How a Maker of Baby Carriages Outgrew Communism

It's amazing how much history can be tucked into a baby carriage.

Zeitzer Kinderwagen, or Zekiwa, as the carriagemaker based here is known, could be used to tell just about the whole story of German manufacturing, from the exuberance of the 19th-century Industrial Revolution to today's era of outsourcing and downsizing.

Infants were still being wrapped in swaddling clothes when Ernst Albert Naether started his business in 1846. He had taken over his father's wheelwright shop, and had the idea of mounting baby-sized baskets onto a small wagon chassis. Voil! The first modern baby carriage.

By the time Naether's firm marked its 50th anniversary, Zeitz was to baby carriages what the Silicon Valley is to today's computer industry. "Zeitz was the location for the baby-carriage business," says Bernd Einhorn, a 30-year veteran of Zekiwa who is now the firm's managing director. By the end of the 19th century, Zeitz carriages were shipped as far as the United States, Russia, South America, West Africa, and Australia.

After the division of Germany in 1945, East Germany's Communist government merged several firms, including Naether, into Zekiwa. Never mind that West Germany had Mercedes - East Germany had Zekiwa.

By 1988, Zekiwa was one of the prestige brand names of Eastern Europe. Production was some 800,000 units a year, including both baby and doll carriages. Twenty percent of this stayed in East Germany, 60 percent went to the Soviet Union and other East bloc countries, and 20 percent went to West Germany and Western Europe.

The firm had 2,600 employees. "It was a typical East German operation," Mr. Einhorn says. "We did everything in-house, even the microelectronics on the production line."

Then came "the turning," and specifically, currency union of East and West Germany on July 1, 1990. "Overnight, our whole market was gone," Einhorn says. East German customers suddenly could shop in the West, and Eastern European customers could not afford to pay in hard currency.

Fortunately, he says, a large contract with the Soviet Union enabled the firm to modernize and keep afloat. And unlike many of the command economy firms of that time, he says, "We had our own deals in the West. We knew the market, and our customers knew us. That made the difference."

Still, the upheavals associated with privatization were "a bitter experience," Einhorn says, especially "having to lay people off that you've grown up with."

Nowadays the firm has only 70 employees, although there are another 200 working in effect full time for Zekiwa at other firms in Germany. Zekiwa sells 30,000 baby carriages and 120,000 doll carriages a year. So much work is done by subcontracting and outsourcing that Einhorn prefers to speak of "sales" rather than "production."

Product development and assembly is all that Zekiwa does in Germany now; all the rest of the work is done abroad - in Poland, China, Taiwan, Italy, and France.