SCHENKER-RHENUS AG History

Address:

Hainer Weg 13-15
W-6000 Frankfurt am Main 70
Germany

Telephone: (69) 60530
Fax: (69) 6053207

Joint Subsidiary:
Incorporated: 1872 as Schenker & Co.
Employees: 20,000
Sales: DM11 billion (US$7.55 billion)

Company History:

Schenker-Rhenus AG is an international freight forwarding and transport organization formed in 1991 by the merger of Schenker & Co. GmbH and Rhenus-Weichelt AG. The group is a subsidiary of Stinnes AG (80 percent; the Deutsche Bundesbahn has a 20 percent shareholding), which itself is incorporated in the VEBA group. With more than 20,000 employees worldwide, 600 offices in more than 120 countries, and annual sales of DM11 billion, Schenker-Rhenus is one of the world's largest transport companies.

The group in its present structure has four operational companies: Schenker Eurocargo AG, Rhenus-Weichelt AG, Schenker International AG, and Schenker Waggon- und Beteiligungs AG. Schenker Eurocargo AG and Rhenus-Weichelt AG together form the largest division of the company, including all the European transport operations. This division accounts for 13,000 employees and has an annual turnover of DM6.5 billion. It has 255 offices in Europe, of which 120 are in Germany. Schenker International AG consists of the group's worldwide air and seafreight transport business. This division has 345 offices, 6,000 employees, and an annual turnover of DM4 billion. The smallest division is Schenker Waggon- und Beteiligungs AG, responsible for the marketing of train cars throughout Europe, and for ferry traffic between Germany and Finland. Schenker Waggon- und Beteiligungs AG has 1,000 employees and sales of DM500 million per year.

Schenker-Rhenus AG's origins can be traced back to Däniken, a small village in Switzerland, where Gottfried Schenker, the son of a locksmith, was born on February 14, 1842. The Schenker family had lived in Däniken for many generations, but Gottfried moved beyond his home territory, studying law at Heidelberg University and then taking up a post as an official with the Swiss Central Railway in Basel in 1865. In 1866 he moved on to join a private transport company, Braff & Eckert, agents for the French Eastern Railway. This company sent him to Vienna to supervise a grain shipment in 1867. Disputes with his superiors and difficulties in obtaining railroad cars brought Schenker to the point of exhaustion, and after a period in the hospital at the end of 1867 he left this company to take over the Vienna office of forwarding agents Elkan & Co. of Hamburg. Schenker organized large rail consignments for this company, ensuring the most efficient and profitable use of goods capacity. He sent, for example, railway construction materials from France via Switzerland to Austria, and shipments of tobacco and food in the opposite direction.

Schenker, now based permanently in Vienna, was married in 1869. He found time on his honeymoon to arrange a deal for transporting rail carriage parts from Switzerland to Romania. By this time he had decided to work for himself and left Elkan & Co. to set up his own office, where he began arranging discount shipments. At the beginning of 1872 he was introduced to Moritz Karpeles and Moritz Hirsch, both in their 30s and owners of a freight forwarding company. They were impressed by Schenker's plans for expanding the international forwarding business into southeastern and western Europe and for moving into sea transport via Trieste and Fiume. The three decided to start a company together, and Schenker & Co. was founded on July 1, 1872, officially incorporated at the Austro-Hungarian Commercial Court in Vienna. The starting capital was 50,000 guilders; Karpeles and Hirsch each provided 20,000, and Schenker provided 10,000. Despite his smaller share in the business Schenker was to receive 50 percent of the profits.

In 1873 Schenker obtained the agency of the French Eastern Railway and through this deal was able to put into practice a pioneering idea: combining a number of small shipments into one transport unit. The first combined freight shipment was carried from Paris to Vienna in 1873, consisting of champagne, cognac, cosmetics, and fashion items for the Austrian market. Schenker's success in putting his ideas into practice and selling railway forwarding services led to a succession of contracts in the following years. In 1880 he concluded a contract with the Great Eastern Railway in London, where he also opened a branch office. This was followed by a contract with the Hessische Ludwigs-Eisenbahn-Gesellschaft in Mainz, a deal in which Schenker committed himself to move 1,000 carloads of goods per year. An 1882 contract with the Chemins de fer de Paris à Lyon et à la Méditerranée, based in Paris, enabled Schenker to expand his network of operations by importing goods via Marseille. In the same year Schenker became representative for the Schweizerische Nordostbahn in Zürich. An office in Munich was set up in 1882 and a contract with the Bavarian railways in 1884 led to the rapid expansion of traffic through Bavaria to the Danube ports. A further Swiss contract was concluded with the Verienigte Schweizerbahnen in 1886.

