Not politicians but sound businessmen: Norton Company and the Third Reich.
The study of the relationship between politics and economics in Adolf Hitler's Third Reich has been lengthy and contentious. One view emphasizes the primacy of politics, that is, the role of Nazi leadership in policy initiation. Another focuses on economic determinism with considerable attention to the part big business or monopoly capitalism" played in policy formation. Still others offer a polycratic interpretation involving different but interdependent blocs in a power-cartel.' " lan Kershaw, for example, builds on the work of Franz Neumann and Peter Huttenberger and argues that big business participated actively and benefited tremendously until almost the very end of the Nazi regime, but that policy control "moved unmistakably towards the specifically Nazi bloc' in the power cartel'"
The recent debate over the role of big business in Hitler's rise to power aptly illustrates the level of disagreement. David Abraham has written that capitalists, and especially their elite, big businessmen, allied with Hitler. Thus, industrialists abandoned the Weimar Republic, supported Hitler's rise to power, and contributed significantly to his consolidation of control. That view has recently been seriously challenged. Henry Turner has asserted that big business and its operators were not responsible for Hitler's rise. They donated less to his NSDAP than they did to other parties. They found him a baffling riddle:' approved of neither his policies nor his techniques, and preferred other solutions to Germany's crisis in 1932--33.
The place of big business in the Third Reich during Hitler's ascendancy is just as uncertain. Arthur Schweitzer's Big Business in the Third Reich (which stops in 1936) argues for a "partial fascism:' in which generals and big businessmen allied with the Nazis in a failed attempt to tame and to use them. On the other hand, John Gillingham contends that the leaders of the Ruhr coal industry were uncooperative, invested reluctantly, and impeded expansion. R. J. Overy's recent discussion of Nazi economic recovery also speaks of business resistance to the Reich and concludes that "much more research is needed to arrive at a satisfactory historical judgment of the relationship between Nazism and German business' " Peter Hayes's response to that challenge, a fine study of IG Farben during the Third Reich, offers an even more complex picture. At Farben, a firm "widely credited, then and since, with carving out a lucrative and murderous place for itself," most leaders futilely dissented from [Hitler's] worst excesses," but then went along.
Norton Company's experience expands our knowledge and suggests a pattern in the relationship between large-scale enterprise and the Third Reich. It offers an interesting and rare inside view of the business-government connection and modifies the little we know about the history of American multinationals in wartime Germany. Norton was not a big German firm, but rather was centered in Worcester, Massachusetts, where it produced bonded abrasives. Nevertheless, Norton was a large company, and it had been manufacturing in Germany since 1909. Between 1933 and 1945, its German subsidiary, Deutsche Norton Gesellschaft (DNG), was variously supportive of, indifferent to, or in opposition to the Reich's policies.
Because of its American roots, Norton Company is not an ideal case for business-Reich relations. But this "test" was not planned. It emerged accidently from research on a company history that uncovered unusual inside data. The data are incomplete, and the case depends on Nor- ton's archival materials and especially on the words of Otto Schutte, DNG's manager, whose reports were subject to his concern to free himself from the Nazi label and to remain in Norton's employ after the war.
Nevertheless, as the citations indicate, the story rests largely on contemporary written evidence; subsequent interviews with survivors have confirmed the account. The written documents fall into two categories: the information gathered for Otto Schutte's denazification hearings in August 1946, and letters and reports written independently in the conduct of the company's business between 1940 and 1945. Among these, several key letters outlining Schutte's strategy were composed before 1942, when the Reich was riding high and Schutte was not constrained to curry favor with Americans. Confirmation of many key points was possible from documents written by a variety of contemporaries: Schutte's German assistants, including Sales Manager Karl Buchsieb, Works Manager Walter jaspers, and Counsel joseph Peters; Pierre Baruzy, Michel Biscayart, Rene Didier, and other top members of Norton's French management; and early visitors from Worcester in 1945 and 1946.
What ordered Norton's seemingly erratic behavior into a logical pattern was the company's vital, dominant, and continuing concern for economic success. Profitability was much more than the "bottom line" or net earnings. It meant the maintenance of the firm's long-term health and expansion, including the care of its fixed assets, the preservation and growth of markets and proprietary advantages, and the continuing development of reliable and improved products. Promoting economic success clearly shaped a logical pattern of behavior during peace, neutrality, and war under American and German management. Norton Company in Germany was not so much pro- or anti-Nazi as it was a-Nazi." Thus, although the Third Reich established the political environment in which DNG operated, and although DNG's products were vital to the Reich's industrial might, Norton's managers drew on German economic policies, techniques, and organizations to set their own course, which variously paralleled, diverged from, or conflicted with the goals of the national state.
AN AMERICAN FIRM IN THE THIRD REICH, 1933-1939
Norton Company clearly qualifies as a big business operating in Germany by readily meeting Henry Turner's criteria for identifying a sam- ple of 158 big firms in Germany in 1927. Norton was a large-scale, integrated manufacturing company that dominated the bonded abrasives industry and that had undertaken some limited diversification. Its products-grinding wheels and other forms of abrasives-came in thousands of specifications according to shape, size, and content. The wheels themselves were fairly simple, consisting of abrasive grains (usually aluminum oxide or silicon carbide) bonded together by either vitrified clays or resins. By the First World War bonded abrasives run on powerful grinding machines were an essential part of modern machine tool and mass production manufacture. They shaped thousands of parts from different materials-principally metals-quickly, cheaply, and precisely (to tolerances of .00025 inch) for automobiles, airplanes, farm equipment, and dozens of other industries.
