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Signed article: "Learning from our history"

September 22, 2005, 15:00 CEST

Not every company can look back at an industrial history stretching back 100 years; only very few of them achieve such a milestone. Hydro's history provides a source of both knowledge and inspiration. There is much in the company's past we can justly be proud of, though all of us shaping history today are aware of questionable past events, and the need for careful appraisal and some humility.

By Eivind Reiten, President and CEO, Hydro

We have just received 1500 pages of fascinating reading material compiled by historians from Oslo University and the Norwegian School of Management. This three-volume history of Hydro is the result of a ten-year research project. The experienced historians and some 50 students have been given free access to archives and living sources both inside and outside the company. They confirm to a very great extent our own impression of Hydro’s history – major engineering feats, gigantic projects and human courage, cooperation and drive. But it also striking how our ideas are formed by myths and a one-dimensional understanding of history. It is therefore liberating and inspiring to be finally presented with the historians’ findings and conclusions within the covers of these books.

It really was a breakthrough encounter that had such an impact on our predecessors early in the 20th century. Engineer Sam Eyde and research scientist Kristian Birkeland smashed the barriers of conventional thinking. Inspired by the surging waterfalls in the southern Norwegian mountains, they took up the challenge of competing with the leading European chemical companies and came out victorious in the race to develop a new technology ensuring enough food for a growing world population. With the help of the Wallenberg brothers of Sweden, they obtained French capital in 1905 for an apparently preposterous development project in a country that stood on the brink of war. But Birkeland and Eyde succeeded, and Hydro started building fertilizer plants and Europe’s biggest hydroelectric power station at Notodden in 1905, and the biggest one in the world at Rjukan some years later. The scale of their accomplishment becomes clear when we learn that the capital invested – between NOK 60 and 80 million – was equivalent to the national budget of Norway at the time.

The company did, however, spend too much on developing its own technology and had to be rescued by IG Farben in 1927, which in return for its Haber-Bosch technology received 25 percent of Hydro’s share capital and full control of the market. Even though this alliance helped remedy difficulties in the 1920s and 1930s, the period as "Lieferwerke Norwegens" – as IG Farben’s called its plants in Norway – remains a gloomy chapter. In 1940 management led Hydro down a road that turned the company into a partner of the German munitions industry. The industrialists were driven by business opportunities, too busy building the company and the country with help of German money to realize their errors in time. Today it is difficult to understand why Hydro did not withdraw from these projects when large numbers of slave laborers were dispatched to Rjukan and Herøya from a number of countries in Europe. An eagerness to achieve commercial goals is important, but our zeal must always be measured against ethical principles. It was not until Herøya was bombed by the Allies, and the Germans capitulated before a superior force at Stalingrad in 1943, that Hydro’s management changed course. Hydro’s head man was sent to a German concentration camp for resisting the occupying forces, but the company’s turnaround came too late to prevent the five war years remaining a dark episode.

One of Hydro’s main tasks during the post-war period was to obtain sorely-needed foreign currency for the country and the company, now under majority state ownership, played a vital role here. Hydro became both an aluminium producer and oil company in the 1960s by joining forces with American and French companies. The cooperation trials conducted at Herøya at the end of the 1960s were clear proof of the fact that management and employees had learned from their negative experiences. For back in 1931 at Menstad, Hydro’s management had exceeded their authority when they attempted to persuade the authorities to mobilize the army in order to deal with striking workers. In 1967 Herøya labor leader and subsequent head of the Norwegian Confederation of Trade Unions, Tor Halvorsen, and Hydro President and CEO, Johan B. Holte, embarked on a cooperative policy that would have a lasting affect on labor relations in the company.

Since then, respect has characterized the way we work in Hydro. The company has not been spared conflicts, but it has proved possible to solve problems in a spirit of open and trusting cooperation. We can rightly say that Hydro underwent a cultural revolution under Holte’s enlightened and far-sighted leadership in the 1960s and 1970s. At the same time, the company grew from being a Norwegian fertilizer producer to become a major energy, metals and chemical company with operations far beyond the country’s borders. Hydro was also confronted with serious environmental problems in the 1970s and 1980s that put the organization to the test on several occasions. There is little doubt that the company emerged more strongly from these conflicts and the subsequent turnaround operation. Had the environmental movement not been as steadfast as it was, and had Hydro’s management and employees not glimpsed opportunities in solving the problems, it is doubtful whether the company would have gained all the competitive advantages we are currently benefiting from.

The combination of courage, foresight and determined effort during the same years inspired the emergence of Hydro as an oil company. Seen from the outside, it must have seemed that the odds were against a "fertilizer company" successfully completing the Oseberg project in the North Sea in the 1980s. Production from Hydro’s first major test as oil operator came on stream several months ahead of time, at a cost that was several billion kroner below budget. And at the turn of the century, when the Troll gas-field under Hydro’s operatorship temporarily became the most productive oil-field on the Norwegian Continental Shelf, there were many people who rightly felt we were repeating the triumphs of the company’s earliest years. In the face of opposition from international industry giants, Hydro delivered a technology breakthrough that made it possible to recover oil that was thought to be without value until then. It was a pointer to the future. As were the acquisitions of the ÅSV aluminium company in 1986, the oil company Saga in 1999 and the German aluminium company in VAW in 2002. At the end of the 1990s we stubbornly refrained from splitting up the company, despite much pressure from financial markets. Instead of selling a fertilizer company in big trouble, we turned the business around and prepared the ground for the successful stock exchange launch of Yara in 2004. Even though spinning off a business that had formed the company’s basis since its inception in 1905 was dramatic enough, the decision to do so is part of a historical pattern characterized by the will to do the right thing in order to continue developing.

Today Hydro is favorably positioned within Norway’s most important industrial sectors – energy and aluminium. Our almost 35,000 employees worldwide continue to deliver top-class results this year as well. Our history tells us how changing teams over 100 years have painstakingly placed one stone on another. For important though the quantum leaps are, they are not representative of everyday life in the company. Hydro’s history is full of opportunities and challenges, restructuring and innovation, victories and defeats, conflicts and cooperation, cowardice and courage. First and foremost it provides us with many lessons – including the importance of restructuring in time. Our history tells us that being foresighted is not primarily a question of crystal-ball gazing. It is all about taking in what is happening around us and making the necessary changes while there is still room to act – whether it be a question of technology, cooperation, organization, or the environment and safety. There are several examples of Hydro’s management not acting especially early, but there are few examples of them waiting until it is late. This was how the company got through its periods of difficulty, and this is the way Hydro – for 100 years – has achieved the international growth that many of its formerly equal Norwegian competitors missed out on.

  • This signed article by Hydro's President and CEO Eivind Reiten appeared in the Norwegian business daily 'Dagens Næringsliv' on 22 September, 2005