By Boaz Herzog, The Oregonian, Portland, Ore. Knight Ridder/Tribune Business News
Nov. 10--HERZOGENAURACH, Germany--Residents in this family-friendly, low-crime city like savoring a good microbrew, riding bikes around town and taking walks along the riverfront.
For some time, the murky river running through the middle of town has served as a dividing line separating two of its biggest employers, sneaker companies that employ thousands of people worldwide.
Sound familiar?
Sure, Portland is a lot bigger and younger than this bucolic Bavarian village of 23,000 people. But in many ways, Herzogenaurach represents the European equivalent of the Portland area, the epicenter of the world's athletic shoe and clothing industry.
Nike rules its empire from a Beaverton headquarters on land the size of a college campus. Adidas America, the U.S. subsidiary of adidas-Salomon, moved from Beaverton across the Willamette River into new North Portland digs last year.
On the other hand, adidas-Salomon, the world's second-largest sports gear producer, and Puma, a fashion sneaker brand enjoying a hot revival, both call Herzogenaurach home.
In recent years, the town's shoe-industry presence has grown even bigger -- perhaps too big, some residents say. Its recent evolution threatens to radically change the town's makeup. Adidas and Puma have demanded more space as their brands have gained ground on market leader Nike.
These days, the clinks and clangs of construction workers fill the city soon after sunrise. Adidas and Puma are enlarging their headquarters and erecting new outlet stores along the city's outer core, where billboards proclaim 'Die neue World of Living in Herzogenaurach.'
The signs tout a multimillion-dollar project that will add a hotel, shops and hundreds of condos to the Adidas campus, built on the site of a former U.S. Army base on the edge of town, near the row of new outlet shops a kilometer off the autobahn. Before the construction began, out-of town shoppers drove into the center of town to find the stores.
Puma this year is undertaking a headquarters expansion of its own, although officials of the much smaller company would not return phone calls to detail the project.
Residents have mixed feelings about the changes. They take pride in the success of their hometown companies and want them to thrive. Some fear the new additions may suck the life out of the city's historic downtown.
'We have a wonderful city,' says Peter Kramer, a burly 25-year-old mechanic walking his dog along the cobblestone streets downtown.
But Kramer worries about businesses down the block: the corner bakery, the drugstore and the clothing boutiques. Fewer tourists are stopping downtown, he says. Many shops, he predicts, will be forced out of business. 'Not enough money -- no customers,' Kramer says.
Shoes have a storied past in Herzogenaurach. The village, which celebrated its millennium last year, has given birth to two of the world's best-known shoe brands.
Generations of residents have made a living from the shoe industry. Textiles dominated work life from the 14th century until giving way to shoes at the turn of the 20th century. One of the town's cobblers, Adi Dassler, eventually would become an earlier pioneer of the modern sneaker.
Dassler, a calm, quiet man, began making shoes during the waning part of World War I, using scraps of old tires, helmets and other debris. In those days, when the nation suffered through a deep depression, about half of Herzogenaurach's residents worked in the shoe industry. Dassler found success with bedroom slippers, but his passion for sports and inventing soon led to gymnastics shoes and soccer boots with nailed-on cleats.
By the mid-1920s, his gregarious older brother, Rudi Dassler, had joined the business, named Gebrder Dassler OHG. The crew of 20 on the factory floor produced about 100 pairs of shoes a day. The shoes gained international fame by the end of the decade. U.S. star Jesse Owens wore a pair of Dassler's track shoes in winning gold at the 1936 Olympics.
When World War II broke out, Rudi Dassler joined Hitler's army while Adi Dassler stayed home to produce shoes for the Wehrmacht. After the war, Rudi, having served a year in a prisoner of war camp, returned to the family business.
Two years later, a bitter dispute turned the brothers into bitter enemies. Rudi walked out of the Dassler factory for good in 1946. He crossed the Aurach River, set up his own shoe shop and named it Puma in 1948. A year later, his brother combined elements of his name to rename the original company Adidas.
