A. Moksel AG - A String of Crises: 1992–98

A String of Crises: 1992–98

Moksel's advance came to a sudden halt in 1992. That year the company acquired G.u.P. Salomon AG, a meat trader and processor near Frankfurt, for DM 40 million. The company was strong in the production of prepared food and had a contract with Burger King. But the deal turned sour after Moksel looked through the firm's accounts and found hidden debt and irregularities costing more than DM 100 million. Moksel reported a DM 125 million net loss in 1992 and was forced to cancel its regular dividend payment.

Meanwhile, Moksel was in the midst of investment and expansion. Aside from a new cutting facility in Buchloe, three new slaughterhouses in the former East Germany were almost ready in the towns of Neustrelitz, Kasel-Golzig near Luckau, and Rodleben near Dessau. Moksel also gained a majority share in Eyckeler & Malt AG, a company near Düsseldorf involved in livestock trade, slaughtering, and processing. In the early 1990s, however, Moksel was investigated for possible illegal dealings with East German companies. The company was suspected of having undeservedly profited from special credits designed to rejuvenate the East German economy. Loans to East Germany had been negotiated by a Bavarian leader with ties to Moksel, and commissions meant for the East may have found their way back to Moksel. When Finance Department leaders of the Christian Social Union made rule changes that absolved Moksel of responsibility, opposition parties on the left accused the government of favoring Moksel because the company was a major contributor to the right-wing party. The investigation was reopened, and the final report in 1994 found that Moksel appeared to have acted illegally in its dealings with East Germany, receiving a share in commissions that were meant for East Berlin. Parties on the left suggested that Moksel's imports from the East resulted in lower livestock prices for Bavarian farmers.

In the mid-1990s a drop in demand for meat was putting even more pressure on Moksel. In particular, the highly modern new slaughterhouses in the East were losing money due to overcapacity. The beleaguered Moksel hit a crisis point in 1994, which Chief Executive Herbert Wüst referred to as "the most difficult year in the company's history." The company reported a group loss of DM 179.1 million. Wüst came to Moksel to lead the company through a drastic restructuring. In his opinion, the Süddeutsche Zeitung reported, the company's dire situation was in part due to "a strategy of size without use of market synergies." Under Wüst's leadership, Moksel laid off several hundred employees in 1994, cutting its payroll to about 2,200. Over the next year Wüst carried out cost-cutting measures, cut back slaughtering activities, and called for a greater focus on processing, international trade, and product branding.

Company Perspectives:

Established as a traditional company in the meat industry, the Moksel Group has developed into one of the leading food production consortiums in Germany, and is active in Europe and on a global scale.

Today, we are distinguished by a considerably expanded product range that is based, as before, on implementing the demanding quality standards of our production and distribution companies.

As a progressive, innovative and highly-competitive food processing company with competent solutions for all food requirements, we are definitely on the right track.

After the restructuring, Moksel's capital reserves were used up almost completely. If not for the support of its banks, the company would have gone bankrupt. Over the course of the mid-1990s, Moksel's creditors refrained from collecting DM 293 million in debt. About DM 50 million was forgiven and the rest converted into rights to Moksel's future profits.

By 1997 the restructuring was showing some tentative results. Moksel reported a small profit of about DM 6 million, its first since 1991, but dividends were still out of the question. Chief Financial Officer Uwe Tillman took leadership of the company after Wüst's early resignation in February. The tough times were not over yet. Creutzfeldt-Jakob or "mad cow" disease had just appeared in Britain, causing a drawn-out drop in demand for beef products. The company's financial situation remained poor. The März food company, which held a third of the company's shares, had gone bankrupt. Moksel was in dire need of an investor that could pump some capital into the company, but the search for a partner took years.