The long road from leather

Highest quality

Freudenberg has always been good at transformation. Again and again, the company has analyzed market opportunities successfully and departed from cherished and familiar paths. But there is one major exception: its emotional attachment to its original business, leather.


In the beginning, it was a tannery in Weinheim. Today it is a global technology company with a wide-ranging portfolio of products. Freudenberg has often remade itself. This has meant making repeated adjustments, repositioning its business and seeing changes as opportunities. So it sounds as though rationality has largely prevailed at Freudenberg. Always? No, not always. After all, human beings are at the helm of any company. And their behavior can vary at times – it can be less rational and more emotional. That’s one reason there was a struggle over the company’s original leather business from the late 1960s until it came to an end in 2002.

Numbers don't lie - but they're not everything either

Let’s start with a few facts: Between 1969 and 1986, Freudenberg’s leather division lost a total of 131 million Deutschmarks. The losses were the most serious in 1973 when the division’s losses reached about 33 million Deutschmarks. The company’s profits that year were about 51 million Deutschmarks. Over time, the leather’s total share of Freudenberg’s revenue fell precipitously.

So from a purely economic standpoint, it was clear that an earlier exit from the leather business would have made sense. That was also the finding of an in-house study of the leather division’s profitability in 1986. It stated that, “in economic terms,” it had become impossible to continue the business. Nonetheless, Freudenberg’s 153-year-old commitment to leather would not come to an end until 2002. It is clear that no other product would have been given such a long reprieve. But in the end, this was not just any product – it was leather, the wellspring from which everything else emerged.

A helpful retrospective

A look back at Freudenberg’s history reveals the huge role that leather played for the company and its founding family. Formed as a tannery in 1849, Freudenberg was totally geared to the production of leather for decades. To put it somewhat indelicately, its product line was leather and that was it. Across generations, the descendants of company founder Carl Johann Freudenberg and the company’s later managers would learn the tanning trade from scratch. It was a matter of developing a deep understanding of leather. What emerged was a strong attachment and emotional commitment to this one product. 

Highest quality

Leather production consists of about 75 production steps, each of them individually optimized to produce high-quality leather. The standards of quality developed at the time have become part and parcel of Freudenberg’s self-conception.

It took the economic crisis of 1929 to bring diversification. One example was the development of the Simmerring. Nonetheless, Freudenberg was still mainly a tannery in 1945. Its leather divisions accounted for two-thirds of its sales at the time. Thus, leather was still dominant at Freudenberg even 100 years after its founding. 

Massive changes in the market

Germany’s leather market was undergoing huge structural changes during the 1960s. A wide variety of artificial leather products emerged as competition for natural leather. Freudenberg’s management was fully aware of how massive these changes would be. For example, Hans Erich Freudenberg, a member of the Board of Management from 1949 to 1976, was already describing the fierce competition from substitute products as a “disruptive factor for the leather business” in 1967. 

The exciting part was the way Freudenberg responded to the structural crisis in the German leather industry. First of all, from today’s perspective, it was in the best Freudenberg tradition. The company recognized the opportunities in the market. Within a few years, it rose to become Europe’s largest producer of artificial leather – incidentally, an important milestone on its path from traditional leather producer to technology company.  

Strategy: shrinking, not closing

But in another way, the response was not at all typical of a skilled corporate quick-change artist. In its simplest form, the  decades-long strategy for its money-losing natural leather division could be described as “shrink it, don’t close it.” The unit’s capacity and costs were reduced, which naturally led to the division’s downsizing. The Board of Management was opened up to non-family members in 1970. Still, for a long time, it could not bring itself to fully shut down its venerable leather business. 

The Board began discussing the topic in earnest in 1986, if not earlier. In that year, a letter was drafted to notify the Partners of the closing. But the measure was not carried out, and the letter was never sent to shareholders.  

Late successes

At the end of the 1980s, Freudenberg was focusing on a market niche, “high-quality leather for luxury segments.” It supplied manufacturers of high-end shoes and leather goods on every continent. Even if the company was only successful in this market niche for a short time, there were indeed some very prominent fans of Freudenberg products. For example, then-U.S. President George H. W. Bush ordered three pairs of shoes from a Freudenberg customer, Allen Edmonds Shoe Corporation, in 1989. They were naturally made of Freudenberg leather.

Liquidation prevented at the last minute

Rudolf Scharpff, member of the Board of Management from 1979 to 1993, was in charge of the leather business at this time. His account of the board’s inner conflict on the matter is even more impressive. “I was […] already on the way to liquidate it, but Hermann [Freudenberg] called and said, ‘we are not going to do it’ […]. Then it was delayed.”

Hans Erich Freudenberg saw the reasons for the long attachment to leather as “a sense of responsibility for the jobs and ties to a tradition.” The response from Reinhart Freudenberg, member of the Board of Management from 1972 to 1997, was similar. As one of the defining personalities in Freudenberg history, he will have the last word on the matter: “In retrospect, we would have saved an incredible amount of money if we had closed it much more quickly. But that was impossible from an emotional standpoint.”

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