War history of Waterford's new partner

Rosenthal, the publicly quoted German porcelain manufacturer, now 51.6 per cent controlled by Waterford Wedgwood, has, despite political adversity, stood the test of time. Even though the brand-name was Jewish, it was not changed under the Hitler regime.

At the time there were long meetings on whether they should change the name - but the notorious Nazi Minister for Information Joseph Goebbels interceded.

The man who said "Every time I hear the word `culture' I reach for my revolver" had a strong sense of the importance of business to the `war effort'.

He recognised the value of well-known brand names and said: "If we change the name we will no longer be in the position to exploit their porcelain."

Indeed, some products were specifically manufactured for the Nazi Party. The back stamp included the Jewish name, Rosenthal, as well as the swastika!

That does not mean that the assets of Philipp Rosenthal, who established the firm in 1879/80, were not confiscated by the Nazi Party. They were. In 1934, he was forced through the "Aryanisation" programme to resign as chairman of Rosenthal AG which was then a publicly quoted company. Perhaps fortunately for him, he had married, for a second time, Maria, an Aryan. He was in his 60s, she was in her 20s.

So when he "resigned", the management of the company and his shareholding, were handed over to the Aryan relations of Maria. That was not taken lying down. In 1937, an attempt was made to confer special powers of attorney on his stepson, Udo Franck. But this was thwarted by a petition filed by his grandchildren on the grounds of permanent legal incapacity since 1934.

He had a colourful career which started in the US as a China buyer. At one stage he delivered mail by pony express. He died in 1937.

His son Philipp Rosenthal junior (by Maria) served in the Foreign Legion in north Africa at the beginning of the second World War. After the fall of France in 1940 his luck ran out and he was imprisoned in concentration and labour camps. Like many others he had to escape and after the fourth attempt, in 1942, he succeeded when he reached Gibraltar.

The war years were spent in Britain where he worked as a baker's apprentice, teacher, journalist and finally ended up in the political intelligence department of the Foreign Office. After the war, the Geiger family appeared to be in control of Rosenthal who (according to the company) facilitated the passing of control of the porcelain company to Philip Rosenthal. The company subsequently expanded, reaching employment of 8,400 in 19 factories. However, high costs necessitated a contraction in employment and outlets. A further 350 are to be laid off in 1998 which will bring employment down to 1,600.

The Waterford Crystal brand has also stood the test of time but only after being revived. Originally set up in 1783 it ceased production in 1851 due to high costs. Charles Bacik, a Czech glass maker, revived it in 1947. Joe McGrath came on the scene with a significant investment in 1950. The Wedgwood brand has been around for two centuries. Following the acquisition of a controlling stake in Rosenthal, these international brands are now under the one umbrella. It makes a lot of sense for the products where there can be useful cross-pollination.

Also, Waterford Wedgwood's timing is opportune, as the benefits from the rationalisation programme carried out by the German company are now coming through.

There is now a concerted effort to make the group fire on all three cylinders to achieve the group target of a 15 per cent return on sales by the year 2001. Waterford Crystal is getting there. This margin rose from 8.2 per cent to 9.5 per cent in the first half of this year.

Wedgwood is lagging a lot at 5.4 per cent against 6.2 per cent but that contraction was due to adverse currency movements and extra costs off-loaded in the first half.

Wedgwood has embarked on a £27 million rationalisation programme involving almost 600 redundancies and the closure of a ceramics plant. All that should be reflected in fatter margins. Rosenthal with 65 per cent of its sales generated in the lethargic German market has incurred substantial losses but it should move towards break-even at the end of the year. It has around 15 per cent of its domestic market where it competes with Villeroy & Boch and Hutschenreuther.

Rosenthal should generate profits of between DM2 million and DM4 million in 1998, rising to DM15 million in 1999 and possibly DM30 million in 2000 provided the benefits from rationalisation and synergies come through. Assuming a modest growth in sales that would bring the return on sales to around 9 per cent. Waterford Crystal has benefited considerably from its outsourcing of new products. Wedgwood is benefiting to a lesser degree. Rosenthal is also likely to outsource some new products.

Overall the acquisition of Rosenthal will be earnings neutral in 1998, but should be earnings positive thereafter, making it a useful addition to the Waterford Wedgwood stable and ensuring Rosenthal's future over the foreseeable future. Had the brand name been changed under the Hitler regime it might not have been around today.