

time-consuming and expensive, as the price charged to move a freight car is calculated on the basis of the most expensive goods being shipped. The problem with air freight is simply cost and capacity. This sector remained underdeveloped for a long period, particularly for domestic traffic. Passenger aircraft offer only very lim293

Regional Headquarters Europe East – Europe North/East

ited cargo capacity. The air charter business has expanded considerably, but there are few scheduled air freight routes for regular goods, only for replacement parts and similar items where speedy delivery is of the essence. In 1998 Schenker Russija also pointed to crime. While robberies on the main routes were declining, theft by deception was increasing rapidly, involving the loss of entire loads. Shipments were unloaded at fake warehouses, or at false “correct” addresses using forged customs clearance documents. “Losses Customer event Snow fun day 2008 of samples”116 due the customs officers were another problem, sometimes under threat of damage to food and luxury foodstuffs  ; customs seals were also changed. Various methods were used to alleviate the situation, including code words, one half of the (same torn) banknote or copies of the passports of authorized recipients. In any event, it was always important to avoid doing anything that was against regulations. Due to careful handling of its shipments, only five trucks of the more than 10,000 dispatched were affected, including one in Germany itself. Schenker’s warehouses are protected by armed security guards. The Schenker organization was originally very decentralized  ; individual national subsidiaries had a considerable degree of freedom. BTL , however, was heavily focused on Gothenburg and Helsinki for the Russian market, enabling a faster decision-making process. Stinnes attempted to combine the two structures. Reporting requirements and audits became stricter and more numerous with each passing year, which may benefit shareholders, but also requires a great deal of effort. In a global corporation, conflict between the headquarters and individual national subsidiaries is inevitable, as the latter must respond to local events and conditions and cannot afford to lose their flexibility. Today, Schenker Russia has a highly qualified workforce, with many employees having a university background. 15 years ago, just being able to speak English was an accomplishment in itself. The company provides on the job training for its staff, with an internal training program that also serves as motivation for the employees. Schenker Russia pays salaries in line with those offered by local firms, but offers the opportunity for employees to learn the international freight forwarding business. Even when employees leave the company, many retain a connection with Schenker. Good sales staff remains a precious commodity. Initially, the company’s services practically sold themselves, but today’s much sharper competition has changed things. Employee turnover has improved significantly  ; during the Metro 294

Ukraine

project, the company’s period of peak growth, Schenker was forced to hire nearly anyone it could find. Personnel planning is now much easier, as the claim that the employees are the most critical resource for freight forwarding is no hollow phrase. The most important family holiday in Russia is New Year (Novyj god). Most workers take from December 30 until January 8 off because January 7 is the Orthodox Christmas. Christmas parties have only been held by Schenker Russia for the past five years  ; previously, the company was unable to afford them. They are also only held at two or three locations, as it would be impossible to bring together 900 employees spread out across the entire country. The company publishes three quarterly newsletters for customers and employees, informing them of the latest developments in the company and presenting individual projects. Rather than sponsoring athletics, the company focuses its activities on the cultural sector. In terms of the other countries of the former Soviet Union, Ukraine and Kazakhstan continue to be important trade partners. Freight traffic with these countries will continue to grow, but the Russian firms have to be formally registered in these countries also. The Baltic transport routes continue to be important, but today carry primarily transit traffic, especially Latvia. For years, Finland was particularly crucial with regard to customs clearance and security. For the first ten years, high-tech products such as computers and electronics were moved via Finland  ; today, customs procedures have been simplified and risks reduced, so even these high-value goods can be shipped through Poland and Belarus. Ukraine On September 23rd, 1996, OY Bilspedition East AB established Scansped Ukraine. The company began as 2 employees working from a single, tiny room, with Roman Gorak as Managing Director and Alexey Golub as Transportation Manager. Their first task was to handle documentation for Schenker OY ’s Ukraine-bound freight traffic. Scansped Ukraine’s first independent project was to organize the delivery of mobile phone components for Kyivstar, the leading mobile telephone company in Ukraine. Turnover and freight volumes increased, and more and more customers were acquired. During the first five years, the small team of employees primarily dealt with imports and exports via Scandinavia. In 1998, the company was renamed Schenker-BTL , Ukraine, Kiev. Its six employees worked from a single 80 m² office and a fenced-in warehouse of 1,100 m², which was monitored around the clock. In 2002, the company ventured into airfreight, opening a representative office in Boryspil. In the spring of 2005, a contract was concluded with Metro AG , a major international retailer. This represented a leap in the company’s fortunes. The project also 295