By 1919, bonded abrasives manufacture, which had scarcely existed a generation earlier, was a $30 million business in the United States. With a book value of almost $20 million (about four times the minimum Turner used to define big business in Germany), Norton Company was among the four hundred largest industrial firms in America.
The key to Norton's dominance was its strategy of integration. Production of its own abrasives in electric furnaces provided advanced knowledge and precise control of the cutting element in a grinding wheel. The mixture and firing of bonds and grains to exact formulas and under carefully controlled pressures and temperatures assured the predictability of action and the duplication of performance so essential to the high-precision, mass-production grinding characteristic of Norton's customers. Marketing through Norton's extensive sales organization permitted careful scheduling of high-volume flows and provided informed salesmen and technicians to counsel the company's major customers-industrial distributors and large-scale manufacturing firms. By the early 1930s Norton had diversified to include coated abrasives (sandpaper), refractory materials (as by-products), and grinding machinery. For more than a decade, the company had been the largest abrasives enterprise in the United States, accounting for one-third of total domestic sales.
Norton's superior products and sales techniques found customers all over the globe. Because foreign sales generally accounted for about one-quarter of all revenues, the company had quickly become a multinational enterprise. In the early 1920s it had plants in Germany, France, Canada, and Japan. When Hitler became chancellor in 1933, Norton Company's plant in Wesseling, just outside Cologne, was nearly a quarter-century old.
Norton's relationship to the Third Reich in its first six years depended on cooperation, requiring some sacrifice from the firm. To provide domestic or otherwise assured supplies of natural resources and to help finance the recovery and strong economy essential for a powerful national state, the German government instituted important economic controls. Although businesses certainly found Germany congenial for investment during the 1930s, there were important costs, especially for a multinational firm. Such restrictions as tariff barriers, limitations of imports, and control of foreign exchange forced serious adjustments on large enterprises that continued to do business in Germany
For Norton Company compliance meant a loss of control and a sharing of fundamental manufacturing secrets crucial to the success of the conservative New England firm. To reduce the risk of foreign production and to preserve domestic profits, Norton historically had compelled its overseas plants to purchase abrasive grain from its American furnaces. Precious bond formulas were preserved by the exportation of premixed clays from Worcester. The company protected proprietary advantages in its manufacturing processes by keeping such advanced equipment as sophisticated presses and tunnel kilns in Worcester. In the early 1930s the German plant still made grinding wheels with techniques and equipment dating from the industry's earliest days in the 1880s. Clays and abrasives were mixed with water in a puddling process (somewhat like making a mud pie), dried in open rings or molds, and fired (or baked) in periodic kilns.
In the mid-1930s manufacture at Wesseling was radically modernized to satisfy the state's requirements. In order to meet targets for self-sufficiency in raw materials, abrasive grain was now purchased from German producers largely dependent on Hungarian bauxite supplies approved by the German government. For the same reason, bond formulas were sent to Wesseling for mixture from German clays. Higher tariff barriers and tightened currency controls in Germany restricted DNG's reliance on Worcester for sophisticated products and forced the American firm to export current technology. As a result, powerful presses with precise closed molds supplanted the old rings, and a modern tunnel kiln supplemented the older periodic kilns. New resin-bonded wheels expanded the product line. By 1939 Wesseling employed almost all the important product and process innovations that had been developed at Worcester since the First World War.
Norton Company's compliance with Reich policies provided a significant contribution to the resuscitation and growth of German industry in the 1930s. Germany now had access to the up-to-date bonded abrasives techniques and technologies essential for precision, high-volume production in the metal-making, metal-working, and machinery industries. According to Norton sources, for example, Wesseling was the only German bonded abrasives plant with a department to produce grinding wheels for ball bearing manufacture.
Reliance on German or nearby raw materials sources reduced the nation's foreign dependence and conserved scarce foreign exchange. Currency controls meant that German profits were reinvested instead of being repatriated, which also preserved foreign exchange.
Norton Company and the Third Reich both benefited as the economy rebounded rapidly between 1933 and 1938. Gross National Product, which had dropped from 91 billion marks in 1928 to 72 billion marks (in constant 1928 marks) in 1932, surpassed its pre-Depression peak in 1935 and reached 126 billion marks by 1938. Private consumption and investment also recovered, and key areas for national power improved dramatically. By 1937 investment in heavy industry had exceeded 1928 levels, and machinery production rose 60 percent between 1936 and 1939 as rearmament accelerated.
The scanty data for DNG before 1938 suggest a similar experience. A plant that had employed about one hundred people in the mid-1920s had four hundred workers by 1939. Book value, which was at most 1.5 million marks in 1924, exceeded 5.8 million marks in 1939. In the same year gross sales had reached almost 6.5 million marks, and DNG had established itself as a strong second in the German abrasives industry with about 10 percent of the market.
