Robert Bosch GmbH History

Company Perspectives:

We want satisfied customers. That is why the highest quality of our products and services is one of our major corporate objectives. This also applies to the quality of the work carried out in our name by our trading partners, and in their sales and service organization.

Company History:

One of the ten largest companies in Germany, Robert Bosch GmbH is best known as a worldwide supplier of automotive equipment, with world leadership in fuel injection systems and antilock brakes. The company has also developed into a world leader in various other areas, including communications and radio technology, traffic management systems, power tools, household appliances, kitchen and bathroom furniture, thermotechnology, automation technology, and packaging machines. Bosch has operations in more than 128 countries, including the stakes it holds in 42 joint ventures worldwide. Since 1964, 92 percent of the company has been owned by the Robert Bosch Foundation (the Bosch family owns the remaining eight percent), which runs the company on the basis of nonprofit principles and uses its share of company profits to fund various philanthropic programs.

Early History

The company was founded in Stuttgart in 1886 by a highly motivated, self-educated electrical engineer named Robert Bosch. More talented as an administrator than as an engineer, Robert Bosch gained a reputation for innovation in industrial relations. He instituted an eight-hour work day (which was uncommon at the time) and paid employees at a higher standard rate in the belief that superior working conditions would encourage better employee performance. Bosch readily acknowledged ability and creativity in his employees, assigning the most talented among them to positions in the most promising areas. He also recognized the need for a diverse, high-quality product line as the most direct means to growth.

Bosch entered the automotive industry in the early 1890s, when the company introduced a hand-crank motor starter. Near the turn of the century, on the strength of the growing American automobile market, Bosch became the world leader in ignition systems. By 1914, 70 percent of the company's sales were in the United States. The outbreak that year of World War I resulted in an American trade embargo against Germany. Bosch was prevented from doing any more business in the United States and forced to rely solely on European sales under a wartime economy.

When the war ended in 1918, the German economy was in a state of complete disarray. The nation fell into a serious economic depression during the 1920s, which caused many businesses to fail. Bosch, however, managed to remain in business, partly as a result of its diversification and good management. As the economic situation stabilized, public discontent in Germany began to rise. Bosch, which expanded modestly during this period, purchased the radio manufacturer Blaupunkt-Werke in 1933. That same year, the Nazis under Adolf Hitler seized power and initiated a new economic order characterized by industrial growth and rearmament.

The company enjoyed several periods of strong growth during the 1930s, primarily due to strong demand from German industry and the military for electronic and mechanical products. The company's growth necessitated a new form of organization, and in 1937 it was incorporated as a private limited company. German military adventurism and territorial expansion precipitated World War II which again eliminated foreign markets for companies such as Bosch. Robert Bosch died in 1942, during the height of Germany's success in the war, and was succeeded by Hans Walz. As outlined in Robert Bosch's will, ownership of the company eventually--in 1964--was transferred in large part to the Robert Bosch Foundation, with the balance remaining in the hands of the Bosch family.

Postwar Rebuilding

For Germany, the remainder of the war was characterized by severe shortages of all kinds and extensive war damage. At the end of the war Germany was partitioned into occupied Soviet and Western Powers zones (later East and West Germany). The more heavily industrialized western zone, where Bosch was located, was in ruins. Bosch reorganized and its factories were rebuilt. The American market, however, remained closed to Bosch after the war, again forcing the company to strengthen its connections with smaller European manufacturers. New efforts were made to develop more advanced products, and by 1949 Bosch perfected a mechanical fuel injection system.

West Germany was "readmitted" to the world market system in the early 1950s, during which time Bosch became a major supplier of automotive products to foreign manufacturers. During the 1950s the consumer automobile market experienced strong growth, due this time to an expanding world economy and new levels of prosperity.

Also during the 1950s, Bosch began a cautious program of long-term diversification. For example, household appliances were added to the company's product line in 1952 with the introduction of Bosch kitchen appliances. In 1958 washing machines were added, then dishwashers in 1964. In 1952 Bosch also began to manufacture hydraulic equipment and do-it-yourself power tools.

Hans Walz retired in 1962 after 20 years as the company's chief executive. He was replaced by Hans Merkle, a self-taught and apprenticed engineer and businessman, known for his ability to predict changing market conditions. Merkle recognized pollution control and fuel economy as key factors in future automobile sales. Under Merkle's leadership, Bosch began to devote more of its resources to the development of electronic products, and later produced a new fuel injection system that promoted a smoother running engine and reduced fuel consumption.

Potential competitors of Bosch, including Siemens and Bendix, largely ignored the potential of fuel injection systems while Bosch continually perfected new and better versions. When strict new antipollution regulations were enacted in the United States, automobiles equipped with Bosch fuel injectors, such as the Volkswagen Beetle, became extremely popular. Soon afterwards, other European manufacturers, including Daimler-Benz and Volvo, decided to integrate the Bosch system into their product line. When the 1973 OPEC oil crisis caused dramatic increases in the price of petroleum, the highly efficient Bosch fuel injection systems became virtually indispensable.