Regional Headquarters Europe East – Europe North/East

triggered new investments. Schenker Ukraine acquired a new office in Vyshneve117, leased a 9,780 m2 warehouse, and increased its number of employees eightfold. Gunnar Aru was named the new Managing Director. Year

Growth GDP real

Unemployment rate Annual average

1990

−4

–

Change ­Consumer prices

Public debt in % of GNP

5

–

1991

−9

–

91

–

1992

−10

–

1.211

–

1993

−14

–

4.735

–

1994

−23

–

891

–

1995

−12

6

377

–

1996

−10

8

80

–

1997

−3

9

16

–

1998

−2

11

11

48

1999

0

12

23

61

2000

6

12

28

45

2001

9

11

12

37

2002

5

10

1

34

2003

10

9

5

29

2004

12

9

9

25

2005

3

7

14

18

2006

7

7

9

15

2007

8

6

13

12

2008

2

6

25

20

2009

−15

9

16

35

2010

4

8

9

39

2011

5

8

8

36

Year

Inhabitants In 1000

GDP per capita ­Purchasing power in EUR

1990

51,892

4,800

1993  : 38

2011

45,706

5,700

32

Public debt in % of GNP

Source  : Handbook of Statistics 2012, Central, East and Southeast Europe  ; Vienna Institute for International Economics Studies, Vienna 2012

296

Ukraine

Ukraine office warehouse and truck

Ukraine office and warehouse Kiev winter

A new terminal was opened in Lviv118 in 2006, as was a new representative office in Odessa for maritime freight. From January 2007 to December 2008, a specially picked team carried out a project for Nokian Tyres, for which a new warehouse was opened in Brovary119. The Metro project ended in December 2009  ; it had been quite a learning process for Schenker Ukraine. It had propelled the company to a leading position in the Ukrainian logistics market. However, both turnover and the number of em297

Regional Headquarters Europe East – Europe North/East

Ukraine new warehouse Kiev empty

Ukraine office

ployees had declined as a consequence of the global financial crisis  ; accordingly, 2010 brought new projects for international companies such as Coca-Cola, L’Oreal, Kimberly-Clark, Stora Enso, Dipol, Henkel and the Fozzy Group, and sales increased rapidly. Year

Turnover in 1,000 Euros

Employees

2007

12,074

191

2008

15,463

157

2009

5,522

50

2010

7,347

63

2011

10,942

82

Oleg Verzhbytskyy was named Managing Director in 2011  ; his predecessor, Gunnar Aru, assumed the position of Director for Special Projects for the DB Schenker Logistics Region Europa East. Today, Schenker Ukraine has 3 branches, in Kiev, Boryspil and Odessa, and 14 agencies and several representative offices throughout the entire country. With 298

Belarus

Ukraine Staff

75 employees and 11,000 m2 of warehouse space, it runs 50 regularly scheduled road freight routes. It is one of the leading companies in Ukraine for land, air, and maritime freight transport and logistics, and has its own customs clearance department. Belarus On July 22, 1999, Schenker founded a representative office in Minsk as a ZAO 120 (closed joint stock company) under the management of Vladimir Zholud. Freight services for local companies and imports of Western goods were handled from a 1,500 m2 terminal, mostly through Lithuania. Trucks for transport to/from Russia and Ukraine were leased. Shipments to Kazakhstan were carried out by air or by rail. In 2002, the firm had three employees working from a single office, and warehouse space of 2,000 m2. On May 10, 2011, the company was reestablished as DB Schenker FLLC (Limited Liability Company), with offices in Minsk and at the city’s airport, which continued to be managed by Vladimir Zholud. The representative office was closed on July 25, 2011. The company provides all logistics services as part of the global Schenker organization, including customs clearance. 299

Regional Headquarters Europe East – Europe North/East

Kazakhstan In 2001, Schenker concluded an agency agreement with International Cargo Services (ICS) in Kazakhstan. This company works on Schenker’s behalf in Kazakhstan and Kyrgyzstan, and operates branches and offices in several locations.