Nor was Norton alone. Naturally, German big businesses like IG Farben and Allgemeine Elektrizitats Gesellschaft (AEG) benefited from recovery in an "orderly" political climate that suppressed elements on the Left. Moreover, a surprising number of American multinationals invested and expanded while adjusting their policies to meet the Third Reich's demands. Direct investment by U.S. firms in Germany after 1929 grew 48 percent to $206.3 million in 1940, led by such large industrial companies as Ford, General Motors, IBM, and
Standard Oil of New Jersey. They accepted the restrictions of the four-year plans and adjusted ownership sufficiently to get certification as "pure" German firms to avoid discrimination. At the German government's request, Ford, for example, built new plants, added new products, boosted exports, reduced dependence on foreign materials, and partially standardized parts to German specifications, financing all these activities with profits that could not be repatriated because of government currency controls.
Mutual prosperity, however, should not be taken as partnership with or commitment to the Third Reich. Against the background of worldwide depression and disorder, taking advantage of profit opportunities in Germany during the 1930s was not an endorsement of Hitler and National Socialism. Although the paths of many large firms and the Reich ran parallel in the 1930s, they were not necessarily congruent. Despite their profits, for example, Ruhr coal operators balked at risky investments in expansion and at economic planning requested by the German government. As one historian of Ruhr coal has commented, "In respect to their potential contribution to the success of Hitler's enterprise, the operators came up short."
The relationship of American multinationals to the Reich was similar. As Mira Wilkins pointed out in her history of American multina- tionals, "The American companies acted irrespective of politics. Yet the political and economic life in Germany shaped their operations" Leaders of American firms simply did not comprehend Hitler's political program and largely ignored his attacks on Jews, but many, like Thomas Watson of IBM, were "literally bewitched" by Germany's economic possibilities. Henry Ford did not foresee war as late as 1939. George Moffett of the Corn Products Refining Company did not like the Reich's restrictions but admired its order and certainty.
Cooperation and expansion largely resulted from companies' attempts to use marks that could not be removed from Germany to preserve existing markets important to the long-run success of the enterprises. As the historians of Ford's international operations put it: "The only road it could take to success after the political revolution of  was one of teaming up with the National Socialists.... The iron hand gripped Cologne [Ford's main German plant] firmly, although the velvet glove of approbation and profits (which eventually might be taken) made it fairly acceptable'
Norton's experience illustrates the process. Its people were not enthusiastic about the Reich. As conservative New England Republicans, Norton's owner-operators, Aldus Higgins and George Jeppson, showed no interest in German nationalism and expansion or in the racial program of National Socialism. Furthermore, the operators' insensitivity to potential war was not simply a matter a greed, opportunism, or obtuseness.
Studies of the German economy in the 1930s indicate that the Reich did not organize on a wartime footing until late in the decade. One authority has pointed out that between 1932-33 and 1934-35 "rearmament represented some 17 per cent of total government expenditure, and only 1.3 per cent of GNP over the period." The study concludes that "after 1936 rearmament became increasingly important.
In the face of rising insecurity, Norton's top executives were uneasy but continued to hope for the best. During the Munich crisis of 1938, Aldus Higgins admitted that "our investments abroad are somewhat risky." Nevertheless he believed that the advantages justify our policy and that the chances of a successful outcome in those [European] plants are good "
In addition, Norton's expansion was consistent with its historical reluctance to invest overseas unless compelled to protect important markets that were providing volume and profits essential to the well-being of the enterprise. None of" Norton's early foreign plants resulted from aggressive international expansion. The German, Canadian, and English operations were built to breach tariff walls in established markets. The Japanese factory appeased a key distributor, and the French and Italian plants were virtual gifts of circumstance.
The situation at Wesseling in 1933 was no different. The German plant served an old and major industrial market. More important, Norton had begun resuscitation before Hitler's rise. In 1928, after the Dawes Plan helped to stabilize and encourage the German economy, the company completed its puchase of the shares of DNG held by its original German partners. In that same year DNG established its own sales department to supply major customers and industrial distributors directly. Thus, cooperation with the Third Reich and expansion in Germany between 1933 and 1939 evolved logically, continuing previous investment and helping maintain the firm's long-term success, albeit with lost profits on bonds and abrasives and diminished control of returns.
WAGING NEUTRALITY, 1939-1941
Peace and prosperity had led Nazi Germany and Norton Company along similar if not identical paths and bad obscured basic differences. American neutrality during the early years of the Second World War necessitated further compromise with Reich controls to preserve investment and opportunity. War's advent, however, strained the relationship between company and state, a shift that occurred, ironically, as Norton's Continental operations became almost entirely dominated by German managers.
The shift from American personnel to German nationals in DNG's management was another prudent compromise by Norton's owner-managers. The American-owned DNG and its American operators suffered increased scrutiny and suspicion from Hitler's Nazi government. Ted Meyer, the Worcester research man assigned to DNG, and other non-Germans knew that they were being spied on, although there was no outright harassment. In 1937, the year when President Franklin Roosevelt's quarantine speech drew bitter condemnation from the Nazi government, Norton quietly began replacing top non-German personnel with nationals. Walter jaspers supplanted Works Manager Hugo Dahlquist, Karl Buchsieb followed Hubert Peake in the office, and Otto Schutte relieved Carl Griffin as resident manager. Simultaneously, Schutte, engineer Eric Becker, and other top people joined the Nazi party at Carl Griffin's request and with Norton Company's knowledge.
