Ivar Kreuger

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Ivar Kreuger

Born March 2, 1880(1880-03-02)
Kalmar, Sweden
Died March 12, 1932 (aged 52)
Paris, France
Cause of death Suicide
Burial place Norra begravningsplatsen
Occupation Businessman
Industrialist
Children not known
Parents Ernst Kreuger (1852-1946)
Jenny Forssman (1856-?)

Ivar Kreuger (March 2, 1880 – March 12, 1932) was a Swedish civil engineer, financier, entrepreneur and industrialist. Between the two world wars, he was one of the most powerful businessmen of Europe. Negotiating match monopolies with European and Central and South American governments, he finally controlled two thirds of the worldwide match production, and became known as the "Match King". [1]

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[edit] Birth

Kreuger was born in Kalmar, the eldest son of the banker, industrialist and Russian consul Ernst August Kreuger (1852-1946) and his wife Jenny (born Forssman 1856). He had 5 brothers and sisters; Ingrid (born 1877), Helga (born 1878), Torsten (born 1884), Greta (born 1889) and Britta (born 1891). The family Kreuger owned several match factories in the Kalmar area. In school, Ivar skipped ahead two classes by taking private lessons, to graduate at age 16, continuing his studies at the Royal Institute of Technology in Stockholm where he graduated with combined Master's degrees covering both the faculties of mechanical and civil engineering, at the age of 20.[2]

[edit] The early years in America

After the turn of the century he spent seven years traveling and working abroad as an engineer in the U.S., Mexico, South Africa and other countries but spent most of the time in America. At an early stage he came in contact with the patented Julius Kahn[3] system for concrete-steel constructions that was exploited by the company Trussed Concrete Steel Co. This new technique had not been introduced in Sweden at that time. He managed to get the representative rights for the system for both the Swedish and the German markets and in the end of 1907 he returned to Sweden with the goal to introduce the new methods in both countries at the same time.

[edit] The building contractor

Paul Toll (standing), left Henrik Kreüger and Ivar Kreuger during an inspection of an overpass in Solna 1908, one of the first orders for the company Kreuger & Toll.
Paul Toll (standing), left Henrik Kreüger and Ivar Kreuger during an inspection of an overpass in Solna 1908, one of the first orders for the company Kreuger & Toll.

In May 1908, he formed the construction firm Kreuger & Toll in Sweden with engineer Paul Toll, at that time working for the construction company Kasper Höglund AB, and his cousin Henrik Kreüger, working at the faculty of civil engineering at KTH, as a consulting engineer for the company. In Germany he formed the company Deutsche Kahneisengesellschaft (translated: Kahn-steel company) together with a colleague from the time in America, Anders Jordahl. The new way of constructing buildings was not fully accepted in Sweden at that time and in order to market the new technique he held several lectures and wrote a large illustrated article on the subject in the leading engineering magazine at that time, Teknisk Tidskrift.[4]The firm in Sweden and the new way of constructing buildings soon became a success and they won several prestigious contracts such as the construction of the Stockholm Olympic Stadium (1911-12), the foundation work for the new Stockholm City Hall (1912-13) and the department store NK (1913-14) in Stockholm. The chief engineer behind these advanced projects was Henrik Kreüger.

After some years Ivar Kreuger became more focused on “constructing” new companies and corporations, rather than constructing buildings and bridges and as a result of that the company Kreuger & Toll in 1917 was split up in a subsidiary company, Kreuger & Toll Construction AB with Paul Toll as the managing director and Kreuger & Toll Holding AB with Ivar Kreuger as the manager. The Swedish banker Oscar Rydbeck (1878-1951) became a close associate and an important teacher for Ivar in the financing business. He was working for Kreuger & Toll as a consultant from around 1912 until the Kreuger Crash in 1932.

