When Ericsson was pulled into the Kreuger sphere of interests, the Wallenberg sphere viewed this development with concern and skepticism.
The Wallenberg family controlled Stockholms Enskilda Bank (SEB), and its involvement in the Kreuger group was limited, compared with that of other banks. Although the bank had succeeded in successively raising guarantee requirements for loans, Kreuger was still SEB's largest borrower.
For Marcus Wallenberg, the Kreuger crash resulted in a lifelong personal commitment to Ericsson, which following Kreuger's death in 1932 was in dire straits, particularly since Kreuger had made its US competitor International Telephone and Telegraph Corporation (ITT) a major owner in the company.
It was primarily Marcus Wallenberg who worked out a solution to Ericsson's problems. The importance of his role at Ericsson became apparent in 1933, when he replaced his brother Jacob Wallenberg on the board of Ericsson's Italian company, where Marcus Wallenberg was often called "Mr. Ericsson".
Marcus Wallenberg's role came naturally. He had been responsible for the Kreuger loans at SEB. He established close contacts with Sosthenes Behn, president of ITT, and thus created a strong position for himself as a mediator between the two largest owners.
In 1933, Marcus Wallenberg was also elected to the board of directors of Ericsson's parent company. At the same time, a finance sub-committee was established under his leadership, which in practice became a board within the board that dealt not only with financial issues.
Marcus Wallenberg also quickly took command in solving Ericsson's precarious liquidity situation, which included a total of SEK 65 million owed the company by the Kreuger & Toll estate. The debt work out included Swedish and foreign banks.
In addition, Marcus Wallenberg was involved in Ericsson's concessions business, particularly in Finland, Argentina and Mexico. Telephone network operations were costly and had become a burden on the company during the years of crisis. Wallenberg contributed to finding sustainable solutions that put Ericsson's interests foremost and were supported by loans from SEB.
In Finland, Ericsson became the most favored supplier for future deliveries of telephone equipment. In Argentina, Ericsson relinquished its dominant position in favor of ITT. In Mexico, however, a solution would not be found until 1958, when domestic owners took over.
The agreement during the 1930s, in which Marcus Wallenberg carried a heavy load, gave him a strong position at Ericsson and in the company's business, which was divided among the three major Swedish banks, SEB, Skandinaviska Banken and Handelsbanken.
The Wallenberg group, however, did not immediately increase its shareholding. Only after a process that began in 1953 when Marcus Wallenberg was appointed chairman of Ericsson would the group increase its holding. In his new position, Wallenberg soon initiated discussions with ITT about its ownership role in the company. The president at that time, Edmund H Leavey, announced in 1957 that he wished to sell ITT's shares in Ericsson at their book value.
Negotiations were held regarding the price, but the situation was complicated by a change of presidents in the American company. In his first meeting with Harold S Geneen, the new president of ITT, Marcus Wallenberg emphasized the historical background for ITT's shareholding in Ericsson and what he considered morally obligating.
These words fell on deaf ears, however, and Geneen threatened to sell the shares immediately on the US market. Marcus Wallenberg was forced to capitulate on the issue of price and negotiated an share option in February 1959 corresponding to SEK 117 million, which was more than a doubling of the price discussed two years earlier when the negotiations started.
After this expensive but smoothly implemented transaction, the Wallenberg group's voting share in Ericsson increased to about 25 percent. This "Swedification" of the company met with praise and strongly nationalistic sentiments.
Marcus Wallenberg's work during his 45 years on Ericsson's board of directors - he resigned as chairman in 1977 - was extremely important in strengthening the company's international position. This applied to everything from the negotiations in Finland in the 1930s to preparations for entering the US market in the 1980s.
Marcus Wallenberg, who was deeply interested in technology, was also able to witness Ericsson's success in the extensive development program that resulted in the AXE system, which was quickly chosen by some 40 countries and contributed to Ericsson being able to successfully compete against ITT, for example.
Author: Anders Perlinge