300

The cold wind of history

The socialist planned economy was the great social experiment of the 20th century. It ultimately failed, if only because a complex advanced industrial society cannot be controlled in a centralized manner. The state must establish a framework, but decisions must be taken locally in businesses (companies) and households. On the other hand, the strong focus on heavy industry at the expense of consumer goods led to an economy of shortage, even decades after the Second World War. In addition, the Cold War burdened these countries with levels of military spending that they were far less able to shoulder than the richer NATO countries. The transition was therefore ultimately triggered by the leading power, the Soviet Union, which was forced to realize that it could no longer keep pace with the “West”, in economic, political or military terms. While East and Southeast Europe had indeed industrialized, they were not able to grow into a service and information society  – apart from the security apparatus. The infrastructure was neglected and business initiatives were not profitable. State monopolies operated unrivalled in all areas in a “market” which did not sell but rather distributed. The decisive “transformation” therefore had to take place in people’s minds – who, however, did not find this easy, having been subjected for decades to a planned economy. The Cold War therefore also had to be followed by reconstruction. The ideological term “Eastern Bloc” belied the cultural diversity of these countries. Each country had an entirely different starting position. Some, such as Hungary, the Czech Republic and Slovenia, had a more favorable position, while others, such as Albania, were able to achieve high growth rates due to their low starting points. However, initially all experienced a shock. During the first period of the transition, the GNP shrank drastically in all countries, forcing them to face something that had not existed in the planned economy  : unemployment and inflation. 301

The cold wind of history

In addition, the region suffered a significant population loss through emigration or labor migration. The 1990s were therefore in many ways a time of crisis, which was also due to government policies. The governments were faced with the challenge – new to them – of introducing a market-based framework. Politicians could not always resist the temptation of continuing to meddle in national affairs and undermined the reconstruction process. To a certain extent, this is still true today. For example, the privatization of state enterprises was often carried out as a participation and credit note campaign for citizens or employees, but sometimes also as a management buy-out – so as not to be completely at the mercy of foreign investors. This meant that no new know-how or capital entered the economy and the future of companies was highly uncertain. Most of these companies have, meanwhile, disappeared, become insignificant, or were forced at least partially to accept foreign ownership or takeovers. In fact, the transformation was very much an achievement of Western companies who entered this market very rapidly, invested, trained staff and introduced advanced working methods. This was also true for Schenker. The actual Schenker pioneers arrived at the very beginning. They rented a room in a hotel or a small apartment and set up a temporary representative office. Also during the planned economy era, Schenker had maintained business relationships with state-owned transportation companies, with which it necessarily continued to cooperate. Once this was legally possible, it established its own national companies, sometimes as a joint venture with local partners. However, they were already operating with the Schenker system and brought with them the import business of Western European industry. Investments were made, locations expanded, staff trained and IT systems implemented. Initially, this was carried out via a partner system in which Schenker companies in Germany, Austria and Scandinavia took over responsibility for individual subsidiaries in Eastern and Southeastern Europe. By the end of the 1990s, this region was placed under two regional headquarters, Helsinki for Eastern Europe and Vienna for Southeastern Europe. Schenker was market leader in Finland and Austria and had the appropriate management capacity. Both were neighbors of and had long-lasting political, cultural and economic relations with the “Eastern Bloc”, which were not completely terminated during the Cold War. They were familiar with the local business culture and thus formed an important link to the Schenker headquarters in Essen. The regional headquarters did not see it as their task to “control” the national companies they were responsible for, but rather to support their self-development. They had to succeed on their own merits and fight for a place in the sun. The initial euphoria, the “gold rush fever” of the first year soon evaporated. Not least due to the global financial crisis of 2008, growth rates have declined in the region. Due to the significant need to catch up in logistics, the Schenker national companies have continued to invest and grow in these difficult times. 302