Schenker had built up a considerable European network throughout the 1880s. At the end of the following decade the company moved beyond Western Europe with the agency for the Orient Railways in Constantinople. The rail network operated by the Orient Railways covered 1,400 kilometers and gave Schenker an excellent base in the Turkish Empire, where he established five branch offices. In 1900 he moved into Asia, opening a branch in Derindje in 1900. The European network was extended and consolidated at the time, with a new branch in Rotterdam (1892) and deals with Dutch and Belgian railway companies (1892-93). An agreement with the Chemins de fer du Midi in Paris in 1894 opened up routes to the French Atlantic ports and to Spain. Within the Austro-Hungarian Empire Schenker operated on a track network covering 6,000 kilometers.

Schenker's company had expanded rapidly in the 1880s and 1890s, becoming the only operator in Europe to offer through rates all the way from London to Constantinople. Schenker's innovative ideas--especially regarding combined cargo--and entrepreneurial skills had made the company a market leader. The sphere of activity was not confined to railways, however. The opening of the Suez Canal in 1869 had led the three partners--of which Schenker was the real driving force--to consider moving into sea traffic. As with rail traffic, the secret of success lay in negotiating agency contracts with shipping companies. Yet when it became apparent that shipping companies could not meet existing demand for transportation, Schenker took the initiative and founded his own shipping company for trading with Great Britain: the Adria Steamship Company, incorporated in 1879. The new shipping line started on the route from Trieste and Fiume to Glasgow. Soon a regular schedule was established for the five ships traveling between Trieste, Fiume, London, Liverpool, Hull, and Glasgow. This core business was expanded by contracts and agencies with other shipping companies, including Cunard, Thomas Wilson, and Clarkson. 1895 saw a move beyond the European continent with the founding of shipping company Austro-Americana to handle sea traffic to the United States. Austro-Americana was the first shipping company to maintain regular service between the Adriatic and North America.

River transport, on the Danube in particular, was also an important part of Schenker operations at this stage. The Süddeutsche Donau-Dampfschiffahrts-Gesellschaft, based in Munich, was founded in 1895. By the turn of the century this subsidiary had seven river tug boats, 36 barges, and branches in Regensburg, Vienna, and Budapest.

Schenker also became involved in the travel agency business, opening branches in Vienna (1886), Munich (1890), Prague, and Karlsbad (1898). He also negotiated deals with existing travel agencies enabling him to offer group package deals to his customers. In 1896 Schenker became the agent for the Orient Express in Austro-Hungary, and in 1900, the year of the World's Fair in Paris, he opened a branch in the city as well as renting an entire hotel and renaming it Grand Hotel Schenker for the duration of the event.

By 1901 the company had 33 offices and 1,000 employees, of which 423 were based in Vienna. Various relatives of Schenker had also become involved in the business, including his brother, his brother-in-law (who ran the travel agency in Munich) and his nephew (who ran branch offices in Munich and Nuremberg). Yet Gottfried's only son Eduard did not wish to pursue the career in international forwarding his father had envisaged for him, longing for a musical career instead. After a dispute between father and son Eduard committed suicide in 1892 at the age of 20. A friend of Eduard, August Angerer, remained on close terms with the Schenker family and subsequently married a niece of Gottfried Schenker's wife in 1894. In the years that followed, Schenker adopted Angerer and made him his official heir. When Gottfried Schenker had a stroke in 1901, August--who had changed his name to August Schenker-Angerer--took over the business. Gottfried Schenker died on November 26, 1901.

August Schenker-Angerer continued expanding the Schenker network, opening new branches and establishing further shipping lines with direct connections to the continental transport business. When August Schenker-Angerer died in 1914 at the age of 48 his place was taken by Emil Karpeles, successor of Schenker's founding partner Moritz. The company had 40 branches by the outbreak of the First World War.

The collapse of the Austro-Hungarian monarchy and the transformation of Europe as a whole after the war meant that the company's network had to be built up all over again. A number of subsidiaries of the original Austrian company were made into independent national joint stock companies as part of this process. Germany had been a weak area in the company's network before the 1920s but now great efforts were made to build up a strong network in German and Eastern European territories. As road transportation began to grow in importance Schenker increased its activities in this area. The worldwide economic crisis of the interwar years led to a drastic reduction in the overall volume of goods transported. This had serious effects on the company.

The construction of a German network brought with it ever closer cooperation with the German state railways (the Deutsche Reichsbahn), and in the mid-1920s the company concluded a partnership deal for combined-cargo traffic within Germany. This deal was the prelude to a full acquisition of Schenker by the Deutsche Reichsbahn in 1931. Following the takeover, Schenker's company headquarters were transferred from Vienna to Berlin.

During the prewar period Schenker's sphere of activity was expanded to include air freight. By the outbreak of World War II the company had grown to encompass 200 branches, in Germany and abroad, and 9,000 employees. The First World War had had a devastating effect on the company's fortunes, but the effects of the Second World War were even more disastrous. All the branches in central Germany and in eastern and southern Europe were destroyed and the company's foreign assets abroad were seized.

