Ericsson and the great depression
In terms of ownership and finance, Ericsson found itself in crisis at the beginning of the 1930s due to Ivar Kreuger's manipulations. However, it was equally as serious that the company's most important markets fell when the full force of the 1930s depression was felt. There was a decline in world demand for telephones and switches. During the first three years of the decade, the number of telephones in the world fell by 2.8 million. The company's foreign operations saw their sales almost halved. The global depression hit Swedish exports hard. In 1931, Ericsson had had exports valued at approximately SEK 22 M, while this fell to SEK 7 M in 1933.
In Sweden, the same problems were experienced, since the demand for telephone equipment was so low. This was particularly a result of Televerket, the Swedish PTT, making a concerted effort to install its own crossbar switch system throughout the country at the start of the 1930s. Malmö received a new station for no fewer than 20,000 subscribers. At the same time Televerket was doing its utmost, in a weak market, to safeguard its own Nynäshamn workshop for telephones. Thus, the state's own plants grew considerably, while Ericsson was forced to reduce its workforce.
What would Ericsson's management do in a situation where demand for telephone equipment in both Sweden and other countries was weak Naturally, products were sought which could be produced using the existing equipment and personnel. A diversification of production was implemented and new markets found, primarily within Sweden.
One such market was the result of the major telephone producers of the world terminating their cartel agreements, which reserved various markets for the participants. As a result, Ericsson had a monopoly in Sweden on transmission equipment and this became an increasingly attractive market because, despite the crisis, the state authorities were investing in the development of long-distance telephony. Amplifiers and loading-coils became important components in the Swedish telephone network. At the end of the decade, loading-coils were as valuable as telephones in Ericsson?s deliveries to Televerket, which did not possess its own resources in the area of transmission.
However, it was other customers and other products that attracted the greatest amount of interest in the 1930s. When the export markets fell and Televerket reduced its orders, Ericsson made a whole-hearted investment in products other than telephone equipment. Ericsson commanded about half of the light-current market in Sweden. Imports were quite substantial, particularly from the German Siemens company, and ASEA played an important role within Sweden. The much larger strong-current market was ASEA's real domain. Since electrical installers were dependent on that company, which also had light-current material as part of its range, ASEA dominated the light-current sector. In order to expand within the light-current area, Ericsson would preferably have to reach a market agreement with ASEA. The Wallenberg Group now had major influence in both companies, which made agreement easier.
In April 1933, both companies reached an agreement which resulted in ASEA restricting itself to its strong-current operations, while Ericsson received, in principle, exclusive rights to the "manufacture, sale and installation of equipment, transfer appliances, and so on, that were intended for light current". This meant, for example, electricity meters, measuring instruments, railway signaling equipment, light bulbs and electronic tubes for telegraphy, telephony and radio. From then on, for example, ASEA purchased its electricity meters from Ericsson. Similar agreements were reached with ASEA in the cable sector - there was already a European cable cartel that protected the Swedish companies from foreign competition.
A smooth path was now assured through cartel agreements, both internationally and domestically. In addition, the state authorities helped by increasing import duties on industrial products.
Author: Ulf Olsson
PUPIN BOX FOR THE DUTCH PTT , 1931
PTT = Post, Telephone and Telegraph.
A totalisator was used on race tracks to show the odds
Electricity meter for direct current, 1952