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Deutz AG

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Deutz AG is a global manufacturer of gasoline engines and diesel engines. One of the company’s founders was Nicolaus August Otto, inventor of the four-stroke gasoline engine. The company’s engines include air-cooled and high-speed diesel engines and gasoline engines ranging in power from four to 7.4 kilowatts for use in everything from cars and tractors to turbines and pumps.[1] Deutz also serves as the primary supplier of diesel engines for Volvo AB.

In addition to diesel engines, the company operates an industrial plant division under the corporate umbrella of KHD Humboldt Wedag. The industrial plants are built for use in the cement, mining, and aluminum industries.

Contents

[edit] History

In the 1860s Nicolaus August Otto developed a four-stroke engine that would change global motorization forever. Otto discovered that when a mixture of fuel and air was compressed inside the engine’s cylinder before ignition, the power of the engine improved significantly. Another discovery he stumbled upon was that the pressure generated from combustion was very hard to control. Testing on an atmospheric gas engine in his Cologne workshop began in 1863 and quickly evolved into a new design for a gasoline engine based on a four stage process—intake, compression, combustion, and exhaust—for which he was awarded both national and international patents.

[edit] The Establishment of N.A. Otto and Cie.

In February 1864 Otto’s engine caught the attention of Eugen Langen, a German engineer and sugar factory owner. Impressed by Otto’s gasoline engine, Langen signed a contract with Otto and provided the capital to start a business together.[2] Their small workshop, established in an old part of Cologne, became the world’s first engine factory. In 1867 Langen and Otto presented their atmospheric gas engine at the Paris World Fair.[3] Three years later they shipped three of their atmospheric engines to the U.S. They also established lucrative business relationships and deals with a Hamburg-based businessman and a Manchester-based manufacturer, the Crossley Brothers. Eventually they had the means to build a brand new factory in the Deutz suburb of Cologne situated on the east bank of the Rhine River. By 1872 their company went public and was renamed the Gasmotoren-Fabrik Deutz AG. German engineer Gottlieb Daimler was hired as the company’s new engineering director.[4]

[edit] Otto’s New Motor

Otto continued refining his engine technology for a four-stroke engine with compression. In 1877 he finally received a patent for one and the new engine was marketed under the brand “Otto’s neuer Motor” meaning “Otto’s New Motor." His breakthrough engine also drew attention from many of his competitors who tried to challenge his patent but to no avail. Otto was equally determined to devise an ignition system that was able to run exclusively on liquid fuel and in 1884 he invented a voltage magnetic ignition system. Not everything was running smoothly at the company though. Daimler was interested in building powerful and fast engines contrary to Langen’s insistence on producing small, cheaper ones. Eventually growing differences between the two caused Daimler to leave the company. On the production front, things were also beginning to look down. After producing a total of 2,649 engines, production on Otto’s atmospheric gas powered engines came to an end in 1886 when a German court rescinded part of his patent;[5] the news devastated him. Otto passed away in 1891 years later at the age of 59. Eugen Langen, Deutz’s other co-founder, passed away four years later.

[edit] Diesel and Deutz

After the death of Langen and Otto, many improvements were made to gasoline- and petroleum-powered motors. Motors were being used in industry, agriculture, and transportation. Deutz benefited from all these changes and by 1886, had established plants in Vienna, Austria, Milan, and Philadelphia. The company focused on diversifying its product range and expanding operations with a number of strategic acquisitions.

Another significant change to global motorization was achieved with Rudolph Diesel’s development of the diesel engine, the patent for which he offered Langen in 1892. Langen, skeptical of the engine’s capability to work, refused Diesel’s patent. Diesel continued to refine his engine and eventually found another partner.

