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VOEST-ALPINE AG up to the Restructuring of ÖIAG

Commissioning of Blast Furnace A (1977)

Following the merger of VÖEST and Österreichisch-Alpine Montangesellschaft, between 1974 and 1976 a number of other companies are consolidated into new entities and newly integrated into VÖEST-ALPINE AG if necessary. Particularly important in this connection are Gebrüder Böhler & Co AG, Schoeller-Bleckmann Stahlwerke AG, and Steirische Gußstahlwerke AG—companies forming part of the nationalized special steel industry—which are consolidated into a new entity named Vereinigte Edelstahlwerke AG (VEW). VEW is the largest subsidiary of the VÖEST-ALPINE Group.

The effects of the merger of VÖEST and Österreichisch Alpine-Montangesellschaft already coincide with the first oil crisis and the large rupture in prevailing economic trends. Starting in 1975, Austria, too, is affected by the fallout from the international steel crisis, such as the general decline in prices. The steel industry is buffeted by massive changes, which trigger a steep decline in growth. In turn, this initiates rapidly accelerating structural changes in the industrialized countries’ steel industries. To lessen the impact of economic cycles on the steel sector, the management of VÖEST-ALPINE shifts its focus to the expansion of its activities in industrial plant engineering and finished goods.

In mid-1977, the Group puts in place a new organizational structure, specifically, a multi-dimensional segment structure. The Group is divided into four divisions (steelworks, processing, finished goods, and industrial plant engineering) that are each accountable for their own bottom line. As part of the reorganization, in 1978 industrial plant engineering is placed under the direct control of the Management Board. Furthermore, the name VÖEST-ALPINE AG is tweaked ever so slightly—Ö (the letter O with an umlaut) is changed to a simple O—and the company’s logo is revamped.

The company has been trying to penetrate a broader range of markets since the late 1970s. Hence a comprehensive diversification strategy is initiated in 1980. It marks a shift toward highly processed and top-quality products providing the greatest possible added value, process innovations, the company’s entry into the high-tech sector as well as an intensified focus on trade.

This strategy entails the founding in 1982 of VOEST-ALPINE Medizintechnik GmbH, VOEST-ALPINE Glas GmbH, Austria Mikrosysteme International GmbH, and VOEST-ALPINE Energieservice GmbH as subsidiaries and associates of the VOEST-ALPINE Group. The following year sees the creation of a new division named Electronics and Automation under the direct control of the Management Board; it combines all production and service activities related to electronics.

Starting in 1979, VOEST-ALPINE AG begins work on developing the so-called “COREX process” in cooperation with Korf Engineering GmbH, a German company in which it holds a 49 percent interest; this process makes it possible to generate pig iron directly from non-metallurgical coal and iron ore in inexpensive and environmentally friendly ways (“coal reduction process”). Korf Engineering GmbH is taken over in 1983 and becomes a wholly-owned subsidiary.

The following facilities among others are started up between 1975 and 1985: Cold Rolling Mill II; Blast Furnace A with a hearth diameter of 10.5 meters and a maximum pig iron output of 5,500 tons per day; the world’s largest plasma melting furnace at the electric steel plant in Linz; a continuous caster for billets and a wire mill in Donawitz; the oilfield piping plant in Kindberg; and the precision steel tubes plant in Krieglach. One of the most modern apprentice training centers in Austria is also completed in Donawitz.

The crisis that has been brewing in the nationalized industries for a long time finally comes to a head in 1985: As VOEST-ALPINE has been writing lots of red ink since 1981, the government has stepped in repeatedly to help with capital infusions, but these entail stricter state control over the allocation of the funds.

The fact that the Group has used its political clout to lasting effect; the fact that it has been abused to serve as a national labor pool; changes in international economic parameters; the erosion of individual companies; diversification failures in both foreign projects and the finished goods division (among others, the Bayou Steel Corporation in Louisiana, USA; mechanical engineering in Liezen; etc.); as well as the enormous losses that a company named Intertrading (which was founded in 1978 and is VOEST-ALPINE’s trading subsidiary) has run up in connection with its speculative activities in the oil market lead to the bankruptcy of VOEST-ALPINE in 1985 and the resignation of its entire Management Board. The conglomerate, which by then has 70,000 employees, is broken up. The “VOEST Debacle,” as it is known, literally triggers a national crisis and sets in motion a far-reaching restructuring process in Austria’s industries.