Corporate history of Daimler AG, Part 2: Benz & Cie. and Daimler-Motoren-Gesellschaft

  • Inventors become company founders
  • Strong influence from investors

Gottlieb Daimler and Carl Benz invented the automobile independently of one another in 1886. But there were also parallels in their lives as entrepreneurs. For example, both inventors had problems with investors – the two founders left the companies that bore their names because their business partners became overly interfering and even conspiratorial.

Life had not exactly been a bed of roses for Carl Benz, born in 1844. He was two years old when his father died. In spite of a shortage of money, however, his mother considered it important that her son should have a good education. After working for a number of employers, in 1871 the engineer and August Ritter, a mechanical specialist, decided to make a go of it alone and opened a workshop in Mannheim. It turned out, however, that Ritter was not exactly the most reliable of partners, and the fledgling company only survived thanks to the dowry brought by Carl Benz’s young wife Bertha Ringer, whom Benz married in 1872. Even then, business failed to pick up significantly and the automotive pioneer was forced to seek out new financiers in the Bühler brothers and the banks. But investors always want a share in the success of a business, so in 1882 the Gasmotoren-Fabrik Mannheim was converted into a joint stock company. Carl Benz held just 5 per cent of the shares, and when his investors attempted to exert influence on his designs, the inventor opted to leave the company just a year later.

That same year Benz found new financiers and on 1 October 1883 he set up Benz & Co. Rheinische Gasmotoren-Fabrik, Mannheim, a general partnership, with the industrialist Max Kaspar Rose and commercial agent Friedrich Wilhelm Eßlinger. The gas engines sold well and Benz could at last continue researching his car engines with a degree of financial security, presenting his first Patent Motor Car in 1886. Two new investors joined the company in 1890, Friedrich von Fischer and Julius Ganß, and by the turn of the century Benz & Co. had grown to become the world’s leading car manufacturer.

In 1899, the Gasmotoren-Fabrik became the joint stock company Benz & Cie. Rheinische Gasmotorenfabrik. Julius Ganß was made a member of the Board of Management alongside Carl Benz. Whereas 50 workers had been sufficient for car production in 1890, now Benz needed a workforce of 430. Internal dispute arose when sales took a dramatic downturn with the launch of the Mercedes competitor product in 1901 and when Carl Benz refused to agree to new models and design principles: Carl Benz ended his active involvement in the company. The management appointed the French designer Marius Barbarou to the Mannheim plant in an attempt to counter competition from Daimler.

But the new model series did not significantly improve the business situation, and Ganß and Barbarou left the company in 1904. At this, Benz returned to the Supervisory Board. The new investor Georg Diehl and Fritz Erle, in his position as plant manager, asked the incumbent chief designer Hans Nibel to comprehensively revise the model range, and in 1905 he succeeded in returning the company to economic prosperity – particularly with the prestige and luxury class of vehicles. But the company’s racing and record-breaking vehicles also achieved worldwide notoriety, cars such as the ‘Lightning Benz’ of 1909. Benz himself established C. Benz Söhne in Ladenburg in 1906. The company also produced automobiles, at least until 1923/24, whereupon it continued operations as an automotive supplier.

Benz remained a member of the Supervisory Board of Benz & Cie. and subsequently Daimler-Benz AG until 1927. When Dr. Carl Benz died at the age of 84 on 4 April 1929, Daimler-Benz AG was already well established as a leading international company in the automotive sector. In 1929, exports already accounted for 15 per cent of total sales and its workforce of around 15,000 employees were turning out well over 11,000 cars each year.

The inventor is ousted: Gottlieb Daimler

Born in 1834, the engineer Gottlieb Daimler started work as a designer for the metalworking company Straub in Geislingen an der Steige in 1862. He was appointed director in 1865 of the engineering workshop at the Bruderhaus orphanage in Reutlingen, and it was here that he met Wilhelm Maybach for the first time, forming one of the most congenial partnerships in automotive history. In 1869, Daimler took over as director of the workshops at Karlsruher Maschinenbaugesellschaft, having persuaded Maybach to go with him as his technical draftsman. Three years later the pair moved to Gasmotorenfabrik Deutz, where Daimler was appointed technical director of the workshops by Nikolaus Otto. In 1872, Daimler and Maybach developed the spark ignition engine (Otto engine) to production standard.

Daimler quit Deutz in 1882 following a dispute with Otto and used his severance pay to purchase a large townhouse in Bad Cannstatt with a sizeable garden, where he set up a test workshop in the greenhouse. His aim was to develop small, high-speed combustion engines to drive all types of vehicles on land and water. In 1883, the two men – Maybach was still employed by Daimler – applied for a patent for their jointly developed and now revolutionised single-cylinder four-stroke engine.

But their private capital did not go far among a workforce of around 25 employees, and Daimler was forced to look for wealthy partners. In November 1890, he founded Daimler-Motoren-Gesellschaft (DMG) with Max von Duttenhofer and Wilhelm Lorenz. But the strings in the background were pulled by banker Kilian Steiner from the Württembergische Vereinsbank. There was trouble from the outset, however. The contract modalities offered to Daimler’s confidant and intended technical director, Maybach, were unacceptable and he therefore quit the company on 11 February 1891. Daimler, too, became increasingly uneasy about the commercial policies of his partners. Whereas Duttenhofer wanted to build stationary engines, Daimler was more interested in vehicle production. Finally they reached a compromise which enabled Daimler to continue his research work with Maybach and independently of DMG.

Despite this, however, the relationship between Daimler and his DMG business partners grew increasingly tense and Duttenhofer and Lorenz ultimately threw the inventor out of the business altogether. After a period of power play, Daimler eventually disposed of his shareholding and the rights to his inventions in 1894 for 66,666 Reichsmarks. Obviously this was not without a struggle: his business partners threatened him with insolvency, saying that if he stayed, the Württembergische Vereinsbank would demand payment of debts. Gottlieb Daimler left the company that bore his name, and together with Wilhelm Maybach moved into temporary residence in the Hotel Hermann to dedicate himself to further development of the automobile.

His departure had no impact on the patents and their application in France, however – a fact already ascertained by Daimler in 1890. His excellent relations with fellow campaigners in Eurosope ultimately restored his reputation: the Englishman Fredrick Richard Simms, who became acquainted with Daimler and his engines in 1890 and who reserved the marketing rights for the entire British Empire, found a powerful financial consortium which bought the Daimler patents in 1895. The backers were shrewd enough to realise, however, that these were worth little without the automotive pioneers Daimler and Maybach on board, and so it exerted pressure on DMG: Daimler would get back his 178 shares – equivalent to approximately 19.8 per cent of the nominal share capital – as well as 5 per cent of the annual profits of DMG. Maybach was appointed technical director and received 30 shares. Duttenhofer and Lorenz financed an increase in share capital.

The internal wrangling continued, however. In 1898, Duttenhofer and Lorenz by-passed Daimler to establish Motorfahrzeug- und Motorenfabrik Berlin (MMB), a company that also built vehicles under licence from Daimler, predominantly trucks and mostly powered by electric engines. When Gottlieb Daimler died in March 1900, his heirs were disempowered. They retained merely the status of minor shareholders with no influence. Two years later the two companies in Cannstatt and Berlin merged to form a single entity under the name that had existed since 1890 – Daimler-Motoren-Gesellschaft – and operations in Berlin developed into DMG’s commercial vehicle plant.

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