Gunther Thielen

By Peter Gumbel

Gunter Thielen didn't expect to play peacemaker when he took over as chief executive of Germany's Bertelsmann in August 2002. The company was laden with $3.5 billion in debt and a slew of dubious new assets, including the controversial online file-sharing site Napster and the now defunct Rosie magazine in the U.S. Still, Thielen's biggest challenge was an internal one: Thomas Middelhoff, the flamboyant CEO Thielen replaced, left behind a simmering crisis between the $22 billion firm and its key owners, the Mohn family. Reinhard Mohn, the 82-year-old patriarch, was so upset by Middelhoff's tenure that he rewrote his own governance rules to give the family a bigger role, sparking open criticism.

Thielen, 61, is both diplomatic and entrepreneurial (he also owns his own sausage factory), and he moved quickly to calm the situation, smoothing relations with Mohn and his wife Liz and reversing many of Middelhoff's most controversial moves. He abolished the post of chief operating officer and returned to the highly decentralized structure that had long been a Bertelsmann tradition, cutting 1 in 6 jobs at corporate headquarters. "The businesses are all so different and require such different management skills that one person can't run them all," Thielen says. To shore up profitability, he has sold the firm's German specialist magazine group BertelsmannSpringer for $1.35 billion and merged its troubled music division with Sony's. Debt has dropped to below $700 million, and Thielen says the firm is again on an expansion course. Don't expect Middelhoff-style grandiose plans, however: probable targets for acquisition are small to midsize TV stations in Eastern Europe. "It wasn't so much a clean-up as a change of philosophy," says Klaus Goldhammer, a German media consultant. "Thielen is taking Bertelsmann back to its roots." --By Peter Gumbel