Flint Industries, Inc. and Subsidiaries - Page 5




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          in its G�nther stock, before taking into account the amounts at             
          issue in this case, was $7,374,438.                                         
          III.  G�nther's Management and Operations                                   
               G�nther’s gesch�ftsf�hrer, Albert G�nther (Albert), and its            
          procurist, Hans Kampfrad (Kampfrad), controlled G�nther’s day-to-           
          day management and operations.6  Albert reported directly to                
          Flint’s president.                                                          
               Most of G�nther’s products were switches, relays, and sensor           
          devices such as those used for air bags and braking systems.  The           
          market for these products was highly cost-sensitive because                 
          G�nther had several competitors that made similar products.                 
               At some point before 1992, G�nther was an industry leader in           
          air bag sensor technology.  Subsequently, however, new products             
          superseded G�nther's technology and eroded its competitive                  
          advantage.  Although G�nther owned patents for some of its                  
          manufacturing processes, by May 31, 1992, G�nther's patents had             


               5(...continued)                                                        
          German law, states that G�nther is a wholly owned subsidiary of             
          Gordos International Corp., and G�nther’s commercial report  for            
          its FYE April 30, 1992, states that G�nther’s share capital was             
          transferred from Gordos International Corp. to Flint Electronics            
          Co.  We accept the parties’ stipulation, however, because the               
          relevant facts regarding G�nther’s ownership by a member of the             
          affiliated group and petitioner’s adjusted basis in G�nther’s               
          stock are not in dispute.                                                   
               6The positions of gesch�ftsf�hrer and procurist in a German            
          GmbH are similar to those of general manager and controller in a            
          U.S. company.  However, because the gesch�ftsf�hrer and procurist           
          were the only members of G�nther’s senior management, they had              
          considerably more power and authority.                                      





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