The cold wind of history

“Expatriate” leaders from Germany, Austria and Scandinavia, played – and continue to play – a major role in the building of the modern logistics operation. But it was Schenker’s explicit goal to increasingly recruit the management team from local candidates. The respective Managing Director to some extent had the role of cultural translator. He not only had to meet the requirements of the Essen headquarters as well as Western customers in terms of timeliness, accuracy and reliability, but also to understand the business and work culture of his country and adapt it accordingly. At first, Schenker had the ambitious goal of achieving growth under its own steam and not through mergers. This was disrupted by Schenker’s takeover of the Swedish logistics group BTL , who had developed a branch network in Eastern ­Europe. The – at times not easy – merging of the national companies into Schenker-BTL considerably increased the company’s capacity. In some, especially larger countries, domestic forwarders were also taken over as otherwise the establishment of a national freight forwarding network would have taken too long. With accession to the European Union, some former state-owned enterprises clearly saw that they would have no future without international connections and regarded the takeover by Schenker as the best solution. The smaller Schenker national companies then had the daunting task of integrating a large number of employees and streamlining operations to a new level of efficiency. For Schenker, Eastern and Southeastern Europe were traditional markets in which it had been represented until 1945. Re-entry into the market in 1989 was therefore experienced as a “déjà-vu” – after all, Schenker had already been all over the country. However, the old times could not be revived, if only because the company’s former employees were no longer there after half a century. The old terminals at railway stations and docks had been destroyed or were dilapidated. The new facilities were located mainly at highways or airports, and also IT systems and volumes of the transportation and logistics functions to be managed today no longer compare with former scenarios. The company therefore had to rebuild from scratch, a fact that would greatly gratify the company founder Gottfried Schenker  : “Gottfried, look down  ! ”

303

Interview partners 

In addition to the holdings of the Schenker Archive Vienna managed by Mr. Karl Romsy, the book was basically compiled through interviews in each country. We would like to give special thanks to these partners, who provided documents and photographic material. Austria

Romania

Elmar Wieland Klaus Lippstreu

Albin Budinsky Valeriu Dascalu

Croatia

Bulgaria

Martin E. Kuen

Helmut Schweighofer Frank Markovits Vassil Atanassov Galia Natcheva Hristo Vassilev Pavel Pavlov (Despred) Velko Belovski (Despred)

Slovenia

Rok Svetek Czech Republic

Vladimir Handl Tomas Holomoucky Slovakia

Dietmar Schmickl Hungary

Káldor, László Zsuzsanna Papp

Finland

Göran Åberg Mikael Dalenius Henry Fagerström Igor Stjerbakoff Sweden

Hakan Larsson Stefan Eriksson 305

Interview partners 

Lars Stensman Estonia

Meelis Arumeel Peep Kütt Kari Peltonen Latvia

Aivars Taurins

306

Lithuania

Edmundas Daukantas Poland

Janusz Górski Monika Pachniak-Radzińska Zbigniew Pabian Russia

Anatoly Gvozdev Ruslan Petrukhin

Notes

  1 The Schenker Dynasty  : The History of the International Freight Forwarding Company from 1872 to 1931) – by Herbert Mais and Dieter Stiefel   2 Without Borders  : The History of the International Freight Forwarding Company Schenker 1931–1991) – by Herbert Matis und Dieter Stiefel (Mai 2002)  ;   3 Go East  ! – Schenker Logistics in Asia/Pacific Region 1960 – 2010, by Dieter Stiefel, 2010   4 Goulash Communism (Hungarian  : gulyáskommunizmus) refers to the variety of communism as practised in the Hungarian People’s Republic from the 1960s until the collapse of communism in Hungary in 1989. With elements of free market economics, as well as an improved human rights record, it represented a quiet reform and deviation from the Stalinist principles applied in Hungary in the previous decade.The name is a semi-humorous metaphor derived from “goulash”, a popular Hungarian dish.   5 Solidarność = Solidarity (full name  : Independent Self-governing Trade Union – Niezależny Samorządny Związek Zawodowy) is a Polish trade union federation that emerged on 31 August 1980 at the Gdańsk Shipyard under the leadership of Lech Wałęsa.   6 Glasnost (Russian  : глáсность lit. «Publicity») was a policy that called for increased openness and transparency in government institutions and activities in the Soviet Union. Introduced by Mikhail Gorbachev in the second half of the 1980s, Glasnost is often paired with Perestroika (literally  : Restructuring), another reform instituted by Gorbachev at the same time.   7 Das Haus Schenker – see also Translators’s note 1)   8 Schenker & Co. Vienna   9 German Reich Railway or the German Imperial Railway – was the name of the German national railway created from the railways of the individual states of the German Empire following the end of World War I. The company was founded in 1920 as the Deutsche Reichseisenbahnen when the Weimar Republic, formally known as Deutsches Reich (German Reich, hence the usage of the Reich in the name of the railway), took national control of the German railways, which had previously been run by the German states. 10 Schenker & Co. Vienna – For Schenker’s history until 1991, see the two volumes  : “Das Haus Schenker” (The Schenker Dynasty  : The History of the International Freight Forwarding Company from 1872 to 1931) by the renowned economic historians Herbert Mais and Dieter Stiefel, Vienna 1995, and Herbert Matis/Dieter Stiefel, “Grenzenlos” (Without Borders  : The History of the International Freight Forwarding Company Schenker 1931–1991”, Vienna, 2002 11 German Railways

