Electronics and the Facit Crisis

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How electronics destroyed Facit in 1971-72.

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Electronics and the Facit Crisis

  1. 1. I hope that this slideshow can shed some new light on the recession we’re going through in these days.
  2. 2. After decades of growth, Facit, a Swedish manufacturer of typewriters, mechanical calculators and office furniture got into deep trouble in 1971-72.
  3. 3. A technological shift was about to happen…
  4. 4. Electronic calculators were becoming better and better and started to replace Facit’s calculators.
  5. 5. Just before the storm a new CEO was recruited.
  6. 6. ”Large structural changes are needed”
  7. 7. Gunnar Ericsson handed over to Lennart von Kantzow.
  8. 8. Kantzow happened to be married to Gunnar’s sister Ulla.
  9. 9. The Ericsson family had built and owned Facit since the 1920s and therefore, this seemed to be a good way of retaining the family’s control over the company.
  10. 10. The technological shift started to bother Facit bigtime at about the same time as Kantzow started as CEO.
  11. 11. After decades of profits, the bottom line was now painted in dark red.
  12. 12. ”Facit: no dividends 54 MSEK in losses.”
  13. 13. Needless to say, some layoffs had to take place.
  14. 14. ”1000 jobs are lost at Facit.”
  15. 15. Here comes the next bomb.
  16. 16. Kantzow is fired after about 1 year as CEO:
  17. 17. ”Even the CEO is fired!”
  18. 18. ”I don’t know why I was fired.”
  19. 19. Since Gunnar Ericsson was still the chairman of the board this created huge headlines in the Swedish media.
  20. 20. ”Facit refuses to tell why Kantzow had to leave.”
  21. 21. Gunnar Agrell, who was in charge of the subsidiary called Addo now entered has CEO.
  22. 22. ”Can you handle Facit’s problems, Gunnar Agrell?”
  23. 23. However, Agrell was only supposed to remain as CEO until a new one had been recruited.
  24. 24. ”Facit intensifies its search for a new CEO”
  25. 25. But who wants to become the captain of Titanic?
  26. 26. No one. Therefore it was now up to Gunnar Ericsson to step up once again.
  27. 27. ”Is Gunnar Ericsson able to handle the Facit crisis?”
  28. 28. Gunnar and his father had built and lived with the company for many, many decades.
  29. 29. It was now up to Gunnar to watch this go down.
  30. 30. ”I have to rescue Facit.”
  31. 31. It must have been tough to take on this job. Facit was critized for everything.
  32. 32. ”Did Facit miss a unique invention?”
  33. 33. ”Facit director tried to stop TV program”
  34. 34. ”The bubble that burst.”
  35. 35. The results for 1972 didn’t seem too promising either.
  36. 36. ”Another 55 MSEK loss at Facit. Poor sales.”
  37. 37. The situation started to become desperate and Facit now asked McKinsey for advice.
  38. 38. Speculations about Facit continued in the meantime.
  39. 39. Will even more workers have to be fired?
  40. 40. Given that Facit had manufacturing sites throughout all of Sweden, the entire country was worried…
  41. 41. ”Malmö may lose 1100 jobs”
  42. 42. ”They can kill two cities!”
  43. 43. In mid 1972, the investigation was ready to be published.
  44. 44. ”USA Experts: Shut down Addo!”
  45. 45. (Back in those days the Swedish office of an American consulting firm was referred to as ’American’)
  46. 46. ”3000 have to be fired”
  47. 47. Though the report contained some recommendations it was after all up to the board to decide where the layoffs should take place.
  48. 48. ”Facit sacks 2400 employees!”
  49. 49. Not many people envied Gunnar Ericsson during those years.
  50. 50. Ericsson had grown up in Åtvidaberg and he had always cared about the town..
  51. 51. Therefore many layoffs took place in other towns throughout Sweden.
  52. 52. Malmö suffered.
  53. 53. ”75 people are ’notified’ today”
  54. 54. Göteborg suffered.
  55. 55. ”The Göteborg plant for sale”
  56. 56. Strömstad suffered.
  57. 57. ”Soon there will only be retired people left”
  58. 58. ”Strömstad is heading for a disaster”
  59. 59. ”30-40 percent of the factory jobs in Strömstad are lost.”
  60. 60. More than 30 percent of Facit’s employees had to leave the company within two years.
  61. 61. The Facit stock had lost most of its value.
  62. 62. ”Shareholders lost 0,25 billion SEK in five years”
  63. 63. Speculations now took place regarding the future of Facit…
  64. 64. ”Strange transaction of Facit shares”