The first fully functioning diesel engine was built in 1897. Deutz entered into an agreement with MAN AG to build the new diesel engines. Only two motors were built in the first series. One was shipped to the U.S. becoming the first operating diesel engine in the country. The second motor was kept by Deutz to be experimented on. A year later, the company developed its own diesel model engine without the cross head of Diesel’s design. In 1901 the company canceled its licensing agreement with MAN AG. After the patent on Diesel’s engine expired in 1907, Deutz started the mass production of its own diesel engines. Two of these diesel engines were a three-cylinder 75 PS motor for a ship and a 450 PS engine for a German power station.[6] Deutz also attempted to use its new diesel engine to develop a locomotive for agricultural applications, but failed. Another venture involved using the motors in automobiles under the leadership of Ettore Bugatti. The relationship was short-lived, with the last Deutz-Bugatti cars being manufactured after Bugatti left Deutz to start his own business in 1912.

[edit] The Klöckner Era

In 1906 Peter Klöckner was elected to the Deutz Board of Directors. Klöckner was the member of a shipbuilding family and had experience managing large companies. By 1919 Klöckner had become vice president of the company’s board and in 1924 he was appointed president. To further the company’s development of technology, Klöckner provided generous contributions of capital. By 1922 he owned 22 percent of the company.[7] By this time, Deutz had already been in business for more than 55 years and had earned itself an international reputation. Its motors were used in everything from ships to agricultural and industrial equipment. Its diesel motors were also extremely popular, accounting for about one-third of the company’s overall sales. Equally popular were the company’s smaller motors produced at its plant in Philadelphia.

Under Klöckner's leadership, Deutz was steered in new directions. In 1919 the company collaborated closely with Motorenfabrik Oberursel in Frankfurt. Deutz eventually took over the company and its existing product line of motors replacing it instead with a new line of medium sized two-stroke diesel engines for ships. The company was renamed Motorenfabrik Deutz in 1921. In 1922 Klöckner also made a strategic agreement with a company called Maschinenbauanstalt Humboldt AG that was experiencing financial trouble. After partnering together, the two companies were able to turn a small profit. In 1930 all three companies were merged into one to form Humboldt-Deutzmotoren AG.

Deutz also expanded into the truck manufacturing business when it acquired an Ulm-based fire extinguisher and truck maker business called C.D. Magirus. Its first model series of 50 trucks was launched in 1933.[8]

By 1938 Klöckner had amalgamated Humboldt-Deutzmotoren AG into his growing business empire, later renaming it Klöckner-Humboldt-Deutz AG (KHD).

[edit] The Effects of War on Deutz

Deutz never fared well financially in times of war. During World War I the company’s sales dropped by 40 percent.[9] Deutz was never seen as the first choice for manufacturing war materials, partly because the company’s motors were too small. Later, it did manufacture shells, locomotives for the military, and Argus motors for airplanes to support the German war effort. The company experienced a similar reaction during World War II. Once again it was not the first choice for war materials. It started to produce larger motors for the marines as well as an artillery tractor for the Germany Army. In 1940 Klöckner passed away and his son, Dr. Gunter Henle, assumed management of the company. Many of the company’s production facilities were destroyed by fires.

The company did manage to resume production of its motors and parts for civilian use by 1945. Production didn’t last long however. A few months later Occupation Forces banned Deutz from manufacturing motors for almost two years. By 1948 the German economy began to normalize as a result of currency reform in the western part of the country and Deutz was able to resume production of its air-cooled diesel motors in 1949—the very same motor first requested by the German military in 1944. The devastation of war on Germany and on Deutz was felt by the company’s employees who rallied together to rebuild the company. By 1951 Deutz was on a steady course, even exceeding prewar results with 292 million DM in sales.[10] By 1953 the Klöckner group of companies was reorganized. Klockner-Humboldt-Deutz (KHD) was once again an independent entity, free from Occupation power. Over the coming years KHD made several corporate strategic decisions:

