Ivar Kreuger had initially made a career for himself in the construction industry, where he enjoyed major success by investing in modern cement building technology. He subsequently led structural rationalization within the Swedish match sector and when he had gained control of this through his Svenska Tändsticksaktiebolaget, he succeeded in building an international empire which dominated the global match trade using cartels and rational production. He later combined his match business with international lending in such a way that he gave favorable state loans to a number of European countries in return for permission to monopolize the match market in each country. Complete control was vested in the parent company Kreuger & Toll.
In the 1920s, Kreuger made use of the fact that the Swedish stock market was depressed by the after-effects of the financial crisis from 1921-1923. Swedish companies were inexpensive and Swedish banks had large holdings of shares that they had been forced to retain as deposits following emergency loans. Now they wanted to get rid of them.
Until 1928, Kreuger invested in a broad spectrum of shares, but thereafter he focused, mainly in secret, on acquiring majority holdings, in order to be able to dominate several Swedish industries. He began by buying shares in the Grängesbergsbolaget, and continued to gather ownership power in a number of forest industries to merge them to form Svenska Cellulosaaktiebolaget (SCA) and to buy mines in Västerbotten to form Boliden AB. Kreuger's involvement in Ericsson must be seen in the light of similar transactions at the time.
Ericsson was a successful company with an international focus, which might have appeared generally attractive to Kreuger. However, there were special reasons for his interest in Ericsson. The concession transactions with their state-guaranteed monopolies could be easily linked to the granting of loans and were not far removed from Kreuger's match business.
At the end of the 1920s, Kreuger supported Ericsson in negotiations for telephone concessions, but at the same time he nurtured good personal relations with Sosthenes Behn, head of the International Telegraph & Telephone Corporation (ITT), the worlds largest manufacturer of telephones and Ericsson's opponent in a number of markets throughout the world. Karl Fredrik Wincrantz, the president of Ericsson, appears to have mostly favored fighting ITT, but as usual Kreuger saw more substantial benefits in reaching agreement and dividing the spoils. It can be surmised that what had crossed Kreuger's mind was a worldwide agreement of the kind enjoyed by the match companies. A prerequisite for cartel agreements was, however, that Kreuger first gained control of Ericsson.
Kreuger's admission to Ericsson as an owner had been through Wincrantz, who formed a holding company in 1925, AB Ängsvik, in order to gain a dominant holding in Ericsson. Kreuger had, without the knowledge of the Ericsson Board, invested half of the share capital in Ängsvik and thus helped Wincrantz to take power and become sole president. Then, without the knowledge of Wincrantz, Kreuger continued to purchase Ericsson shares and in 1930, when Wincrantz was unwilling to follow Kreuger's directions regarding international business, Kreuger showed his hand. From that point, Kreuger & Toll dominated Ericsson in ownership terms. Wincrantz was deposed as President and Kreuger appointed his own handpicked men, Walter Ahlström and Johan Grönberg, as chairman and president.
Author: Ulf Olsson