Like the earlier changes in the 1930s, the alteration in leadership was consistent with the firm's long-run health. Putting Germans in charge would help blunt Nazi hostility, and in Otto Schutte Norton gained a top manager who could deal directly with his countrymen in the German bureaucracy. Schutte seems to have bad no other interest in the Nazi party His file at the Berlin Document Center shows that he joined the party in May 1937, but he did not hold party offices or engage in other party activities.
The shift also gave DNG an able leader with strong ties to Norton Company. Otto's uncle, Alfred Schutte, had been Norton's major European distributor between the 1890s and the First World War, and be had owned 15 percent of DNG until 1927. Otto, who held an engineering degree, had trained in Worcester and in the Chicago sales office for two years. He returned to Germany at Norton's request in 1928 to become first DNG's sales engineer and subsequently its sales manager and to direct the previously described transformation from handcrafting in a workshop to manufacture in a modern factory. More than any other single individual, Otto Schutte was responsible for DNG's resuscitation in the 1930s. Given Schutte's abilities and accomplishments, his rise to the top would have come without government intervention, because Norton had already begun training and promoting nationals in its European plants. The French plant, Compagnie Generale des Meules Norton (CMN), located at La Courneuve outside Paris, and Pierre Baruzy, its native resident manager, had pioneered a strategy in the early 1930s that would be repeated in the German, English, and italian plants. Both Baruzy and Schutte were trained and treated as members of the Worcester family firm. Like Schutte, Baruzy was the nephew of a Norton European salesman. He also received two years' training in Worcester and had several years' experience as CMN's head of sales under resident manager Thomas Green before becoming resident manager himself in 1931.
Both Baruzy and Schutte were charming men who developed warm personal relationships with the Jeppsons and Higginses and their top American managers. Both men were lavishly entertained and comfortably housed in the homes of Norton owners on visits to the United States and in turn acted as hosts and tour guides for visits by the Americans. Baruzy even called Tom Green's wife ma grande soeur ("my big sister"). Finally, as in Schutte's case, Baruzy's promotion signaled the rise of a talented native team, including Armand Lefebvre, Michel Biscayart, Jacques Bonne, and Rene Didier.
Schutte and Baruzy's training was normal for Norton Company, whose owner-operation endured for three generations across eighty years. The Jeppsons and the Higginses carefully selected and educated their top and middle-level executives in Worcester, not only for their business skills but also for their loyalty to the values of a conservative New England enterprise that justly emphasized its family image. Because the process included the original
American overseas managers, it naturally incorporated their French and German successors. Even top foreign assistants for sales and production visited Worcester in regular rotation.
Although Norton's training may have been extreme, it was certainly not unique. Business historians like Alfred Chandler and Thomas Cochran have persuasively identified the evolution of a common managerial ideology as big business grew. Salaried professional managers traded their talents, diligence, and success for respect, stability, and generous rewards. The exchange generated loyalty to big firms where managers invested and administered the property of often large and widely scattered groups of stockholders. Allegiance and the consequent need for long-term planning for career and company competed with such traits as desire for individual freedom, national feeling, and hope for the enormous personal wealth of entrepreneurs like Andrew Carnegie and John D. Rockefeller.
The loyal native managers played key roles in Norton Company's fortunes after the Second World War broke out in 1939. At Norton, as at Standard Oil of New jersey and at Ford, control fell into the hands of these managers, and communication grew more irregular between 1939 and 1941. However, the native managers and their top teams consistently viewed their operations as integral parts of Norton Company. Terms like "Norton Company," "DNG:" and CMN" refer to the place (Worcester, Wesseling, or La Courneuve) where decisions or actions occurred. Differentiation is not meant to suggest contrasting interests. Moreover, the notion that plants on both sides of the war simply converted to war work in their host countries does not apply in Norton's case. Its experience points up significant, successful efforts by resident managers to pursue the firm's long-run well-being, sometimes to the detriment of the Axis powers under which they operated.
Although Baruzy pioneered native management, real leadership fell to Otto Schutte because of Germany's early dominance of Europe and because the shrewd German began plotting his course for Norton before the war. His party membership, leadership of DNG, expertise, and determined loyalty to Norton Company placed Schutte in an excellent position after the Second World War began. To prevent DNG's seizure as foreign property, Schutte moved quickly to have himself appointed trustee in 1939. Already listed as Geschaftsfuhrer (plant manager), he became a Wehrwirtschaftsfuhrer, a leader of a war industry, in 1941. As we shall see, Schutte made DNG an important part of the Reich's war effort to avoid interference with and possible dismemberment of the plant. He acquired the necessary work force and allocations of scarce abrasives, coal, gasoline, and other raw materials to keep the factory running at full capacity.
To help DNG's reputation and to solidify Norton Company's position in Europe, Schutte also aided the firm's Italian operation at Corsico, near Milan. Throughout the war he made semiannual visits to the Italian plant, nominally headed by a Fascist sequester, but in fact still operated by Luigi Marzoli, Angelo D'Imporzano, and other prewar Norton appointees. DNG supplied crucial technical information for bond formulas as well as bond mixes and abrasive grain. Finally, Schutte inter- vened to help avoid a takeover by competitors that would have revealed secret formulas and proprietary equipment.