Expansion and Diversification inthe 1970s and 1980s

Throughout the 1970s, Bosch made moves to expand its operations overseas, moving into Japan and Malaysia in 1972, Turkey in 1973, and Spain in 1978. By the mid-1970s, Bosch had made strong progress in regaining its prewar market share in the United States. Bosch purchased a plant in Charleston, Virginia, in 1974 to produce fuel injection systems in the United States. The company also acquired a 25 percent share of American Microsystems, a manufacturer of integrated circuitry, and a 9.3 percent stake in Borg-Warner, which was well-established in the area of microcircuitry. Bosch planned to apply technologies developed by these two companies to produce even more advanced automotive systems.

The Charleston plant was subsequently expanded three times. Through the late 1970s fuel injection systems, Bosch's primary product, became the most important electronic component to automobile manufacturers. By 1984, nearly half of the cars sold in the U.S. were equipped with fuel injection systems.

In the early 1980s, several other manufacturers initiated efforts to reduce Bosch's share of the worldwide automotive components market. Marcus Bierich, who was named chief executive officer of Bosch in 1984, reacted quickly to these threats by expanding the company's product line and diversifying its operations.

One of the most important products to emerge from this new initiative was ABS, the antilock braking system. This device prevented brakes from locking by means of an electronic gauge wired to the brake pedal. In addition to being an important safety feature, it made a number of other wires and cables redundant, allowing physical space for "cruise control" and other features. By 1985, the Bosch ABS system was standard on many European automobiles and had also been introduced on American luxury cars. Despite competition in this area from Alfred Teves (a subsidiary of ITT) and Honda, Bosch developed additional facilities to build ABS system in order to meet the anticipated increased demand.

Following up on the success of ABS, Bosch was also involved in the development of electronic traction control, which involved sensors to measure wheel speed and adjust the speed as necessary to keep the car under control. Bosch began production of its first traction control system in 1986.

As car features grew more sophisticated, Bosch continued to develop systems to aid the driver. A new device called the digital trip meter calculated the course and direction of a car by measuring heat levels of the terrain and posting a computerized map on the driver's dashboard. In addition to making the driver aware of the most efficient available routes, the meter could also detect traffic jams. The product was introduced in 1989 as the Travelpilot navigation system. A more sophisticated version using CD-ROMs and providing data to the driver via voice and symbols was later introduced in 1995 on luxury-model Japanese vehicles.

Fierce competition and a 1984 metalworkers strike seriously affected the company's production for several months and weakened its lead over competitors. For virtually the first time, clients were forced to evaluate alternative suppliers.

The 1980s also saw Bosch enter the telecommunications market through the acquisition of or the purchase of stakes in various companies involved in the manufacture of equipment and the development of systems, including Telefonbau und Normalzeit, a German telecommunications company, and Telenorma, the exclusive supplier of communications systems to Bundespost, the national postal and telecommunications group. In 1989, these various activities were consolidated with the creation of the Bosch Telecom Business Sector.

1990s and Beyond

In addition to expansion into the newly merged areas of the former East Germany, Bosch continued to expand internationally in the early 1990s. The newly opened markets of Eastern Europe were one targeted area, as marketing operations were established in Poland, Hungary, and the Czech Republic in 1992; in Bulgaria, Croatia, Latvia, Russia, Slovenia, Ukraine, and Belarus in 1993; and in Romania in 1994. On the manufacturing side, two Czech Republic-based joint ventures were formed in 1992 to produce automotive equipment. In the Asia-Pacific region, Bosch entered into a joint venture to form Korea Automotive Motor Corp. in South Korea in 1993; was involved in another South Korean joint venture the following year, Korea Mechanics and Electronics Corporation; established a sales company in the Philippines in 1995; and entered into no less than six joint ventures in China also in 1995. Finally, in the United States in 1992, Bosch joined Penske Transportation in setting up a joint venture called Diesel Technology Company to develop and produce injector technology for diesel engines used by heavy-duty commercial vehicles.

Bosch continued to refine its electronic automotive components in the 1990s, introducing the Vehicle Dynamics Control system in 1994, designed to improve the stability of vehicles in critical situations by detecting all rotational movements of the car around its vertical axis. The company also entered into the increasingly lucrative market for airbags through a joint venture with Morton International called United Airbag Systems. Bosch was contributing its expertise in electronic components by developing the triggering devices for side-impact airbags the venture was developing.

Despite continuing its long tradition of innovation, Bosch entered a difficult period in the early 1990s under the combined pressure of depressed markets for automobiles and increased competition. Although known for the high quality of its products, Bosch had also over the years developed a reputation for high prices and inflexibility in its relations with its clients. Auto makers were increasingly turning to other cheaper and more cooperative suppliers for parts they used to purchase from Bosch or manufacturing the parts themselves. The latter occurred in 1991 when General Motors suddenly cut in half what was previously a standing order for fuel-injection parts. Also contributing to Bosch's difficulties was its telecommunications business which, although profitable and already contributing nearly a quarter of overall sales, was finding it increasingly difficult to compete against the giants of the industry--Siemens, Alcatel, and Northern Telecom.