[edit] The corporate designer

In 1911-12 the Kreuger family match factories in Kalmar, Fredriksdal and Mönsterås came into financial problems. He was then recommended by his banker Oscar Rydbeck to turn the factories into a stock corporation in order to raise more capital. This was the starting point for the reformation of the entire Swedish match industry as well as the major match companies in Norway and Finland. With the Kreuger family match factories as the base he first founded the Swedish corporation AB Kalmar-Mönsterås Tändsticksfabrik in 1912. His father Ernst Kreuger and uncle Fredrik Kreuger became the major shareholders and his brother Torsten Kreuger was appointed the general manager. Ivar became a member of the board. A merger between this company with a lot of other small match companies in Sweden, the company AB Svenska Förenade Tändsticksfabriker (eng. Swedish United Match Companies) was founded in 1913 with Ivar Kreuger as the general manager. Later, by merging with the largest match company in Sweden at that time, AB Jönköping-Vulcan, Svenska Tändsticks AB (Swedish Match) was founded in 1917. This company group now covered the entire match industry in Sweden, including all major companies that manufactured the production machines that were used in the factories, and it also had control over major companies supplying the raw material for the match industry. During this time he also acquired the largest match companies in Norway (companies Bryn and Halden) and in Finland (companies Wiborgs and Kekkola).

However, Ivar Kreuger did not only "acquire" companies but also introduced a whole new way of thinking in the match industry with large scale production facilities, new ideas to increase the efficiency in both production, administration, distribution and in the sales organisation. This was the starting point for the large international corporations that have since become the norm in the industrial world.

In just nine years (from 1908-1917) he had managed to establish a new large construction company as well as founding a united Swedish match industry, including the major match companies in Norway and Finland. With this new company structure the match industry in Scandinavia now became a major competitor to the large manufacturers elsewhere. By expanding the Swedish Match company through acquisition of government-created monopolies, the Swedish company became the world's largest match manufacturer. He set up an affiliate to Kreuger & Toll in the United States and formed the International Match Corporation which eventually came to control almost 75% of the world production in matches.

In the years when Europe was suffering from the problems of the Great Depression, Kreuger's companies would often give loans to European governments needing money, and as a security the government would grant his empire the match monopoly in this country. In 1929 Kreuger loaned equal to $28 million to Romania. In return, he gained a monopoly in match sales. This debt remained unpaid to 2002. The loans at that time were enormous and could only be compared with the size of large government loans to other countries.

Kreuger did not limit himself to mere matches but gained control of most of the forestry industry in northern Sweden and planned to became a head of a cellulose cartel.

After founding the pulp manufacturer SCA in 1929 Kreuger was able to acquire the majority shares in the telephone company Ericsson, the mining company Boliden (gold), major interests in the ball bearing manufacturer SKF, the bank Skandinaviska Kreditaktiebolaget, as well as others. Abroad he acquired Deutsche Unionsbank in Germany and Union de Banques à Paris in France, often with the acquired companies' own money. These maneuvers were made both necessary and possible by his invention, decades ahead of his time, of Enron-style financial engineering, which reported profits when there were none and paid out ever increasing dividends by attracting new investment and/or looting the treasury of a newly acquired company. By 1931 an estimated 200 companies were controlled by Kreuger. However, the Stock Market Crash of 1929 turned out to be a major factor in exposing his false accounting that ultimately proved fatal to both Kreuger and his empire.

In the spring of 1930 he visited America and held a lecture about the situation in world economics at the Industrial Club of Chicago with the title "The transfer problem and its importance to the United States".[5] He was invited by President Hoover to the White House to discuss the subject and in June he was awarded the title Doctor of Business Administration at the Syracuse University, where he worked as a young chief engineer when a stadium was built there in 1907.

In 1929, at the peak of his career, the Kreuger fortune was thought to be worth 30 billion Swedish kronor, equivalent to approximately 100 billion USD in 2000, comprising more than 200 companies. In the same year the total loans made by Swedish banks were barely 4 billion SEK.

[edit] Main companies controlled by Ivar Kreuger around 1930

Ivar Kreuger in the head office of the Swedish Match in Stockholm around 1930.
Ivar Kreuger in the head office of the Swedish Match in Stockholm around 1930.

By 1932, rumours spread that Kreuger & Toll and other companies in Kreuger's empire were financially unstable. A Foreign Affairs report from 1930 had judged that of the $630 million worth of assets the company claimed to have, $200 million came from the match business, $30 million were in the bank, and the other $400 million were merely categorized as "other investments."[6] When the company finally went bankrupt in 1932, claimed assets of $250 million turned out to be nonexistent.