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Notes

12 Austro-Hungarian Monarchy, also known as the Austria-Hungary or Austro-Hungarian Empire, k. u. k. Monarchie (k. and k. Monarchy), Dual Monarchy, or Danube Monarchy  ; more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in Central Europe from 1867 to October 1918, following the end of World War I 13 The First Republic of Austria’s history began on November 12, 1918 14 Deutsche Reichsbahn 15 Traffic Credit Bank 16 The German Parliament (1867–1933) 17 German Reich Fish Office 18 North Sea German Ocean Fishery 19 Field Headquarters 20 Nowdays  : Tallinn 21 AO = Auslandsorganisation = Foreign Organization 22 The area near the border of the GFR with the formal Soviet-occupated zones and the GDR 23 E.ON SE (formerly E.ON AG),[2] marketed with an interpunct as E·ON, is a European holding company based in Düsseldorf, North Rhine-Westphalia, Germany. It runs one of the world’s largest investor-owned electric utility service providers. The name comes from the Greek word aeon which means eternity. 24 IPO = initial public offer 25 Council for Mutual Economic Assistance 26 Party = the Comunist Party 27 In Austria and Germany popularly called “Gastarbeiter” 28 Serbia and Montenegro was created from the two remaining republics of Yugoslavia after its breakup in 1991. The republics of Serbia and Montenegro together established a federation in 1992 as the Federal Republic of Yugoslavia (FRY). In 2003, it was reconstituted as a state union officially known as the State Union of Serbia and Montenegro. 29 Soviet–East German freight forwarder Deutrans 30 Verordnung über eine Vereinigung volkseigener Betriebe ‘Deutsche Spedition’ – VVB 31 “flight” from the republic” 32 A peace demonstration held near the Austrian-Hungarian border 33 German Trust Company 34 VEB Volkseigene Betriebe in der DDR, nationally owned enterprise, people’s enterprise, socially owned enterprise (SOE) 35 Magdeburger Street 36 Agency entrusted with privatizing the East German enterprises 37 Federal Republic of Germany 38 The development of Schenker Austria has been described in a separate publication  : Dieter Stiefel, “Zur Geschichte der Spedition Schenker in Österreich”, Vienna 2007 39 Original names  : Österreichisches Credit-Institut, Deutsche Bahn, Stinnes, neue Deutsche Bahn 40 Association of Austrian Logistics Network 41 Senovážné Square 42 VltavaElba Haulage/Towboad Forwarding Company Ltd. 43 Hybernská Street 44 Havlíčkovo Square 45 A part of the city Ústí nad Labem 46 Chech Savings Bank