Protecting Norton by aiding the Italian factory was defensible in the Reich as support for a German ally, but in France Schutte's challenges were much greater.
The unexpected and rapid German victory in France had halted operations and scattered CMN's management and work force. Schutte quickly visited Paris and again had himself appointed first trustee and later custodian of the American-owned operation to prevent a threatened takeover by the Nazi government and shipment of the equipment to Germany. He had Pierre Baruzy made deputy managing director by swearing responsibility for Baruzy's behavior.
In the summer of 1940, when Hermann Goering's Air Ministry was looting French plants and French workers were conscripted to Germany, Schutte was remarkably successful in protecting Norton's interests. He reassembled the operating force by acquiring travel permits and gasoline for some and by having others released from stockades where they were held as prisoners of war or as conscript labor. His influence as titular plant head and as a Nazi party member again allowed him to obtain the necessary permits for transportation and for abrasives, coal, and other raw materials. CMN was even permitted to deliver goods and collect payment in unoccupied areas in France. Finally, DNG technicians, who had been mixing their own bonds since the mid-1930s, shared their bond formulas with the French, who had depended on Worcester-mixed bonds until France's fall. As Otto saw it, his "main task was to swing the French Norton plant in[tol production in order to avoid that surplus machines would be shipped to Germany to relieve the pressure on machine tool factories' This he accomplished by switching
Wesseling orders to the French plant, which by 1941 had returned to full operation.
For Schutte, the protection of Norton's stake in Europe held undoubted primacy over patriotism, victory, and other nationalist considerations. Two months after France's fall he wrote Herbert Stanton, head of Norton's foreign operations, that "we were greatly concerned about the fate of the French Norton branch and of its members of the management" and that he had reopened the plant on his own initiative, not least from a consideration to prevent others from getting inside information about our manufacturing methods." At the war's end
Baruzy confirmed that O[tto] S[chutte] acted from the start as a friend and a
Norton man, with the Norton interests constantly present in his mind "
Norton Company's success in preserving its own interests in Europe during American neutrality depended on two factors. Otto Schutte accentuated the common interests of the firm and the Reich and blurred the conflicts. He quickly took the initiative to keep all three Continental plants operating and to supply the bonded abrasives demanded for the war effort. Steady production emphasized the value of Norton plants and raised the cost of dismemberment or transfer of management. Norton's early contributions, then, would help promote tolerance for its future deviation from Reich policy.
At the same time, Schutte skillfully exploited the confusion in German economic policy at home and in conquered territory during the war's early years. Without clear direction from the top, administration of German economic policy inevitably fragmented among the Wehrmacht, the Four Year Plan Organization, the Air Ministry, the Ministry of Economics, local party officials, and various industrial groups. During the summer of 1940, confusion extended to occupied
France, where Goering's Air Ministry, which sought the immediate fruits of conquest, battled the Ministry of Economics, which wanted to integrate French production into a New Economic Order for Europe. As one historian of the German wartime economy put it: "The machinery of economic policy and of war-production was extremely complicated and all areas of important decision were crisscrossed by administrative borderlines.
Schutte, then, piloted Norton through administrative conflict. His friend Colonel (later General) Bullinger at the Air Ministry helped him reestablish CMN and avoid its break up, the greatest immediate threat. Assertions about the need for grinding wheels and Norton's primacy in the field helped garner crucial supplies of energy and materials. And, as we shall see, successful operation would help fend off bureaucrats' and rivals' subsequent efforts to dismember, relocate, or reorganize CMN under German control.
Furthermore, between 1939 and 1941, Norton Company's relationship to the Third Reich was not unique. A historian of Reich economic policy has pointed out that German industrialists, remembering the inflation after World War I, were able to put up a very stout resistance to measures designed to prevent them from hoarding hard goods." In the 1930s iron and steel producers resisted
Reich efforts to develop German iron ores and stubbornly continued to import superior Swedish ores. During the war control of machinery and machine tool manufacture was "not very successful " A sympathetic Reich administrator appointed from the industry allowed firms to continue to produce for extensive civilian use despite the war. Before 1942 Schutte's footdragging fitted well with "the reluctance of the Nazi Party and of the German industrialists to give up various peacetime objectives until events made it plainly clear they bad to."4
WAR AND CONFLICT, 1942-1945 America's entry into the war heightened German scrutiny of Norton operations in France and Germany, but at first had little direct bearing on the firm's relationship to the Third Reich. Increasing conflict and estrangement between the firm and the national state resulted from Norton managers' stubborn insistence on protecting and preserving the company's long-term prospects. Otto Schutte continued to try to balance Norton Company's course with the Reich's needs, but time and war sharpened the divergence of interests.
Part of the conflict evolved from Schutte's management of DNG. He carefully husbanded profits by refusing to declare dividends, which would have fallen to the German government in a blocked mark account and which might have triggered demands for lower prices. Instead, he maintained a cash reserve ten times the prewar norm and reinvested heavily in another tunnel kiln and other equipment to expand capacity on account [as he later wrote] of the questionable international value of the mark " Schutte shrewdly justified the high reserves as necessary insurance against bomb damage since the American-owned DNG was not eligible for government indemnity.
