Just after the July 15 meeting adjourned, a brusque Dehomag letter was dispatched to IBM Geneva. Citing German law and company statute down to the sub-paragraph, Dehomag’s notice advised Geneva that its previous cabled proxy to Zimmermann was unacceptable in its form. With or without the approval of IBM NY, the letter bluntly warned, the re-scheduled July 29 meeting would address the Watson medal crisis “and its eventual consequences for our company,” as well as the “replacement of the eliminated member, Mr. Holt.”9
For years, cabled instructions from Geneva and New York projecting Watson’s micro-management had been routine facts of corporate life for Dehomag. But all that was before Watson returned the decoration. Now Heidinger had the momentum to work his own will. He would force his issues with a combination of strict legal interpretation and rapid-fire corporate maneuvers.
Heidinger’s July 15 correspondence to IBM Geneva warned the parent company that should it fail to provide the proper proxy form for the July 29 meeting, or fail to ratify Berlin’s choice for a new board member, a stalemate would prove just as destructive. Then, “no decisions binding the company can be taken,” Heidinger warned, adding, “To enlighten matters, we wish to state that according to… [German corporate] law, the board of directors has to be composed of three persons at least.”10 Holt’s ouster left only two sitting board members: Heidinger and his brother-in-law Vogt. Without three on Dehomag’s board, the firm would be illegitimate and incapable of functioning as a corporate entity.
To ensure that Watson could not litigate the board putsch as setting “unreasonable” deadlines in view of difficult wartime circumstances, Heidinger scheduled the July 29 meeting not in Dehomag’s Berlin headquarters, but in the subsidiary’s Munich branch. Munich was much closer to IBM’s Geneva office, “thus diminishing your traveling time,” Heidinger carefully wrote to IBM Geneva.11
This time, IBM rushed to comply. Watson’s Geneva representatives did not feel comfortable entering Germany with officials agitated. But they did present their resident German agent, Zimmermann, with a proper power of attorney. The July 29 board meeting in Munich convened at 10 A.M. with a reading of the rules and relevant statutes. Quickly, they did away with the traditional balance sheets showing losses resulting in zero bonuses. Heidinger forced adoption of the true profits totals: nearly RM 2.4 million for 1938 and almost RM 4 million for 1939. Management bonuses of nearly RM 400,000 were approved for Rottke and Hummel. Heidinger reserved his own bonus for later.12
The medal crisis was then vigorously debated “in view of the great urgency of this question.” Heidinger demanded that Holt’s seat on the board be filled not by one German director, but two. He nominated Emil Ziegler on the suggestion of the Berlin Chamber of Commerce. The second nomination was a leading Nazi official, Ernst Schulte-Strathaus, a key advisor in Deputy Fuhrer Rudolf Hess’ office.13
Dehomag was to become completely Nazified. The hierarchy had plans for Hollerith machines that stretched to virtually all the Reich’s most urgent needs, from the conflict in Europe to Hitler’s war against European Jewry. Some of the plans were so sensitive they could not be discussed with outsiders. It was absolutely essential that Dehomag be controlled by the highest Nazi party and government circles. Heidinger had connections at those levels, which had benefited Dehomag through the Hitler years.
Heidinger had been a friend of Hess’ since their soldiering days in World War I. The Schulte-Strathaus family had, in 1910, helped Heidinger launch the original Hollerith Company in Germany. Bonds remained tight during the post-War years. Ernst Schulte-Strathaus had emerged as one of the bizarre and mysterious personalities at the top of the Nazi leadership. A doctrinaire astrologer, Schulte-Strathaus read the stars for Hess.14
In the July 29 board meeting, Heidinger demanded that Schulte-Strathaus be ratified. In fact, Heidinger had already invited him to join the board and Schulte-Strathaus had already accepted.15 So he expected a unanimous yes.
But Watson was not ready to allow Heidinger to dictate who could sit on the board—even if the proposed man was a personal advisor to Deputy Fuhrer Hess. Zimmermann declared that he was instructed to vote against Schulte-Strathaus. Wielding IBM’s majority, the measure was defeated. Watson preferred either Rottke or Hummel, both of whom owned token stock options, or Zimmermann himself. Heidinger staunchly refused to even allow Watson’s suggestions to be voted, asserting that German corporate law made employees ineligible for seats on a board of directors. Heidinger insisted on Schulte-Strathaus as a representative of Hess.16
Heidinger adjourned the meeting in a stalemate. Next, he decided to either cash out of the company, or pressure IBM into essentially walking away from its subsidiary. The stakes were immense for Germany.
Hess’ office was not the only one determined to ensure the complete cooperation of Dehomag. Other key Party advisors to der Fuhrer’s office, soon to emerge, also had plans for IBM’s equipment. But the strategic alliance with IBM was too entrenched to simply switch off. Since the birth of the Third Reich, Germany had automated virtually its entire economy, as well as most government operations and Nazi Party activities, using a single technology: Hollerith. Elaborate data operations were in full swing everywhere in Germany and its conquered lands. The country suddenly discovered its own vulnerable over-dependence on IBM machinery.
Millions of cards each week were needed to run the sorters. Indeed, the military alone employed some 30,000 people in their Hollerith services. Adding other governmental and commercial clients, at any given time, thousands of operators were working at Holleriths. Watson presses printed all the cards these people needed moment to moment. IBM’s paper and pulp supply lines extended to mills throughout the world. IBM owned the patents for the unique paper stock the Holleriths required. At the same time, Germany’s war industry suffered from a chronic paper and pulp shortage due to a lack of supply and the diversion of basic pulping ingredients to war propellants. Only four specialized paper plants in Germany could even produce Hollerith card stock—all were on contract to IBM. The few paper houses in France were running low on coal and cellulose supplies, hence their deliveries could never be assured for more than a month or two at a time. IBM was constantly pooling its global paper resources, including its abundant North American suppliers, to meet the ever-increasing demand. The Reich could not tap into the vital North American paper markets. Holleriths could not function without IBM’s unique paper. Watson controlled the paper.17
Printing cards was a stop-start process that under optimal conditions yielded 65,000 cards per eight-hour shift. The Third Reich consumed cards at an almost fantastic rate. In 1938, more than 600 million per year were consumed from German sources alone. In 1939, that number almost doubled to 1.118 billion. Projected use by 1943 was 1.5 billion just within the Reich. Building a printing press was a six-month process at best, much longer when the metals were not available. Dehomag clients typically stockpiled a mere thirty-day supply of finished punch card paper. Holleriths could not function without cards. Watson controlled the cards.18