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Notes

47 Original name  : Oderberger Lagerhaus-Aktiengesellschaft 48 Financial Directorate 49 Original name  : Deutsche Agrar- und Industriebank 50 U Jezu Street 51 Londynska Street 52 “Wo Gott in der neuen Firma wohnt.” 53 Original  : Karlův most 54 Grösslingová Street 55 Mostová Street 56 Rybné Square 57 Armady Street 58 Vladimíra Majakovského Street 59 k. u. k. Monarchie = Kaiseriche und Königliche Monarchie – Imperial and Royal Monarchy 60 Today in Croatia, Croatian Name  : Rijeka 61 Drau Steamship Company 62 Károly Körút, Károly Circular Road, Circle  ; )  ; at that time the name was Carlsring 63 Nowadays Mérleg utca (Mérleg Street)  ; at that time the name was Waaggasse 64 Árpád Street 65 MÁV – Magyar Államvasutak 66 Nazi anti-Jewish legislation referring to the confiscation of Jewish property and the removal of Jews from Germany’s social, economic and political life 67 Transfer Ruble (also transferable ruble), an accounting unit and means of payment in joint international accounts of countries that are members of the Council for Mutual Economic Assistance (COMECON) 68 Visegrádi Street 69 Szabadkikötő Street 70 Europa Street 71 Váci Street 72 Kraljevina Jugoslavija 73 Slovenia (Socijalistička Republika Slovenija = Socialistic Republic of Slovenia) was a Federal Republic of the Socijalistička Federativna Republika Jugoslavija (Socialistic Federal Republic of Yugoslavia). 74 First Yugoslav transport comp. Schenker & Co. 75 The Berlin Wall 76 Letališka Street, Airport Street 77 Brnčićeva Street 78 First Yugoslavian Transport Company Schenker & Co.Co 79 Slavonska Avenue 80 Ante Kovačića Street 81 Ante Kovačića Street 82 Slavonska Avenue  ; bb = bez broja that means  : without number 83 Heinzelova Street 84 A. Mallys successors 85 Yugoslavian Inland Waterways 86 Gavrilo Princip Street 87 The Geary–Khamis dollar, more commonly known as the international dollar, is a hypothetical unit of currency that has the same purchasing power parity that the US dollar had in the United States at a given point in time. It is widely used in economics 88 Viktoriei Avenue

309

Notes

  89   90   91   92

  93   94   95   96   97   98   99 100 101 102 103 104

105 106 107 108 109 110 111 112 113

114 115 116 117 118 119 120

310

International Transports Bucharest Rahovei Avenue Centura (Ring) Road Schmäh (also ofted dubbed Schmäh in brief ) Viennese snide humour – refers to a colloquial phrase carrying a tipically Viennese humor.The Duden derives the word Schmäh from Middle High German smæhe, which means insult or contemptuous treatment. In Austrian slang, Schmäh means artifice, trick, swindle or untruth as well as engaging friendliness and joke. Robert Sedlacek assumes it is derived from German cant of the late middle ages, where Schmee meant as much as underworld jargon, lies and subtle humor. Österreichisches Handelskammer Bulgarian Royal Carriers Rakovska Street Dédéagh, Dedeagach (Turkish  : Dedeağaç  ; Bulgarian  : Дедеагач  ; Greek  : Δεδεαγάτς  ; English  : Alexan­ droupoli) is a city in Greece and the capital of the Evros regional unit in Thrace. It is an important port and commercial center of northeastern Greece Nowdays Plovdiv) Legue Street – Translator’s note Narodno Sabranie Street Rudyard Kipling, The Jungle Book, Maxims of Baloo, 1894 Russian name  : Торфяновка Russian name  : Совтрансавто Austro-Hungarian Empire The Balcerowicz Plan (Polish  : Plan Balcerowicza), also termed “Shock Therapy”, was a method for rapidly transitioning from a communist economy, based on state ownership and central planning, to a capitalist market economy. Named for its author, the Polish minister and economist Leszek Balcerowicz, the plan was adopted in Poland in 1989 WL BANK AG Westfälische Landschaft Bodenkreditbank Stock Company for International Transports Schenker & Co Zentral-Handelsgesellschaft Ost Known also as Rowno and Równe Polskie Koleje Partistwowe International Shipping Company, Ltd. Co. Ltd. Daily legal news paper Dobroflot or Dobrovolny Flot (Russian  : Добровольный флот, Доброфлот, meaning “Voluntary Fleet”) was a ship transport association established in the Russian Empire in 1878 funded from voluntary contributions collected by subscription (hence the name). Also known as Russian Volunteer Fleet Анатолий Гвоздев Анатолий Гвоздев Loss of samples means that some sample goods are lost from the warehouse because some persons took them out and failed to bring them back … as a sample. Вишнéве Orig  : Львів – Lviv (also Lvov) Orig  : Бровари Russian Original  : Закрытое Акционерное Общество ЗАО – Zakrytoe Aktsionernoe Obshchestvo – Closed joint stock company