In response to these challenges, Bosch in late 1991 instituted a cost-cutting program and process improvement initiative, and also cut its work force by about 8,000. The company continued to struggle, however, as market conditions failed to improve, leading in 1993 to the company's first sales decline since 1967. At the same time, net income fell every year from 1989 to 1993, overall going from DM 626 million in 1989 to DM 426 million in 1993. Further moves were taken in 1993 to turn the company around, including the elimination of 13,000 additional jobs and the institution of team-oriented work groups.

The next two years showed modest improvements for Bosch as sales increased 6.2 percent in 1994 and four percent in 1995, while net income increased to DM 512 million in 1994 and DM 550 million in 1995. Even if not completely recovered, the company was feeling healthy enough by early 1996 to make a $1.5 billion acquisition of Allied Signal Inc.'s hydraulic- and antilock-braking business for light vehicles. The purchase enabled Bosch for the first time to provide its customers with complete brake systems, and as one of the world's leaders in the field to boot.

The size of this latest acquisition confirmed Bosch's commitment to its core automotive components business and also raised the question of whether the company might divest itself of some assets in order to invest further in the core. The most likely candidate was the telecommunications technology sector, given its struggle to establishment itself. Even if it retained its diversified portfolio, Bosch's future, like its past, would certainly be tied most closely to automobile components.

Principal Subsidiaries: Blaupunkt-Werke GmbH; Bomoro Bocklenberg & Motte GmbH; Bosch-Siemens Hausgeräte GmbH (50%); Bosch Telecom GmbH; Bosch Telecom Radeberg GmbH; MotoMeter GmbH; Robert Bosch Electronik GmbH; Robert Bosch Elektrowerkzeuge GmbH; Robert Bosch Fahrzeugelektrik Eisenach GmbH; Signal Huber AG; VB Autobatterie GmbH (35%); Robet Bosch AG (Austria); Robert Bosch Produktie NV (Belgium); Robert Bosch spol. sr.o. (Czech Republic); Bosch Diesel spol. sr.o. (Czech Republic; 76%); Robert Bosch (France) SA; Rober Bosch SpA (Italy); Robert Bosch Verpakkingsmachines BV (Netherlands); Blaupunkt Auto-Rádio Portugal Lda (70%); Vulcano Termo-Domésticos SA (Portugal); Robert Bosch España SA (Spain); Robert Bosch España Fábrica Madrid SA (Spain); Robert Bosch España Fábrica Treto SA (Spain); Robert Bosch AB (Sweden); Robert Bosch Internationale Beteiligungen AG (Switzerland; 90%); Scintilla AG (Switzerland; 85%); Bosch Sanayi ve Ticaret AS (Turkey); Robert Bosch Ltd. (U.K.); Worcester Group plc (U.K.; 69%); Robert Bosch Ltda (Brazil); WAPSA Auto Pe&ccedil Ltda (Brazil); Robert Bosch SA de CV (Mexico); Robert Bosch Corporation (U.S.A.); S-B Power Tool Company (U.S.A.; 50%); Vermont American Corporation (U.S.A.; 50%); Motor Industries Co Ltd (India; 51%); Bosch KK (Japan); Nippon ABS Ltd (Japan; 50%); Doowon Precision Industry Co Ltd (South Korea; 20%); KEFICO Corporation (South Korea; 25%); Robert Bosch (Malaysia) Sdn Bhd; Robert Bosch (South East Asia) Pte Ltd (Singapore; 70%); Robert Bosch (Pty) Ltd (South Africa; 64%); Robert Bosch (Australia) Pty Ltd.

Further Reading:

• Blau, John R., "As Bosch Gets Tougher, Will Customers Get Going?," Electronic Business, January 8, 1990, pp. 81-85.
• "Braking," Economist, April 25, 1992, pp. 75-76.
• Brooke, Lindsay, "No Strong Recovery," Automotive Industries, December 1991, pp. 36-38.
• Fuhrman, Peter, "Euro-Thrash," Forbes, July 22, 1991, pp. 66-67.
• Heuss, Theodor, Robert Bosch, His Life and Achievements, New York: Henry Holt, 1994, 612 p.
• "Knowing Who's Bosch," Economist, February 27, 1993, p. 61.
• Kobe, Gerry, "Robert Bosch Corp. Automotive Group," Automotive Industries, February 1990, pp. 69-70.
• Naj, Amal Kumar, "Allied Signal Selling Piece of Auto Unit," Wall Street Journal, March 1, 1996, pp. A3, A4.
• Plumb, Stephen E., "All Quiet on the Eastern Front? Not at Bosch," Ward's Auto World, July 1993, p. 104.
• Reier, Sharon, "Components: Robert Bosch," Financial World, April 14, 1992, p. 56.
• "Success by Stealth," Economist, July 9, 1988, p. 69.
• Schroter, Harm G., "The German Question, the Unification of Europe, and the European Market Strategies of Germany's Chemical and Electrical Industries, 1900-1992," Business History Review, Autumn 1993, p. 369.
• Way, Arthur, "A Mark of Respect for German Supplier," Financial Times, July 12, 1994, p. FTS3.

Source: International Directory of Company Histories, Vol. 16. St. James Press, 1997.

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