A more serious and complex conflict between company and state arose over plant location. The Ministry of Armaments wanted DNG relocated to eastern or central Germany to protect against Allied bombing raids. DNG's competitors urged a move as a means of acquiring control of the company or its equipment. A certain Dr. Kluy, a party functionary from the Ministry of Armaments who had previously gained control of Carborundum Company's German abrasives plant, urged a merger with DNG that would give him oversight. The Oemeta Company wanted DNG's ball bearing department shifted to its plant for safety. Likewise, Dr. Baudisch of the Ministry of Economics pressed DNG to sell its securities in the public financial markets just as a competitor, thought to be Feldmuhle, tried to buy DNG at a conference sponsored by the Ministry of Economics.
Such attempted raids were not unique to DNG and clearly indicated a firm's exposure to the Reich. Some companies, like Carborundum, fell to the raids of combinations of Nazis and competitors, but DNG's experience demonstrates that other enterprises found room to resist. At IG Farben, the struggle was both offensive and defensive. Peter Hayes has documented battles with the government over location and expansion that Farben both won and lost.
In DNG's case, Schutte skillfully fended off all attacks. He headed off relocation in central Germany by counterproposing the building of a second DNG plant in Czechoslovakia. Construction would absorb the company's embarrassing excess profits and provide Norton with a strategically located factory for European operations when peace returned. As expected, competitors' anguished cries killed the proposal and ended the discussion. In the meantime, Schutte stalled Dr. Kluy's suggestion until revelations of personal aggrandizement weakened Kluy's position. Schutte delayed or bogged down similar plans in lengthy discussions with various bureaucracies until proponents wearied or the course of the war made them pointless.
In addition, Schutte adroitly used tightened government controls over the economy to protect Norton's interests. When Albert Speer became head of the Ministry of Armaments in early 1942, he quickly established the agency as a central planner and coordinator for the economy. The ministry directed the formation of a system of committees and rings for military products and their components. Like the other groups, the abrasives ring, Sonderring Schliefmittel, was charged to coordinate production, allocate special tasks, facilitate the exchange of vital technical information, and encourage standardization among the 164 firms that composed the abrasives industry.
With the aid of his friend Colonel Bullinger in the Air Ministry, Schutte quickly had himself appointed ring leader or fuhrer for the greater glory of DNG and Norton Company On at least one occasion he blocked the expansion of Dresden-Reick, DNG's biggest competitor, but he more frequently used the position to defend DNG. Schutte's authority as ring fuhrer strengthened his refusals to sell or relocate the plant. He also denied requests to standardize bonds or equipment, arguing that the adjustments would consume precious production time and strain resources. Once again the effect was to protect the secrets of DNG's superior products and processes from prying competitors. The defensive character of Schutte's strategy was also indicated by his deci- sion to resign after nine months because rising criticism of his favoritism toward his American-owned firm bad begun to outweigh the position's advantages. To continue protecting DNG's interests, Schutte established an alternative, unspecified course beforehand, apparently relying on his friendship with Bullinger, his recently established precedents, and red tape.
The greatest strain between Norton's operations and the national state and the severest test of Schutte's pursuit of the company's interests resulted from his efforts to preserve control of the French plant under Baruzy's management through DNG exports of technology, raw materials, and orders. Like Schutte, Baruzy and his French executives were undoubtedly loyal to Norton Company, but as citizens of an occupied country they were more willing to jeopardize an abrasives plant to support national aims.
Their responses to demands of country, company, captors, and self-preservation were even more complex. Rene, Didier put it well: "We found ourselves caught in the chain, having at the same time to satisfy the needs of the Germans, those of our customers and our desire not to produce too much which would be used against those whom we already considered as our future liberators."
As Baruzy aptly said, the French used the "weapon of the weak." They operated CMN to prevent a German takeover, diverted as much material and product as they could to help Norton at Germany's expense, and performed minor acts of resistance. They hid tons of abrasives in sandbags around the plant and consumed tons of precious steel and concrete to begin a second tunnel kiln planned for postwar use and to complete an unassembled steel press. They deflected resources into the manufacture of sharpening stones, dental wheels, and other nonmilitary products, padded the work force to help young men avoid conscript labor, and shipped valuable cargoes into unoccupied territory. By sending defective wheels and diverting output, they shipped only 29 percent of total production to DNG instead of the ordered 50 percent, while maintaining workloads sufficient to avoid takeover.
Schutte, who rented a Paris apartment and visited the plant at La Courneuve at least once a month, was aware of the counteractions and chose to ignore them. But Baruzy's more overt, aggressive actions, which endangered CMN, Schutte, and the entire fragile Norton structure, angered him. Baruzy was always more politically involved than Schutte. In prewar France he had been active in right-wing anticommunist movements. He later claimed that during the war his friendship with German collaborators and his service for the Vichy government as municipal counsellor of Paris and general counsellor of the Department of the Seine helped support his appointment as CMN deputy manager, while at the same time he joined the French resistance moVement. He relayed information, false identity papers, and ration cards to the French underground and helped downed Allied aviators to safety for which he was honored by the United States government). The French plant employed escaped prisoners of war, including one who served as assistant personnel manager. Baruzy even hid fugitive prisoners and arms shipments destined for the resistance movement in Schutte's Paris apartment, which was protected by the DNG emblem.