[edit] Death

In February 1932 Kreuger turned to Sveriges Riksbank for the second time in his life and asked for a large increase in his loans. At this time his total loans in Swedish banks was estimated to about half of the Swedish reserve currency that had started to give negative effects on the value of the Swedish currency in the international financial market. In order to grant him more loans, the government required that a complete statement of accounts of Kreugers entire company group was presented, as the banks own calculations showed that Kreuger & Toll economy was far too weak to give him more loans. At that time Ivar Kreuger was in the United States and he was asked to return to Europe for a meeting with the chairman of the Riksbank, Ivar Rooth. The meeting was supposed to take place around 13-14 March in Berlin. He met with Krister Littorin (vice president of Kreuger & Toll holding) and his own banker Oscar Rydbeck in Paris March 11 to prepare for this meeting. However, on March 12 he was found dead in bed in his Paris apartment at Avenue Victor Emanuel III.

Evidence suggested that he shot himself rather than face his creditors.[6] The French police that made the investigation came to the conclusion, after hearing the people working for Kreuger, that he shot himself some time between 10:45 am and 12:10 pm. A 9 mm automatic gun was found on the bed beside the body. Later theories, based partly upon statements from relatives, post-mortem doctors and studies regarding cover-ups in the revision after his death, claimed that Kreuger's wounds had not been self-inflicted. He left a sealed thick envelope behind in the room, addressed to Krister Littorin, containing three other sealed envelopes, one addressed to his sister Britta, one to Sune Scheéle[7] and one letter to Littorin. In the separate letter to Littorin, for some reason written in English although Littorin was his closest Swedish colleague, he wrote: I have made such a mess of things that I believe this to be the most satisfactory solution for everybody concerned. Please, take care of these two letters also see that two letters which were sent a couple of days ago by Jordahl to me at 5, Avenue Victor Emanuel are returned to Jordahl. The letters were sent by Majestic - Goodbye now and thanks. I K.[8] Ivar Kreuger was interred in Norra begravningsplatsen in Stockholm.

[edit] The Kreuger Crash

His death precipitated the Kreuger Crash which hit investors and companies worldwide, but particularly hard in the U.S. and Scandinavia. In 1933 and 1934, the U.S. Congress passed several security reform legislations that were meant to prevent a rerun of the Kreuger Crash. These bills were largely successful in their mission and the American financial industry did not witness a fraud of the same magnitude until the Enron, which occurred after the regulations were relaxed in the 1990s.[citation needed]

Prior to the crash, Kreuger had issued thousands of participating debentures. These were very popular, and a firm public belief in the rising Kreuger empire convinced contemporary Swedes to invest in these "Kreuger papers". Following the Kreuger crash, the debentures became worthless, and several thousand Swedes lost their life savings as a result.

[edit] Personal life

Ivar Kreuger never married but lived many years together with Ingeborg Eberth (born Hässler). He owned several apartments around the world and real estate in and around Stockholm. On business tours in Europe he preferred to meet his business associates in Paris and then stayed in his flat at 5 Avenue Victor Emanuel III.

He also owned several motor yachts, among them Elsa built in 1906, Loris (1913), Tärnan (1925) and the most famous, Svalan (Swallow),[9] built in 1928, a 37 ft, 4.9 ton motor yacht, equipped with a V12, 31.9 liter Hispano-Suiza engine from the US company Wright, with 650 HP output, capable of more than 50 knots. A replica of the boat has been built and can be rented for special occasions[10].

Ivar Kreuger never had a drivers license. A private chauffeur drove his cars. He was moderate on most of things and did not have any special interests or hobbies beside his business, his motor yachts, an interest he shared with his brother Torsten Kreuger, and his country place, a private island (the island of Ängsholmen) in the archipelago of Stockholm about 30 nautical miles straight east of Stockhom. He had a few close friends that often met during summer time at Ängsholmen, when he used his motor yacht to bring them out with a private crew to drive the boat.

He became the major shareholder when SF was founded in 1919 and because of that he sometimes met celebrities from the movie industry. In June 1924, Mary Pickford and Douglas Fairbanks, at that time the world's most popular film stars, were invited by SF to Stockholm and were guided around the Stockholm archipelago in his motor yacht Loris. A 6 minute long film sequence from this occasion[11] filmed by SF was saved and is now owned by the Swedish public service television company, Sveriges Television. In the film sequence, Mary Pickford, Douglas Fairbanks, Ivar Kreuger, Mauritz Stiller (filmdirector at SF), Greta Garbo and some other people that worked for SF at that time appear. Normally Ivar Kreuger preferred to spend his free time away from the spotlights with a few close friends. Most of his time however he was continuously on business tours in Europe or America.

