Some months later, on December 7, 1940, as part of Watson’s move to create the appearance of non-communication and reassure Nazi occupiers of non-control, van Ommeren filed an unusual amendment to the articles of incorporation. This amendment deleted the standard clause of closely held corporations to facilitate communications. The words “by telegraph” were removed from the phrase “Shareholders can be consulted in lieu of meeting by writing or telegraph.” From December 1940 to mid-June 1941, IBM executives undertook the protracted legal applications to ensure that the exiled Dutch consulate approved the power of attorney given to Ommeren.11 IBM wanted to make sure that all of its corporate acts in Holland were recognized not only by the Nazi civil administration, but the exiled government as well.
IBM’s operation in France was “promising”—but from the first years, a small and fragmented market. In 1919, CTR established its first European sales office in Paris, using Heidinger’s original Dehomag as sales agent. With only a dozen French customers, IBM France, in 1925, opened a manufacturing factory and a branch in Lyon. As late as 1927, IBM was fighting a pitched battle with rival Powers Company for the small French market. Each firm had snared just 30 customers using approximately 50 sorters and tabulators fed by about 300 punching stations. Then in 1931, the Swiss company, Bull, appeared in France with a new low-cost integrated machine that seemed to outperform the Hollerith. Bull’s first installation was at the French Ministry of Labor.12
Even though Bull enjoyed but a single client in 1931, Watson saw the new company as a significant threat. IBM ramped up its competitive machinery to neutralize the new firm. Watson personally inspected Bull machines at French government offices with an eye toward buying the company outright. At about that time, IBM signed up the French Ministry of War, which would become a major client for complex Hollerith systems. By 1932, IBM France had expanded to more than sixty-five customers. Protracted discussions between Watson and French Bull owners broke down. So IBM purchased the original Bull rights in Switzerland, this to the shock of French Bull. Immediately after closing the deal, Watson went further, hiring Emile Genon, the very Bull manager who had sold IBM the Swiss rights. French Bull voted to dishonor the contract as anti-competitive and even moved to separate from its Swiss sister company. The serpentine Bull acquisition controversy led to years of lawsuits in Switzerland and France as IBM challenged Bull’s right to sell its own designs, and Bull sued for unfair competition.13
Watson restructured his French organization in 1936, creating a new subsidiary named Compagnie Electro-Comptable de France, or CEC. By the outbreak of war, CEC had hundreds of machines installed, many of them concentrated in just three sectors: banking, railroad, and the military. IBM now dominated the French market with about 65 percent of usage in France proper, and virtually the entire market in France’s colonies, especially North Africa and Indochina. Bull, beset by financial problems, undoubtedly linked to its endless litigation with IBM, secured only 25 percent of the French market share, mainly among governmental and banking clients. Powers clung to its marginal 10 percent segment.14
As France edged closer to war in the late thirties, French War Ministry orders greatly exceeded CEC’s limited factory output. From 1937, excess French military orders were placed directly with IBM NY. In the approximately two years before war erupted in 1939, IBM NY shipped the French military alphabetizers yielding nearly a half million dollars in rentals, as well as $350,000 in spare parts. All of France utilized some 426 million punch cards in those two pre-war years; they were printed locally, ordered from other European subsidiaries, or imported from the U.S.15
But everything changed in French automation when the country was partitioned in June 1940. The Franco-German June armistice was signed less than three weeks after Watson returned Hitler’s decoration. Dehomag’s revolt was in its initial tempest state. Nazi forces immediately seized hundreds of CEC Holleriths. A special “requisitioning” platoon familiar with IBM tabulators was attached to the First Panzer Division to effect the confiscation. Machines were carted off from CEC’s warehouse and workshops, and even removed from CEC’s customers, such as the electric company in Strasbourg and a gamut of armament firms. The largest collection of Holleriths was swept from France’s War Ministry, especially the Ministry’s tabulator service.16
In all, 319 Holleriths were commandeered, spirited out of France, and dispersed to waiting Reich customers throughout Germany. Dozens of verifiers, sorters, and alphabetizers were placed at the Maschinelles Berichtwesen and its many punch card field offices throughout conquered Europe. Many of the devices were assigned to key German war industry companies. Some were deployed at Nazi occupation offices in Krakow and Prague. The largest group of Holleriths was transported to Luftwaffe bases and the German High Command.17
CEC officials logged each machine by original client location, serial number, and leasing valuation so CEC could make a claim in Berlin for payment. These logs were sent to IBM NY for review as soon as they became available. Likewise, German authorities kept meticulous records of each of the 319 requisitioned machines by original site, monthly leasing cost, and new location within Nazi Europe. Although the machines at first were forcibly removed, IBM actually found the action conducive to better relations with the Reich and quite profitable. CEC managers billed the Reich for each machine, and company representatives squabbled with the authorities over precisely how much would be paid for each device. In the fourth quarter of 1942 alone, the German Army paid CEC 9.4 million French francs—equal to about $100,000—for leasing, service, spare parts, and punch cards.18
Quickly, CEC’s profits soared. Volume doubled from 1939 to 1942 to FF101 million for 1942. During that same period profits almost quadrupled to FF26.6 million in 1942, of which FF16.3 million was designated “royalties.” Those monies were derived almost entirely from orders placed by Dehomag and German agencies. For example, the 250 sorters manufactured by CEC in 1942—double the 1938 output—were all ordered by Dehomag. What domestic activity CEC did undertake was generally some miscellaneous card printing and reconditioning of the oldest machines not yet requisitioned.19
Clearly, CEC had been converted into a captive supply source for Dehomag. This was done with IBM NY’s full concurrence. In fact, to meet Dehomag’s increasing demand, Watson in 1941 approved the construction of two new factory sites. One plant was added to the manufacturing complex at Vincennes, outside of Paris. A second factory compound was erected at Essonnes, twenty miles south of Paris, not far from rail facilities. A March 24, 1941, report from CEC management to IBM NY explained, “The equipment demanded by our customers… has caused that the capacity of our present factory at Vincennes was bound to be exceeded very rapidly.” Until the new factory was completed, CEC would use outside “jobbers” to supply parts.20
IBM NY was continuously kept informed about CEC’s progress by a variety of formal and informal means. Sometimes, it was just a handwritten letter, such as the one written in English to a manufacturing executive at Endicott by Dehomag engineer Oskar Hoermann. Hoermann was a principal IBM liaison between the German company, the MB in Berlin, and CEC.