Both Leica and Contax cameras were very expensive and many aspiring photographers could not afford them. Not surprisingly, several manufacturers attempted as early as the late 1920s to create inexpensive 35-mm cameras for a mass market. Most of them failed to gain an audience, as the Great Depression made purchases of such things as cameras either impossible or frivolous. The first successful attempt at marketing a cheaper 35-mm camera was the Argus, introduced in the United States in 1935 at a price of $12.50.
The real competitive threat, however, came from the other side of the globe. After World War II the Japanese started challenging the world's leading camera manufacturers. At first, the imitation Japanese Leica and Contax cameras, which carried the labels Canon and Nikon, elicited only skepticism. However,
when American photojournalists used Japanese cameras to photograph the Korean War, they found that some of the Japanese lenses were of very high quality. During the 1950s and 1960s Japanese camera makers made quality the number one priority for their exports and as a result became more and more successful in competing with rangefinder cameras and lenses made in Germany. Also, the many advantages of single lens reflex cameras, in which the user views his subject directly through the lens rather than through a telescoping mechanism to the side of the lens, became serious competition for the rangefinder systems. In 1965 the first single-lens reflex camera made by Leitz, the Leicaflex, was introduced. The next models followed in 1968 with the Leicaflex SL, the Leicaflex SL2 in 1974, and the Leica R3 in 1976.
Due to shrinking demand and high development and production costs, by 1970 the Leica product line was no longer profitable. Retail prices could not cover the cost of making the expensive cameras and lenses by hand. Under pressured to make strategic decisions that could turn Leica's fate around, Leitz started looking for suitable strategic partners and for ways to cut costs for camera development and production. In 1972 Leitz signed a partnership agreement with the Japanese camera maker Minolta. However, the old rivalry with Zeiss and its Contax flared up again in 1974, as Zeiss had become part of a group that developed a new model, the Contax RTS, a single lens reflex system. Additional development costs were incurred when Leica's new rangefinder model M5 turned out to be too bulky.
During the early 1980s Leitz kept reporting losses with Leica cameras despite the loyalty of numerous professional photographers and world famous collectors such as the Sultan of Brunei and Queen Elizabeth. In 1986, Leica GmbH was founded to manage the Leitz camera division. One year later Ernst Leitz Wetzlar GmbH and Wild Heerbrugg AG merged to form Wild Leitz AG. The new optical concern was headquartered in Switzerland and employed 9,000 people. In 1988 Leica GmbH became an independent division of Wild Leitz and moved headquarters and camera production to a new facility in Solms near Wetzlar.
By that time the camera arm had produced losses for over a decade, subsidized by profits from Leitz microscopes and surveying systems.
While Leica had difficulties selling its annual output of just 20,000 cameras retailing at $3,200 to $4000, Japanese camera maker Minolta sold about 2.5 million cameras in 1988. In the United States Leica camera sales reached a peak of about $8 million in 1985 and dropped off sharply afterwards to about half that amount in 1987. Less than eight percent of America's camera dealers carried Leica in 1988.
It was a vicious cycle; in order to gain market share Leica needed to aggressively market its product lines, and this required money the company wasn't making. Leitz's decision to move half of the camera production abroad also turned out to be problematic. While it lowered personnel cost by about one-third, this gain could not outweigh endless quality problems with the parts manufactured in Portugal and Canada. The new Leica management decided in summer 1988 to move a great chunk of the lens production and camera assembly back to Germany.
Another of the company's strategic mistakes was not pursuing the new technology of auto-focus cameras which had first been invented by Leica engineers. The Japanese, however, realized the commercial potential of this new concept and successfully introduced it to the market while Leica was struggling with reorganization.
In 1990 Wild Leitz Holding AG merged with the British optical group Cambridge Instrument Company. Leica Camera GmbH, the camera subsidiary, became Leica Camera AG. Two years later Wild Leitz sold its Canada production plant to Hughes Aircraft, which continued to manufacture some lenses for Leica cameras. In 1992 a team of executives, led by Leica's president Bruno Frey and supported financially by a subsidiary of Deutsche Bank, attempted a management buyout of the camera operations from Wild Leitz, but failed. Two years later another attempt led by former CFO Klaus-Dieter Hofmann was successful. The Leica brand name remained the property of Wild Leitz, which allowed the new independent company to continue using it for their microscopes and other instruments. Wild Leitz also kept a minority share in Leica. Hofmann became CEO of the newly independent Leica Camera AG.
Two years after the management buyout, Leica Camera was ready to make an initial public (IPO) offering of stock. Some 4.5 million shares were floated on the Frankfurt stock exchange, and Hofmann managed to get the company out of the red. In the year of the IPO Leica introduced the 'R' camera line, its first new series in 30 years. After record profits in 1996, the company was able to report record sales the following year, yet it realized losses rather than profits for 1997 and 1998 amounting to DM 30 million. The acquisition of German miniature camera maker Minox in 1996 turned out to be a major mistake, since the expected synergy between to the two companies did not take place. At the same time Leica camera sales dropped sharply in Asia.
At the beginning of 1999 Hanns-Peter Cohn became the new CEO of Leica Camera. The new management team developed a strategy for the new millennium, which it referred to as 'Leica 21.' One of its cornerstones was the brand-new Leica S1 series of digital scanner cameras. This was a first step into another revolution in photography: the age of computer-based image recording and processing that did not require the 35-mm film that made Leica a legend. Whether this new direction would succeed remained to be seen. Regardless, Leica remained one of the most important and influential brands of the 19th and 20th centuries.
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