  65. 65. ”Sell your Facits shares now”
  66. 66. ”In five years 1880 SEK left out of 10 000 in Facit”
  67. 67. The once so admired Gunnar Ericsson was now subject to a lot of critique, while he had to witness his hometown and his company go through such difficulties.
  68. 68. The crisis was also used by those who wanted to argue against capitalism.
  69. 69. ”Private capitalism ruled by single families is becoming something unreasonable.”
  70. 70. The communists up north in Sweden weren’t too happy either: ”The crime against Facit’s workers”
  71. 71. The German comrades showed their support.
  72. 72. The Social democratic youth party thought that the government had to take some responsibility.
  73. 73. ”The safety of thousands is more important than the owners”
  74. 74. Not much new under the sun in 2009.
  75. 75. Prime minister Olof Palme entered the discussion.
  76. 76. Olof Palme said that one cannot exclude that ’society’ should take care of this.
  77. 77. Was Facit going to get nationalized?
  78. 78. Towards the end of 1972 it became clear that Electrolux wanted to buy Facit.
  79. 79. ”A few gentlemen, some whisky and someone said: ’why don’t we buy Facit?’”
  80. 80. ”The deal was struck over breakfast”
  81. 81. ”Electrolux buys Facit for 60 MSEK.”
  82. 82. Gunnar Ericsson was now a relieved man.
  83. 83. ”Feels great to wake up without power.”
  84. 84. What was going to happen with Facit?
  85. 85. ”The acquisition cannot hide the fact that the crisis will become even worse.”
  86. 86. This was just the beginning.
  87. 87. The problems remained.
  88. 88. Mechanical calculators were dead.
  89. 89. The demand for Facit’s mechanical calculators went down to zero within a few years.
  90. 90. The layoffs continued after Electrolux had bought the company.
  91. 91. Things did not get better in those small towns where Facit had been the main employer.
  92. 92. Who was to blame?
  93. 93. The owners?
  94. 94. Top management?
  95. 95. Capitalism?
  96. 96. Well, kind of.
  97. 97. He and his family controls the fate of thousands of people.
  98. 98. Gunnar Ericsson, ’American’ consultants, Mr. Von Kantzow – none of them had any power to control the fate of Facit.
  99. 99. The mechanic business was dead and with it died thousands of jobs throughout Sweden.
  100. 100. So who was to blame?
  101. 101. The Americans invented the integrated circuit, which enabled calculators to become smaller and better at a furious pace.
  102. 102. The Japanese built their wealth by making those products affordable for millions of people throughout the world.
  103. 103. Blame the Americans, the Japanese and everyone else who was involved in destroying the value of Facit’s mechanical calculators.
  104. 104. Capitalism creates growth and prosperity by destroying old technologies and products.
  105. 105. The Austrian economist Joseph Schumpeter referred to this as creative destruction.
  106. 106. This essentially means that the road to wealth goes via massive layoffs and industrial collapses.
  107. 107. Capitalism is brutal and those people who claim the opposite have most likely never been exposed to the problems it creates.
  108. 108. The theory of Creative Destruction is also a profound criticism of everyone who claims that ’society’ (government) should bail out collapsing industries and ’act responsibly’.
  109. 109. What would have happened if electronic calculators had been abolished?
  110. 110. Who would have benefited from letting taxpayers finance an industry and a company which had become history?
  111. 111. No one. Such measures would have prevented the scarce resources in society from doing something more productive.
  112. 112. In 1971 it was Facit and Åtvidaberg that suffered from capitalism.
  113. 113. ”The history about Åtvidaberg is the history about the Ericsson family.”
  114. 114. Capitalism seems to be pretty good at messing around with capitalists.
  115. 115. The electronic revolution destroyed a large amount of the wealth that the Ericsson family had accumulated during 50 years.
  116. 116. Thanks to ’Brukskultur Åtvidaberg’ och the municipal government of Åtvidaberg. The Facit archive is a fantastic source.
  117. 117. Christian Sandström is a PhD student at Chalmers University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and technological change. www.christiansandstrom.org christian.sandstrom at chalmers.se

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