Everything falls apart

Revolutionary collapses.

Before 1989, production behind the Iron Curtain was a cornerstone of the long-term purchasing strategy at IKEA. Ingvar Kamprad came here back in the 1960s when he was boycotted by furniture makers and the sector as a whole in Sweden. Planned economies like Poland had raw materials at low prices, as well as state-owned factories with great capacity and a need to do business with the West, as eastern currencies could not be used in the West or exchanged for dollars. IKEA made major investments in run-down factories, installed machinery and spare parts, and built up skills. So what happened when the Iron Curtain suddenly fell?

In December 1989, Rutger Ulterman was at an office in Bucharest, Romania, trying to close one final deal before rushing off for the airport. The Berlin Wall had just fallen, as had the regime in what was then Czechoslovakia. Romanian dictator Ceaușescu was still clinging to power, and the situation was very tense.

“Our Volvo 245 was waiting outside and we needed to leave by three to make sure we had time to get through security at the airport,” says Rutger. “At three o’clock, the Romanians came back with yet another change to the contract. At half past three we ran down the stairs, and the contract was signed on the Volvo’s bonnet. We then drove 160 kilometres an hour through the empty streets of Bucharest. We didn’t get stopped by the police, and we managed to catch the last flight out. Five days later, they shot Ceaușescu. That was the grand finale, the collapse of the Eastern Bloc.”

Casually dressed protesters on a wide city street raise their fists towards a tight line of riot police.
When popular protests (here in Bucharest, Romania, 1989) caused the Eastern Bloc to collapse, old structures and purchasing strategies at IKEA also came crashing down. Photo: The National History Museum of Romania (MNIR) through the Communism in Romania project.

Later on, when Rutger went back to Romania, there was a new government in power and everything was different. “Things were different for the people, but also for business of course. No one knew anything,” says Rutger. “Who was running the factories? Where were the raw materials? The machines and spare parts? Who did what, and who owned what?” Håkan Eriksson, head of purchasing for IKEA in Poland at the time, agrees. “We really didn’t know what to do!”

After the fall of the Iron Curtain in the late 1980s, questions were raised within the IKEA organisation regarding the reasoning behind trading with non-democratic and totalitarian regimes. This would later lead to internal changes and, eventually, a new code of conduct.

Seven men, dressed in 1980s style formal wear, laughing together in a parking lot at a factory site.
Purchasing trip in Czechoslovakia, 1991. From left: Kurt Wirland, Bengt Erlandsson, Ingvar Kamprad, Bengt Salomonsson, Jan Aulin, Gunther Watzinger and Nils Larsson.
Close-up of air vent on wall with light blue papered wall.
Before the Eastern Bloc’s collapse, foreign visitors from IKEA, for example, could count on being monitored by the security police, like here in a Romanian hotel room in 1980, where listening devices had been hidden in an air vent.

A sacred principle abandoned

When the revolution arrived, the old structures and thereby also the IKEA purchasing strategies came crashing down. Prices doubled and deliveries failed to materialise. State subsidies stopped, and factories closed down or had a whole new management with new rules. IKEA sent co-workers off to the dazed liberated countries. They looked desperately for solutions and new ways to do business – without success. Eventually, a lot of people started questioning one of the company’s most sacred principles: never to produce anything itself. “IKEA was not supposed to buy from IKEA,” explains Jörgen Svensson, business area manager for dining and bedroom furniture at the time. “Well, that principle had to go. We had to have a complete rethink.”

Ingvar Kamprad shakes the hand of a man in a suit, in an industrial area, outdoors. Two men watch the interaction.
In the early 1990s, Ingvar Kamprad and his co-workers travelled around Eastern Europe, frantically looking for solutions to the production and purchasing crisis. This eventually led to some dramatic changes at IKEA.

Dramatic development

Ingvar Kamprad was initially reluctant for IKEA to have its own factories and would rather start joint ventures with local companies. Only after travelling around and assessing the situation himself did he change his mind. “Ultimately only one question remained: how do you run a joint venture with a company that has no money?” remembers Håkan Eriksson, purchasing manager Poland.

So a decision was made: IKEA had to own its own production capacity and skills if it wanted to continue working in countries that were previously behind the Iron Curtain. “We bought up good companies with people who knew production, such as Alltra AB and their factories, which became the foundation of Swedwood AB formed in 1991. That laid the foundation for the industrial corporation that IKEA has now built up for its own production. It was one of the most dramatic changes in the company’s history, and came to be of crucial importance to our ability to grow,” Jörgen Svensson explains.


Everything falls apart
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