[edit] Recent controversy

Kreuger has been described as "The prince of the first global finance state".[12] The Economist, on the other hand dubbed him "The World's Greatest Swindler"[6] Recently, after classified documents were made public, books have been published which support different views of Kreuger and the circumstances of his death: Därför mördades Ivar Kreuger (ISBN 91-7055-019-0) (1990), and Kreuger-Mordet: En utredning med nya fakta (ISBN 91-630-9780-X) (2000). Although his brother Torsten wrote a book in the early 1960s defending the murder theory, there has been consensus among historians that Kreuger killed himself. It remains to be seen if these new publications will change this view.

[edit] Trivia

  • When the journalist Isaac Marcosson from the Saturday Evening Post asked him about the secret behind his success in business, he answered: "silence, more silence, and even more silence".[13]
  • Ivar Kreuger was engaged in the Swedish movie industry SF by a chance when Charles Magnusson, a cinema owner, was looking for a new place to run his cinema when the new NK warehouse, was about to be built (by Kreuger & Toll) in 1913, that forced him to move out from the present building. He found a new real estate and the owner of that was Ivar Kreuger. Ivar became interested in the movies and was always looking for new business ideas. The movie industry in Sweden, at that time was very small, but had a chance to expand, influenced by the development of the movie industry in America. However the company SF did not turn out so well and he tried to sell it in 1930 to a German company, but without luck, so he kept it.

[edit] References

  1. ^ "Poor Kruger", Time (magazine), March 21, 1932. Retrieved on 2008-04-16. "Principal Kreuger company is Swedish Match — Svenska Tändsticks. It makes 66% of the world's matches, controlling 250 plants in 43 nations. In 1930 its earnings came to $13,000,000. This company's growth was due to Ivar Kreuger's efforts and its rise paralleled his own." 
  2. ^ Remark: The M. Sc. degree around 1900 cannot be compared to the present demands. Today, two M. Sc. covering the full education program in both factulties in 4 years is impossible.
  3. ^ Julius Kahn (1874–1942), civil engineer, inventor, formed the company Trussed Concrete Steel Co. together with his brother Albert Kahn, in 1903.
  4. ^ Title (translated): "Experiences in concrete steel constructions in North America" by Ivar Kreuger in the magazine Teknisk Tidskrift, 1908. National Library of Sweden
  5. ^ Speech held May 15, 1930. National Library of Sweden
  6. ^ a b c "The Match King.", Economist, December 19, 2007. Retrieved on 2008-04-14. "Ivar Kreuger was the world's greatest swindler. He would have thrived today. ... Kreuger walked to a gun-shop and bought a 9mm automatic pistol. That night, the man who had never married, who kissed women on the wrist rather than the hand for fear of germs, had a last tryst with a young Finnish girlfriend. The next day, lying on his bed in a pin-stripe suit, he shot himself, blowing out the last flicker of illusion in a hopeless age." 
  7. ^ Sune Scheéle was working for Kreuger 1919-1932. Between 1925-1930 he was a manager for the Kreuger business in India.
  8. ^ Police report-Kreuger. National Archive, Stockholm. The other two letters to Sune Scheéle and his sister Britta have not been published.
  9. ^ Drawing sketch Swallow
  10. ^ Pampas Shipyard and Yacht Club, Stockholm
  11. ^ Filmsequence, Mary Pickford and Douglas Fairbanks in Stockholm, June 1924. MS Mediaplayer.
  12. ^ Kreuger homepage.
  13. ^ Issac Marcosson, "Ivar Kreuger", Saturday Evening Post, USA, Oct. 12, 1929.

[edit] Further reading

  • Lars-Erik Thunholm: Ivar Kreuger. Published by T. Fischer & Co., Stockholm 1995. ISBN 91 7054 757 2 (Swedish))
  • Lars-Erik Thunholm: Ivar Kreuger. The Match King. Translated into English by George Thiel., 2002. ISBN 91 7054 958 3
  • Lars-Erik Thunholm: Oscar Rydbeck och hans tid. Published by T. Fischer & Co., Stockholm 1991. ISBN 91 7054 659 2 (Swedish))
  • Magnus Toll: Paul Toll 1882-1946, ingeniör-entreprenör. 1996. Private book. (Swedish))

[edit] External links