To this day, the reason for the feud between the brothers, now dead, remains a closely guarded family secret. Rumors still fly, of course. One is that the fighting stemmed from a misunderstanding about the war in which Rudi accused his brother of turning him in to the U.S. authorities. Another says Rudi tried to break up his brother's marriage.
A simpler explanation, 29-year Adidas employee Karl Heinz Lang says, is that the brothers' visions simply differed. Adi Dassler was an inventor whose focus was improving shoes, says Lang, Adidas' director of training. On the other hand, Rudi Dassler was the salesman who wanted to move as many products as possible.
'There's no ship on earth with two captains -- this leads to conflict,' says Lang, who worked several years as Adolf Dassler's personal assistant.
So for decades, the Aurach River divided Herzogenaurach into two camps: Adidas on one side, Puma on the other. As the legend goes, the rivalry between the two became so tense that certain bars and restaurants in town catered to employees of one or the other -- but not both.
Today, the bitterness that brewed for so long has all but disappeared. Adidas and Puma have become public companies, no longer run by Dasslers.
Still, Herzogenaurach's two most famous companies maintain considerable clout.
The big Adidas project now under construction stems back to 1997, when Adidas considered moving its headquarters to a bigger, trendier city with more space to accommodate a growing company. London, Milan, Italy, Paris and even Portland became options.
The possibility of Adidas departing scared Herzogenaurach Mayor Hans Lang.
'I was really concerned,' says Lang from his downtown office.
Adidas was no longer Herzogenaurach's biggest employer. INA, a manufacturer of roller bearings and employer of 7,500 local residents, now claims that distinction. Still, the city would lose its second biggest company, which meant saying goodbye to hundreds of young workers and a huge income tax source, Lang said.
He quickly stepped in, offering to sell Adidas the 120 acres of land that the U.S. Army had used as a base until after the Persian Gulf War. After comparing the nearly $50 million cost of an headquarters move with the approximately $35 million expense of renovating the base's existing buildings, Adidas agreed to stay. With the decision, Adidas resolved to move to the same side of the river as Puma for the first time.
The price Adidas paid for the land was not disclosed, but locally published reports put it at the equivalent of about $23.6 million. The deal included giving the city a 10 percent share of profits on any future development on the land unrelated to the headquarters.
With more land than it needed, Adidas began working with a developer. Soon came the vision for a 'World of Living' development with modern shops and housing complexes. By providing contemporary living arrangements and commercial amenities, the project is expected to help Adidas recruit workers who might otherwise shy away from living in a small town, company executives say.
'At the end of the '90s, it was not very easy to recruit an international work force,' says Michel Perraudin, Adidas-Salomon's executive vice president. 'Today, it's very easy.'
Adidas also plans to make money on the development, which will likely boost Herzogenaurach's population by 2,000 to 3,000 people, Perraudin said.
Both Adidas and city officials dispute the claim that the project could turn the city's core into a ghost town. Most visitors to the outlet stores don't bother to stop at the local jewelry shop or book store, regardless of where they're located, Mayor Lang says. The more traditional businesses, he says, 'must attract people living in Herzogenaurach, not the shopper coming around once a year.'
It has become commonplace for big business to command perks from local municipalities. But how much is too much? Some observers have wondered whether Herzogenaurach has too readily given Adidas and Puma what they want.
For example, Puma's headquarters expansion will bring it less than 100 yards from the Aurach, says Rainier Groh, the Nordbayerische Nachrichten newspaper reporter who has covered the city for more than two decades. A smaller company without the reputation of Puma wanting to build so close to the river would 'have a different situation with the German authorities,' Groh says.
Puma officials didn't return multiple phone calls seeking comment.
As for Adidas, it is still negotiating with city council members about how much space the World of Living development will devote to low-income housing.
'The interest of the company,' Groh says, 'is to make money' -- without regard to setting aside housing for social purposes.
And with Adidas controlling 90 percent of the land, he says, 'Guess who makes the plans there?'
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(c) 2003, The Oregonian, Portland, Ore. Distributed by Knight Ridder/Tribune Business News.
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