Although Schutte suspected some of these activities, just how much he knew before the war's end is unclear. In any case, his position as guarantor of Baruzy's behavior and his desire to protect Norton tied his hands. Otto's bitter resentment and bewilderment underscored the two managers' conflicting views of duty. More than a decade later Schutte still angrily insisted that "Pierre has poorly repaid for the confidence that had been placed in hiM." Schutte thought that the Frenchman had betrayed the German's trust, exposed him to punishment or death by the Gestapo, and jeopardized the entire Norton arrangement. Pierre, in contrast, thought the entire episode "dangerous" but thrilling:' and he told Bert Stanton that Schutte, a good fellow,' has been a brick
Fragmentary evidence suggests that even Baruzy's French colleagues felt that his risky escapades had gone too far and eopardized CMN and Schutte. Schutte was charged before the military governor of Paris with favoritism toward the enemy, and he was investigated by the Gestapo. The Reich relieved him as custodian of CMN just before the Allies recaptured Paris. In the subsequent chaos, Didier, Lefebvre, and other members of Baruzy's team defended Pierre against charges of collaboration with the Germans. Baruzy was swiftly cleared, but his fellow managers' hesitant response suggested their own doubts about the wisdom of his course, whereas they clearly praised Schutte. Didier simply summarized at the war's end that Schutte "helped our task to a maximum.
When Schutte surrendered the Wesseling plant to the Allies in the spring of 1945, be could congratulate himself on a job well done-for Norton Company and its "ring" of European interests. DNG exports had maintained important Norton markets outside Germany. German, French, and Italian plant assets had nearly doubled in book value during the war, and annual sales were running 60 percent or more above prewar figures. Net profits on sales running as high as 28 percent in Italy, 35 percent in France, and 25 percent in Germany helped produce healthy cash surpluses.
As in the period of American neutrality, Schutte's success depended on several factors. Luck of course played an important role. The German factory, like the other two plants, escaped incapacitating damage, despite heavy bombing raids in the Cologne area. In addition, Allied successes in 1944 and 1945 were well timed to relieve Schutte just when his power and authority were being seriously eroded.
The key explanation, however, lay in the theme emphasized throughout this article, the divergence of big business interests from those of the Third Reich. Under Otto Schutte's adroit leadership, Norton's top managers in Germany, Italy, and France applied themselves diligently to perpetuate Norton's position. Schutte's strategies of production, export, and finance balanced the demands of totalitarian government against the assumption that Norton Company would operate in a postwar Europe. He wisely avoided large-scale expansion and concentrated instead on quiet reinvestment and preservation of existing operations and markets, a shrewd, low-profile approach for a company already notorious as an American-owned firm.
Ironically, the Reich's economic policies lent themselves to such a strategy. The denial of indemnities to foreign-owned firms justified the accumulation of large reserves. The confused approach to wartime conversion between 1939 and 1942 let companies establish strategies in their own interests, which they were able to continue despite Speer's imposition of centralized government controls after 1942. In addition, the machinery of Speer's system provided numerous positions on important rings and committees where key industry and management people could influence their own destinies. Schutte was not alone in this course. The self-interest exhibited by machinery and machine tool companies, for example, continued under lenient oversight at least into 1943.
TRUTH AND CONSEQUENCES
Several questions remain. How much was all of this worth to Norton Company? What significance does the case have as a pattern? How typical is that pattern?
Because the freedom of Schutte and other plant managers to pursue their firms' interests was obviously limited, their record was not one of unbroken prosperity and growth. The Norton plants' well-being depended largely on the fates and conditions of their host countries. Rising taxes, materials shortages and, after 1943, the growing ravages of war first slowed and then disrupted manufacture. The Italian plant operated in the red in 1943, as did the French plant in 1944 and both the Italian and German operations in 1945.
In Germany the tunnel kiln closed in November 1944 for lack of coal, and wheel output was only fitful until 1947. Although Allied bombing raids never stopped production, they destroyed several buildings, killed a few workers, and did over 600,000 marks damage. Finally, the book value figures in
Schutte's 1945 report exaggerated the prosperity. Milton Higgins, son of Aldus Higgins and George Jeppson's successor as Norton's president after the war, recalls that plant and equipment were "pretty well worn out" when he visited in 1946, an estimate confirmed by a nearly 50 percent writedown of Wesseling assets between 1944 and 1948.
Conditions were similar at the English, French, and Italian factories. Higgins thought that the Norton European plants were "all pretty well run down" on his 1946 visit. AIthough they had suffered little bomb damage, difficulties stemmed from equipment worn from heavy use and little maintenance. From 1944 until the early 1950s crippling shortages of bonds, abrasives, steel, and energy blocked production, and the ravaged condition of the European economy dried up sales. The postwar rise of tariff barriers, currency controls, and other restrictions further disrupted trade. Finally, the red tape of pacification and occupation severely hampered operations in Italy and Germany.