  • 1953 – entered a cooperation agreement with Vereinigte Westdeutsche Waggonfabriken AG, a manufacturer of railroad cars—the two companies merged six years later
  • 1968 – purchased combine harvester maker Maschinenfabrik Fahr AG
  • 1969 – bought majority shares in Bochum-based industrial equipment manufacturer WEDAG Westfalia Dinnendahl Groppel AG
  • 1971 – took over large engine maker Veorde in Dinslaken
  • 1975 – merged the company’s truck manufacturing arm, Magirus, with Iveco as part of a joint venture with Italian automobile manufacturer Fiat. Fiat eventually purchased Magirus from KHD five years later for 500 million DM.[11]
  • 1985 – took over the agricultural equipment arm of U.S.-based competitor Allis-Chalmers Corp. and founded the Deutz-Allis Corp. in Milwaukee, Wisconsin
  • 2003 – signed a cooperative agreement to become the main supplier of diesel engines for Italian machinery manufacturer SAME DEUTZ-FAHR Group for use in its tractors and harvesting machinery
  • 2004 – signed a joint manufacturing venture with Turkish-based tractor manufacturer UZEL
  • 2004 – signed a joint venture to manufacture and sell diesel engines for FAW Jiefang Automotive Co., Ltd., (FAW). Each company had a 50 percent stake in the new joint venture, which resulted in the launch of a new company called Deutz (Dalian) Engine Co. Ltd. based in the Chinese port city of Dalian.[12]

[edit] Deutz Sinks into the Red

By the 1980s Deutz was established in 135 countries around the world with subsidiaries in the U.K., Australia, Morocco, the U.S., Argentina, Japan, and Singapore. It also became the dominant global manufacturer of air-cooled diesel engines and developed everything from tractors, industrial equipment, and small power generators to aircraft technology.

Despite this expansion, the company experienced serious financial setbacks through the '80s and '90s and sank into the red. One factor was the high costs associated with the development and production of such a diverse product portfolio. The U.S. was also hit by a severe drought, thereby decreasing the demand for farm equipment. Deutz was eventually forced to sell off some of its production subsidiaries to survive. By the early 1990s the company was out of the red but still not in a financially secure place. A recession in the machine building industry in 1994 resulted in further substantial losses, amounting to 300 million DM and the company was forced to sell Deutz-Fahr, its agriculture business division.[13] By 1995 Deutz was on the verge of bankruptcy but was saved from the joint effort and financial backing of some of the company’s key shareholders. Employees also banned together to cut their wages, salaries, and pensions. In addition, other corporate assets were sold off to make up for the shortfall. Deutz was then renamed Deutz AG and restructured to focus more on its engine business.  Many of the company’s existing subsidiaries were integrated into Deutz AG and the rest of what formerly has been KHD was liquidated.

[edit] The Company Today

In 1998 Deutz AB signed a contract with Volvo to become the company’s primary supplier of diesel engines for Volvo’s construction equipment, trucks, buses, marine products, and other applications. The Deutsche Bank owns 25 percent of the company’s shares.[14] Volvo also acquired a 10 percent interest in the company as a show of support and committment. Between 1999 and 2001 Deutz provided more than 100 different prototype engines to Volvo.[15]

Today the company’s primary business is in the manufacturing of both liquid-cooled and air-cooled engines. Primary competitors of Deutz AG include other engine manufacturers such as Cummins Inc., Navistar International, Kubota Corp., Detroit Diesel Corp. and ThyssenKrupp AG. Deutz’s annual revenue as of fiscal year end in 2008 totaled €1,495.0 million.[16]

[edit] Equipment List

[edit] References

  1. Deutz AG. Funding Universe. 05-05-2009.
  2. Deutz AG. Funding Universe. 05-05-2009.
  3. Deutz AG. Funding Universe. 05-05-2009.
  4. Deutz AG. Funding Universe. 05-05-2009.
  5. Deutz AG. Funding Universe. 05-05-2009.
  6. Deutz AG. Funding Universe. 05-05-2009.
  7. Deutz AG. Funding Universe. 05-05-2009.
  8. Deutz AG. Funding Universe. 05-05-2009.
  9. Deutz AG. Funding Universe. 05-05-2009.
  10. Deutz AG. Funding Universe. 05-05-2009.
  11. Deutz AG. Funding Universe. 05-05-2009.
  12. History. Deutz Official Corporate website. 05-05-2009.
  13. Deutz AG. Funding Universe. 05-05-2009.
  14. Deutz AG. Funding Universe. 05-05-2009.
  15. History. Deutz Official Corporate website. 05-05-2009.
  16. Release. Deutz Official Corporate Website. 05-05-2009.