From the outset Schenker's development had been closely linked with the railway business as a whole: after the acquisition by the Deutsche Reichsbahn (the Deutsche Bundes-bahn after the Second World War) this was even more apparent. After about 1880, rail had superseded road as the leading mode of goods transport in terms of tonnage transported. From about 1940 onward this situation was reversed, with road transport becoming increasingly competitive and the railways losing ground. State railway businesses have been further disadvantaged by having to run uneconomical lines and services for public or political reasons. The acquisition of Schenker by the German railways in 1931 had represented an early attempt to establish a foothold in the wider goods transport market and to build up a complete door-to-door transport service, combining rail and road transport. After 1945 the demands of postwar reconstruction, as well as government restrictions on monopolies, prevented the further pursuit of this strategy, however. The Deutsche Bundesbahn was forced to concentrate on ways of increasing the operating efficiency of its core rail business, and Schenker remained a more or less peripheral part of the whole.

Nonetheless Schenker & Co.'s forwarding operations were gradually built up again, and by the time of its centenary celebrations in 1972, the company had 9,000 employees and an annual turnover of DM1.8 billion. It was operating profitably with a gross profit of DM240 million and had a fleet of over 1,200 vehicles, as well as 650 leased vehicles and 40 special heavy goods vehicles.

Two principal factors governed Schenker's development during the 1970s and 1980s: increasing competition in the transport industry as a whole, and the difficulties faced by the Deutsche Bundesbahn. Overcapacity in the German transport industry led to a wave of merger and acquisition activity in the late 1970s and 1980s, forcing many smaller operators out of business and pushing transport rates down. Schenker responded with an aggressive price policy to retain its share of the market. The competitive pressures forced companies to look for ways to improve their efficiency and services. In the 1970s container transport became increasingly important, and in the 1980s companies introduced computer-driven logistics systems and diversified into express parcel services and distribution services for particular industry sectors. In the mid-1980s Schenker joined 'Euro speed,' an express delivery network covering 13 countries, and developed distribution systems for the car industry, department stores, consumer electronics, and textiles.

The Deutsche Bundesbahn, like other state-owned railway operations in Europe, has consistently recorded operational deficits and has relied on the government for subsidy and investment. In Germany the situation has been exacerbated by the debt burden that was taken on by the Deutsche Bundesbahn to finance railway reconstruction after the Second World War. These debts are still outstanding, and the government has had to take over responsibility for the interest payments since 1973. In 1988, following years of debate and controversy, the Deutsche Bundesbahn was restructured with a view to increased commercial efficiency and eventual privatization. A holding company was formed and the different areas of business were separated. Schenker was included in the transport and logistics division along with Transfracht (the Deutsche Bundesbahn's container business) and other smaller subsidiaries. Following this restructuring, a 25 percent stake in Schenker was sold to Stinnes AG, as part of the Bundesbahn's efforts to improve its financial position and increase its investment capability.

In subsequent years the challenges facing the German railways have been further increased and complicated by the reunification of East and West Germany. Integrating the two railway systems in a single network will require substantial investment, and their combined debts total DM55 billion. In 1992 the German government announced its plans for a full merger and privatization of the two railway systems in 1994. These financial and organizational difficulties form the background of the sale of Schenker to Stinnes AG, completed in 1990 (the Deutsche Bundesbahn now retains only a 20 percent stake in the company).

Within the Stinnes group, Schenker was combined with Rhenus-Weichelt of Dortmund to form a new company, Schenker-Rhenus AG, based originally in Frankfurt. Rhenus, which operates principally within Germany, was founded in 1912 and after the Second World War was owned by shipping company Fendel Schiffahrts-Aktiengesellschaft. Founded in 1899 and based in Mainz, Fendel merged with Westfälische Transport AG in 1978.

The re-formed Schenker-Rhenus group faces a variety of challenges and difficulties in the years ahead. Its first challenge--a considerable one--is to integrate the newly-combined operations of East and West Germany into an efficient whole. Competition within the European transport market will also become more severe with the advent of the single European market; German operators in particular are challenged by lower-rate competitors from abroad within their national market. However, after years of ownership by an organization restricted both financially and entrepreneurially, it is conceivable that Schenker's release from the railways will bring a return to the resourcefulness of the company's early years.

Principal Subsidiaries: Schenker Eurocargo AG; Rhenus-Weichelt AG; Armbruster & Co. GmbH; Atlantic Seetransport-Kontor; Deutsche Waggon- und Maschi-nenfabriken GmbH; HACO Transport GmbH; Ulrich Stein GmbH; Deutsche Rhederei Versicherungs AG; Schenker International AG; Schenker Waggon- und Beteiligungs AG.

SCHENKER-RHENUS AG History

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