Depression? What Depression?

Hitler endeared himself to corporate America for another very important reason: he conjured up a solution to the huge problem of the Great Depression. His remedy proved to be a sort of Keynesian stratagem, whereby state orders stimulated demand, got production going again, and made it possible for firms in Germany — including foreign-owned firms — to increase production levels dramatically and to achieve an unprecedented level of profitability. What the Nazi state ordered from German industry, however, was war equipment, and it was soon clear that Hitler’s rearmament policy would lead inexorably to war, because only the spoils resulting from a victorious war would enable the regime to pay the huge bills presented by the suppliers. The Nazi rearmament program revealed itself as a wonderful window of opportunity for the subsidiaries of US corporations. Ford claims that its Ford-Werke was discriminated against by the Nazi regime because of its foreign ownership, but acknowledges that in the second half of the 1930s its Cologne subsidiary was ‘formally certified [by the Nazi authorities] … as being of German origin’ and therefore ‘eligible to receive government contracts.’ (Research Findings, 21) Ford took advantage of this opportunity, though the government orders were almost exclusively for military equipment.

Ford’s German branch plant had posted heavy losses in the early 193Os. However, with lucrative government contracts thanks to Hitler’s rearmament drive, the Ford-Werke’s annual profits rose spectacularly from 63,000 Reichsmarks in 1935 to 1,287,800 RM in 1939. GM’s Opel factory in Russelsheim near Mainz fared even better. Its share of the German automobile market grew from 35 per cent in 1933 to more than 50 per cent in 1935, and the GM subsidiary, which had lost money in the early 1930s, became extremely profitable thanks to the economic boom caused by Hitler’s rearmament program. Earnings of 35 million RM — almost 14 million dollars (us) — were recorded in 1938. (Research Findings, 135-6; and Bilistein et al., 24) 1939, on the eve of the war, the chairman of GM, Alfred P. Sloan, publicly justified doing business in Hitler’s Germany by pointing to the highly profitable nature of GM’s operations under the Third Reich. Yet another American corporation that enjoyed a bonanza in Hitler’s Third Reich was IBM. Its German subsidiary, Dehomag, provided the Nazis with the punch-card machine — forerunner of the computer — required to automate production in the country, and in doing so IBM-Germany made plenty of money. In 1933, the year Hitler came to power, Dehomag made a profit of one million dollars, and during the early Hitler years the German branch plant paid IBM in the US some 4.5 million dollars in dividends. By 1938, still in full Depression, ‘annual earnings were about 2.3 million RM, a 16 per cent return on net assets,’ writes Edwin Black. In 1939 Dehomag’s profits increased spectacularly again to about four million RM. (Black, 76-7, 86-7, 98, 119, 120-1, 164, 198, and 222)

American firms with branch plants in Germany were not the only ones to earn windfalls from Hitler’s rearmament drive. Germany was stockpiling oil in preparation for war, and much of this oil was supplied by American corporations. Texaco profited greatly from sales to Nazi Germany, and not surprisingly its chairman, Torkild Rieber, became yet another powerful American entrepreneur who admired Hitler. A member of the German secret service reported that he was ‘absolutely pro-German’ and ‘a sincere admirer of the Fuhrer.’ Rieber also became a personal friend of Goring, Hitler’s economic czar. As for Ford, that corporation not only produced for the Nazis in Germany itself, but also exported partially assembled trucks directly from the US to Germany. These vehicles were assembled in the Ford-Werke in Cologne and were ready just in time to be used in the spring of 1939 in Hitler’s occupation of the part of Czechoslovakia that had not been ceded to him in the infamous Munich Agreement of the previous year. In addition, in the late 1930s Ford shipped strategic raw materials to Germany, sometimes via subsidiaries in third countries; in early 1937 alone, these shipments included almost 2 million pounds of rubber and 130,000 pounds of copper. (Research Findings, 24, and 28)

American corporations made a lot of money in Hitler’s Germany; this, and not the Fuhrer’s alleged charisma, is the reason why the owners and managers of these corporations adored him. Conversely, Hitler and his cronies were most pleased with the performance of American capital in the Nazi state. Indeed, the American subsidiaries’ production of war equipment met and even surpassed the expectations of the Nazi leadership. Berlin promptly paid the bills and Hitler personally showed his appreciation by awarding prestigious decorations to the likes of Henry Ford, IBM’s Thomas Watson, and GM’s export director, James D. Mooney.

The stock of American investments in Germany increased considerably after Hitler came to power in 1933. The major reason for this was that the Nazi regime did not allow profits made by foreign firms to be repatriated, at least not in theory. In reality, corporate headquarters could circumvent this embargo by means of stratagems such as billing the German subsidiary for ‘royalties’ and all sorts of ‘fees.’ Still, the restriction meant that profits were largely reinvested within the land of opportunity that Germany revealed itself to be at the time, for example in the modernization of existing facilities, in the construction or acquisition of new factories, and in the purchase of Reich bonds and real estate. IBM thus reinvested its considerable earnings in a new factory in Berlin-Lichterfelde, in an expansion of its facilities at Sindelfingen near Stuttgart, in numerous branch offices throughout the Reich, and in the purchase of rental properties in Berlin and other real estate and tangible assets. (Black, 60, 99, 116, and 122-3) Under these circumstances, the value of IBM’S German venture increased considerably. By late 1938 the net worth of Dehomag had doubled from 7.7 million R.M in 1934 to over 14 million RM. (Black, 76-7, 86-7, 98, 119-21, 164, 198, and 222) The value of the total assets of the Ford-Werke likewise mushroomed in the 1930s, from 25.8 million RM in 1933 to 60.4 million RM in 1939. (Research Findings, 133) American investment in Germany thus continued to expand under Hitler, and amounted to about 475 million dollars by the time of Pearl Harbor. (Research Findings, 6)

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