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Rev. January 26, 1998

Germany’s Evolving Privatization Policies:

The Plaschna Management KG

by I. J. Alexander Dyck and Karen Hopper Wruck*

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In the fall of 1994, Horst Plaschna sat in his office looking over Alexanderplatz, the central square

in East Berlin. Over the last several years, as market forces took hold in eastern Germany, this view

had changed dramatically. Western firms flooded across the former border, purchasing eastern

companies and setting up subsidiaries to sell goods from around the world. Construction cranes

crowded the skyline. Unfortunately, in spite of substantial progress, many of eastern Germany’s

economic and social problems remained unresolved. Plaschna was only too familiar with these

problems.

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Plaschna was a restructuring expert with extensive experience in the West German steel and

banking industries. In addition, he had led the turnaround of Deutsche Anlagen-Leasing (DAL), a

large western property holding fund that many considered one of the most successful restructuring

efforts in Germany history. In 1992, Plaschna entered into a unique and controversial three-year

“Management KG” (KG, Kommanditgesellschaft or commercial limited partnership) contract with the

Treuhandanstalt (Treuhand, pronounced “troy-hahnt”), Germany’s privatization agency. The KG

contract represented an attempt to “privatize the privatization process.” Under it, Plaschna took

responsibility for restructuring nine of the Treuhand’s troubled eastern German firms and selling

them to private investors. In exchange, the Treuhand provided financial assistance to the companies

and, at the end of three years, would pay Plaschna and his associates a cash bonus of up to

DM 6 million, depending on his success in selling the firms and in securing employment and

investment guarantees from buyers.

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Two and a half years later, Plaschna had sold two of the nine firms and parts of others.

Unfortunately, the three-year...