The Hugenberg Coup
The Bild- und Film-Amt (BUFA, Picture and Film Office), which was established by order of the War Ministry in 1917, can be seen as a kind of forerunner to Ufa, which was set up the very same year. BUFA found an ambitious rival in the Deutsche Lichtbild-Gesellschaft e.V. (DLG, German Film Society), a non-profit organization that was launched in 1916 after an initial attempt failed in 1914 due to the outbreak of war. Its founders included a group of industry and trade associations, the Deutsche Städtetag (German Council on Municipalities) as well as similar organizations. Although the original idea to promote industry and tourism in both Germany and abroad came from a young publishing executive, Ludwig Klitzsch, the composition of the administrative board left no doubt as to who was financially and ideologically in charge: Privy Financial Counsel Dr. Alfred Hugenberg personally represented the board of the steel and armaments corporation Fried. Krupp AG. Although both sides – the civilian DLG and the military BUFA – repeatedly assured that they collaborated, there was much plotting and scheming behind the scenes. BUFA saw its ambitious plans jeopardized for a centralized film industry under military-state control, and the arch conservatives grouped around Hugenberg feared (a bit absurdly, yet documented in files) that the Social Democratic influence would grow stronger as a result of collaborations with the military department. Thus it happened that DLG was ignored by the state when a central German film company was set up.
Although he was ignored in this fashion when Ufa was founded in 1917, Alfred Hugenberg had his day in 1927. As head of the Scherl-Verlagsgruppe publishing group, he took over, in March, the financially stricken Ufa group, along with its 140 subsidiaries, 134 German and foreign cinemas, and two large studio complexes in Tempelhof and Neubabelsberg. His declared goal was to keep nationalist thinking alive in the German cultural institute, which had grown so valuable. Otherwise, he warned, his domestic rivals, the liberal bourgeois publishers Ullstein and Mosse, would step in - preliminary talks were already underway. Or worse yet, the Americans might swallow up Ufa - a nightmare for the German nationalist Hugenberg. The takeover negotiations show that Hugenberg's coup was by no means a precipitous gamble: Deutsche Bank was ultimately forced to scale down its demands by 6.25 million Reichmarks, besides making other concessions. An additional condition was that Hugenberg receive, from Deutsche Bank, preferred shares with twelve-fold voting rights. Larger blocks of stock were acquired by the Otto-Wolff-Konzern and IG Farben, which owned Agfa and clearly had a natural interest in Ufa as a major purchaser of raw film. Hugenberg held less than half of all shares, but, according to an internal report by Scherl GmbH, the holdings were "distributed in such a way that we will definitely achieve a majority in any voting, which shows that economic control of the company rests entirely in the hands of our group." This was made evident by the new appointments to Ufa's management: Hugenberg himself become chairman of the supervisory board, the banker Emil Georg Stauß his deputy. Ludwig Klitzsch, chief executive officer of Scherl-Verlag, was given the same post at Ufa.
A new potential for conflict arose when, in Ufa's restructuring process, Klitzsch rehired Erich Pommer, who had been working as Paramount production director in Hollywood. After the release of Pommer's first new Ufa film, "Heimkehr" (Homecoming), which was directed by Joe May and based on a story by Leonhard Frank, Ufa's new board members accused him, in 1928, of "Bolshevist tendencies" - a sign of their distrust of Pommer and an additional swing to the right under the new boss, Hugenberg.