Werner von Siemens and his brother William made their initial business contacts in the United States during the mid-1840s. On March 4, 1892, Siemens established its first American subsidiary. But fate had nothing good in store for Siemens & Halske Electric Co. of America.
Protectionism and import prohibitions – The first business contacts with a difficult market
Werner von Siemens and his brother William looked across the Atlantic at an early point and made initial business contacts in the United States. At the time, in the mid-1840s, they sold book-printing presses to American companies for a short period of time. After the establishment of Telegraphen-Bauanstalt von Siemens & Halske (S&H) in Berlin, business activities there were primarily limited for decades to registering individual patents, concluding licensing agreements and delivering a small number of niche products. The highly specialized nature of Siemens products, combined with the needs of local customers, complicated efforts to enter the largely autonomous North American electrical market.
The brothers ran into two other problems as well: the protectionist policies of the U.S. government and a legal prohibition on the import of equipment and machines that were previously patented in the United States.
In 1886, Werner von Siemens hired the widely known American railroad industrialist Henry Villard to represent the interests of Siemens & Halske in the United States – but the anticipated success failed to materialize: Up until the start of the 1890s, his business-acquisition efforts resulted in only a few small contracts.
Gaining a foothold with the company’s own U.S. subsidiary – “The American tragedy”
On March 4,1892, Siemens & Halske established Siemens & Halske Electric Co. of America (S&H America) with the help of the German-American entrepreneur Otto W. Meysenburg in Chicago. Meysenburg became president of the new company and served from this point on as general representative in the United States. The business activities of S&H America involved manufacturing and selling dynamo machines for electric railroads and lighting systems as well as electrical equipment for railways. As expected, on-site production facilitated the use of U.S. patents while eliminating high import taxes and transport costs.
Nonetheless, the company wrestled with financial problems from the start. It had to increase its equity twice in two years. The company’s work was also hampered by cultural differences, conflicting ideas about business management and communication problems between Chicago and the company headquarters located in far-off Berlin. Unfortunately for Siemens, the problems did not stop here: The Chicago factory was destroyed by fire in August 1894 – an occurrence that brought a temporary end to efforts to establish a subsidiary with its own production operations in the United States. “The American tragedy,” as Carl von Siemens described the U.S. activities of Siemens & Halske shortly after the blaze, was finally brought to an end in 1904 with the liquidation of S&H America.
Siemens analysed the U.S. sale market – “cheap, simple and crude as possible”
In 1908, Siemens launched a new era in its U.S. business activities: Under the leadership of the German physicist Karl Georg Frank, the German electric engineering company established an information office in New York that will represent the interests of Siemens & Halske and Siemens-Schuckertwerke (SSW), a company established five years earlier.
Initially, the primary purpose of the office was to amass know-how about specific aspects of the U.S. market and the sales chances of Siemens’ product portfolio. But Frank quickly broke free of the directives issued by the Berlin headquarters – and was soon driving the sale of scientific measuring apparatuses, laboratory equipment and electric-arc lamps.
But information gleaned from his market and competitive analyses proved to be of greater importance to future business growth. With American customers in mind, he called for the company to supply “products that are as cheap, simple and crude as possible – all efforts to incorporate extraneous external features having been eliminated, with parts that can be readily replaced and operation that is as simple as possible.”
The head of the Siemens representative office also initiated and intensified contacts and discussions with the U.S. market leaders General Electric (GE) and Westinghouse Electric Corporation (Westinghouse). Nevertheless, it was not until 1945 that Siemens finally manages to gain a lasting foothold that extends beyond exploiting its patents and engaging in low-volume business with specialized products.