Hungarian Refugee Becomes Car Parts Billionaire in CanadaHugo Miller
Frank Hasenfratz got his first taste of entrepreneurship as a teenager in postwar Budapest, fixing motorbikes with spare parts he fabricated in a country wracked by shortages. He made a few extra bucks renting out the bikes until the customers returned to pick them up.
Everything changed when the Soviet Union invaded Hungary in 1956 to crush an anti-Communist uprising. He took up arms against the Red Army, then fled his homeland to avoid arrest, arriving in Canada in May 1957. He started his first company in the basement of his Ontario bungalow seven years after leaving his native land. Today, Linamar Corp. is Canada’s second-largest auto-parts maker, and its 18-month stock surge on renewed car demand has made the 79 year old a billionaire.
Having a portable skill was something he said his father taught him after the Hungarian Communists had forcibly deported him and his family from their home in 1948.
“My father said, ‘Look, the Communists took everything. I want every one of you to have a trade,’” Hasenfratz said in a phone interview last week. “You must have a trade, a trade nobody can take away from you.”
Linamar assembles vehicle engines and transmissions, and designs and builds gear systems at nine factories in North America, Europe and Asia. The Guelph, Ontario-based company also supplies the construction industry around the world with scissor lifts and articulating booms.
The shares rose 3.5 percent to C$61.91 at 12:59 p.m. in Toronto. That lifted Linamar’s gain this year to 40 percent as its biggest customer, Ford Motor Co., rolls out 16 new models in North America and European car sales rebound for the first time since the 2008 credit crunch. The surge was fueled after Linamar reported a 57 percent jump in profit in 2013.
Hasenfratz controls 23.6 percent of Linamar, a stake valued at about $840 million, and has options worth another $19 million. With proceeds from share sales and dividends, as well as other assets, he has a net worth of more than $1 billion, according to the Bloomberg Billionaires Index. He’s never appeared on an international wealth ranking.
“A lot of people who came out of Eastern Europe made money in a number of different ways,” said Anna Porter, a Toronto-based writer and publisher whose family fled Hungary after the Soviet crackdown. She has known Hasenfratz for at least 25 years and first met him on a flight to Budapest.
“Frank was just particularly good at it.”
The billionaire says he pays little attention to the size of his fortune.
“My personal wealth, I don’t worry about that,” he said. “I have enough money to live on.”
Hasenfratz’s ancestors were ethnic Germans who’d settled in Hungary in the early 18th century. After years of relative peace, the family was terrorized by fighting across Hungary between the retreating Germans and the advancing Soviet Red Army in World War II. They were forced out of their home three years after the war ended.
“They took all the property away simply because we had fairly nice properties and we had a German name,” Hasenfratz said. Losing his childhood home made him even more determined to succeed.
“The Communists took our properties away, but because that happened, I got into the best school.”
A year later, at age 14, Hasenfratz began his technical schooling in Budapest that would lead to an apprenticeship with engine-maker Csonka Janos Gepgyar. His training was disrupted by mandatory two-year military service in 1955. When the uprisings began the next year, he joined the rebellion.
The Red Army crushed the uprising, and Hasenfratz knew he would face imprisonment or execution, according to “Driven to Succeed: How Frank Hasenfratz Grew Linamar From Guelph to Global,” his official biography. He fled with other soldiers during the night into Austria. Passing through Italy, he worked his way north to the French coast and caught a ship across the Atlantic.
Hasenfratz arrived in Quebec City penniless in May 1957, where immigration officials handed him a visa and five Canadian dollars.
“A quart of milk was 17 cents at that time, and a loaf of bread was 17 cents,” Hasenfratz said in remarks as he was recognized by the Canadian Manufacturing Hall of Fame in 2008. “A quart of milk and one loaf of bread, you can live a day -- comfortably.”
He sought his first job in the machine-tool trade after moving in with an uncle on his Ontario farm. In 1960, he married Margaret Ferter, a fellow Hungarian immigrant, and they bought their first home together with money she had saved from summer work in the Ontario tobacco fields.
In that brick bungalow outside Guelph, he started Linamar as a precision tool company with a $1,000 lathe he bought and installed in the basement. Determined to keep costs down and incur no debt, he modified his kitchen oven so he could heat-treat metal to make a copper aircraft part, according to Rod McQueen and Susan Papp, the authors of the Hasenfratz biography, which was published in 2012. The company earned a profit of $20,000 in its first year.
His big break came when he won a contract to build automotive oil pumps for Ford’s Canadian unit, which remains it’s largest customer today. In 1966, after his original partner had dropped out, Hasenfratz renamed the company Linamar, combining the names of his two daughters, Linda and Nancy, and his wife Margaret. He listed the company on the Toronto Stock Exchange in 1986.
Hasenfratz made his daughter, Linda, chief executive officer in 2002. The younger Hasenfratz, who’d already spent eight years on the factory floor, accelerated the company’s international expansion, particularly in Asia.
“I tell you, growth would’ve been much slower if I had been the head of the company” that decade, he said. “She insisted we go to China and I said, ‘You know, it’s too early,’ and you know, it’s best thing we ever did.”
For six years, the company prospered until the 2008 credit crunch sent North American auto production tumbling. Linamar’s revenue fell by 26 percent in 2009 and the company had to lay off nearly half its 12,000 workers.
Linda and Frank Hasenfratz began buying stock to shore up investor confidence in the company, which had fallen to about $2 in March 2009 from $26 in October 2007. By the end of 2009, it was back up to about $15. Under her leadership, the stock has jumped more than sixfold, lifting the value of her 5.9 percent stake to $227 million.
Linda Hasenfratz pledged in a February 2013 interview with Bloomberg to triple sales to $10 billion and reach profit of $1 billion by 2020. The goal appears to be within reach as sales grew 15 percent to C$3.8 billion ($3.48 billion) in 2013. The German tradition of technical training and apprenticeships is something Canada and the U.S. needs to foster, she said in the interview, saying that one of the biggest hurdles is finding enough skilled machinists and engineers.
“You can’t underestimate the human capital you need to pull off 10 to 15 percent growth a year,” she said.
The elder Hasenfratz says he avoids CEO meetings so as to not step on his daughter’s toes but still comes into the office five days a week -- and frequently on Saturday mornings.
“There isn’t a better place to go to,” he said. “I’m having great fun.”