Nevertheless, Norton's continued presence put it in an excellent position to take advantage of the European recovery stimulated by the Marshall Plan and other U.S. foreign aid that began in the late 1940s. The skill of Norton's resident managers-a residue of their careful selection and training in Norton methods and values-allowed the firm to build on the good luck and the economic recovery that it could not control. Baruzy, Schutte, Marzoli, and their associates kept their plants operating under Norton management throughout the war, maintained as best they could a strong staff and work force, and preserved Norton's distribution network and markets across Europe. In postwar Italy, where the Corsico plant did not equal 1938 production until 1950, a 40 percent expansion of capacity was under way by 1952. The French plant matched prewar levels more quickly, grew to $5 million in sales by 1950, and then doubled output by 1958. English operations grew considerably in the 1950s, though German sales recovered slowly.
When peace returned, Norton Company was not inclined to scrutinize or judge. It concluded that in extraordinary circumstances top management at the French, Italian, and German plants had acted well within the bounds of honor and duty, if not in harmony Baruzy, Schutte, Marzoli, and their chief assistants were reappointed. Special efforts were made for Schutte, who became a company legend. Milton Higgins ably summed up the firm's easy resolution of any conflict in loyalty: All during the war [Schuttel was a Norton man primarily [who] had tremendous loyalty to the company. I know of no individual more loyal to the people in the United States and Worcester than Otto was." With the approval of Jeppson and Higgins, Norton Company helped Otto Schutte to clear himself of the charge of being a Nazi official, a designation that would have disqualified him from any executive position. Following his acquittal in British denazification hearings that further confirmed his account, Schutte again became DNG's resident manager, a job he held until his retirement in 1959.
Schutte's restoration was eased because he and DNG were apparently only marginally involved in the most odious aspects of the Third Reich's industrial policies. DNG employed 25 French prisoners of war and as many as 133 foreign (mostly Polish and Russian) laborers. The largely untrained "foreigners" totaled about one-third of the factory work force, and Schutte reported that he paid them wages equal to their German counterparts. (A Mr. Vossmuller, chairman of DNG's "workmen's council," testified that "Mr. Schutte has always treated the workmen without any prejudice.',)
In the only other known incident, Otto temporarily replaced Henri Benedictus and Company, the Jewish-owned distributor of Norton products in Belgium, with Henry Schutte, a merchant of certain but unspecified kinship. Otto acted reluctantly in 1943 (several years after the Reich forbade trade with non-Aryan firms in foreign countries) and apparently only after Benedictus's attempt to provide an Aryan cover went awry. In addition, the German manager carefully gave Worcester the right to reverse the process when peace was restored, which Norton Company did.
Schutte and DNG certainly collaborated with the Third Reich. They failed to protest slavery and racial extermination; they carried out industrial policy; and they engaged in and profited from important war production, as did many others. But the fragmentary evidence suggests no major crime or attempt to conceal the more heinous aspects of Nazism. Instead it indicates indifference or quiet acceptance and the primacy of preserving DNG's and Norton's position. In the Benedictus case, for instance, Schutte moved most quickly when misrepresentation by the distributor threatened to call the Reich's unwelcome attention to DNG.
The story is significant in several ways. Norton Company did not control but reacted to policy. Furthermore, even after discounting for antipathy on the part of managers of an American subsidiary, the experiences of DNG and CMN reveal considerable room to maneuver in the wartime economy of a totalitarian state. At various times, company policies on location, finance, and production clearly ran counter to the Reich's interests.
Second, the pattern of Norton's behavior indicates a wide-ranging variation in the relationship between big business and the national state within the experience of a single firm. The inverse correlation between the nationality of Norton's managers and its adherence to government directives meant that deviation was concentrated under German management and that something besides nationality was at work. The Norton case demonstrates that managers' main concern was not the bolstering of the Nazi state but the maintenance of the enterprise's long-term success.
Based on that sustained interest, Norton's managers responded to the Third Reich's economic policies, techniques, and organizations in ways that variously supported, tolerated, or eroded the government's goals. Certainly, as the leading historian of American multinationals has written, "after 1939-as before 1939-multinational businesses were buffeted by political conditions beyond their control." Nevertheless, the Norton case makes clear the existence of business activities that reduced risk and restored some influence over a firm's destiny
Nor should the Norton experience be attributed simply to the personal values and character of one man. Although Otto Schutte directed strategy, he depended on and received extensive support from his top team. Sales engineer Eric Becker and Sales Manager Karl Buchsieb helped maintain exports; Counsel Joseph Peters assisted Schutte in negotiations to avoid takeover and relocation; and Production Manager Walter Jaspers was Schutte's close confidant and helped conceal "disloyalty" at CMN. Even the French team carefully ran CMN to maintain its independence, markets, and profitability Except for Pierre Baruzy's personal, riskier escapades, the French team also managed resistance in ways that did not threaten the firm.
Furthermore, the case suggests that Norton's experience was not unique. The similarities in training and ideology between Norton's managers and those of other large enterprises indicate that we might reasonably expect to find in multinationals and in German big businesses a varying relationship between the interests of managers and their companies on the one hand and those of the national state on the other hand. The poor organization of German rearmament before 1942, the bureaucratic fragmentation of its administration, and its dependence on the private sector provided considerable opportunity for business to maneuver. Moreover, the experiences of steel and iron, machine tool, and Ruhr coal operators demonstrate that a number of major German firms, in addition to Norton Company, used that opportunity in their own interests.
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|Publication:||Business History Review|
|Date:||Sep 22, 1988|
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