German Schaeffler Scandal Gets Hairy

Any larger German company that was in business during and/or did business with the Hitler regime must face history—at some point. Some companies, such as Volkswagen, owned-up early on that they had used slave labor. Some, such as BMW’s owners Quandt, denied it. American companies, such as Ford and Opel, are amongst those guilty by association. Finally, a fund was set up, which probably benefited the lawyers more than the 25k survivors.

Now, history is catching up with German car parts supplier Schaeffler. According to the Independent, “the giant but debt-crippled Schaeffler car parts supplier was accused of using hair shorn from at least 40,000 Auschwitz death camp prisoners to make textiles at its factories in Nazi-occupied Poland during the Second World War. The highly disturbing allegations were contained in new evidence unearthed by Polish historians at the Auschwitz museum, who said they had found rolls of fabric made from camp inmates’ hair at a former Schaeffler factory in Poland’s southern region of Silesia.” The company’s historian has dismissed the allegations.

He said there was no evidence to support the theory that Schaeffler processed death camp inmates’ hair industrially during the Second World War. According to the Independent, “hair was routinely shorn from prisoners, usually on arrival, at the death camps. The Nazi war machine used it to make army blankets and socks for U-boat crews.”

The allegations can’t come at a worse moment for the company.

As if being an auto parts manufacturer isn’t bad enough, Schaeffler wanted to “do a Porsche” and took over the much larger Continental group. They swallowed more than they could chew. Family-owned Schaeffler borrowed 16 billion euros to buy control of Continental, but the credit crunch left it struggling to service its debt.

The Schaeffler family is now being pressured to surrender control of its company to banks that financed the ill-fated deal, or face bankruptcy. Schaeffler has appealed for government help, but German Finance Minister Peer Steinbrueck said the company had to first do what it could on its own before hoping for support from the government.

Ironically—but not surprising to those with knowledge in German history—the textile factory where the hair is alleged to have been processed formerly belonged to the Jewish-owned Davistan AG. When the Nazis came to power, Ernst Frank, the enterprise’s Jewish owner, was compelled to flee Germany.

The firm came under the control of a consortium of banks, among them the Dresdner Bank. In October 1940, Wilhelm Schaeffler, an employee of the Dresdner Bank, acquired 67 percent of the shares at a price 30 percent below the rated value.

In 1942, the Davistan AG was renamed “Schaeffler AG.” The company made armaments for the Nazi war machine. After the Second World War it re-emerged as one of Germany’s main suppliers of parts to the car industry, specializing in needle roller bearings.

People familiar with those stories call the revelation too coincidental. There are skeletons of this kind in most German companies. Poland is reeling from a devastating banking crisis. They want their fledgling auto parts companies to be bailed out not some high rollers in Germany.