How Ernst Degner Sold MZ Two-Stroke Secrets to Suzuki Motorcycles

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Cover courtesy Haynes Publishing
The compelling story of how Japan's biggest motorcycle manufacturers stole a Nazi rocket scientist's engine secrets from behind the Iron Curtain. In 1961, with the Cold War at its height, East German motorcycle manufacturer MZ was using World War II rocket technology to win Grands Prix, only for rider Ernst Degner to defect and sell the secrets to Suzuki. The following year Suzuki and Degner made history by winning the world title.

Ernst Degner is about to sell MZ’s two-stroke engine secrets to Suzuki Motorcycles for the title of World Champion of the Grand Prix. Degner contemplates signing the contract and organizing the freedom of himself and his family from East Germany during the height of the Cold War in this excerpt taken from chapter 7 of Stealing Speed: The Biggest Spy Scandal in Motorsport History (Haynes Publishing, 2010).

Jimmy Matsumiya placed the needle on the record and the needle found its groove.

I’m burning like a flame dear
I’ll never be the same dear
I’ll always place the blame dear
On nobody but you…

He turned away from the gramophone player, lit a cigarette, sat down in the corner of the modest little hotel room and waited. Moon-faced Jimmy Matsumiya was what his contemporaries might have called a ‘hep cat’: Cambridge-educated, urbane Anglophile, eye for a nice piece of cloth, liked to hang out in jazz clubs. He was also Suzuki’s fixer in Europe, paid to navigate his employers through the strange ways of the western world. Now Matsumiya was all set to pull off the biggest industrial espionage heist in motorsport history.

There was a quiet knock-knock at the door. Matsumiya got up, opened the door and Ernst Degner quickly brushed past into the room. As they shook hands the German looked slightly agitated.

“Hello Mr Matsumiya. We’ve got ten minutes,” said Degner, turning this way and that, not sure where to sit. Matsumiya sat down on the small bed and invited his visitor to take the only chair.

“So, what’s your news, Mr Degner?” he asked. “What have you and your friend decided?” Their voices were strangely strained – they were trying to be quiet but at the same time trying to make themselves heard above the jazz music.

“In general we are quite happy with the terms, Mr Matsumiya. We think we are nearly ready to sign, but there are some important details I would like to discuss with you.” Degner talked as he watched the comings and goings in the hotel driveway, keeping well back from the window.

“That’s excellent news, Mr Degner,” replied Matsumiya. “I have some news: our company president Mr Suzuki says he is prepared to agree to your proposal, but as you say, there are a few details that need attending to.”

“Very good,” said Degner.

The co-conspirators were meeting in Matsumiya’s room in the Fernleigh hotel in Douglas, where the Suzuki and MZ teams resided during Isle of Man TT fortnight. It was June 1961 and they were here to finalise exactly what they wanted from each other. Degner had had enough of life in the communist GDR and wanted to defect from East to West, so he wanted money, and lots of it. Matsumiya wanted a quick way out of Suzuki’s nightmare machine problems, so he needed the best two-stroke know-how in the world and he was prepared to pay for it.

What the pair were proposing was brazen robbery of priceless engine technology – the automotive theft of the century. After its tentative outing at the 1960 TT, the Suzuki Motor Company had invested millions of yen in building a completely new 125 to contest its first full world championship season. And the company was turning out to be the joke of the paddock, which wasn’t the idea at all. Suzuki was in Europe to build the brand name, not to drag it through the mud. At the first three events of the 1961 season none of their 125 riders had even finished a race, let alone got within a mile of scoring world championship points. Meanwhile, Degner and MZ were leading the world championship for the first time after wins at Barcelona and high-speed Hockenheim (where MZ had monopolised the first four places) and a close second place to Honda’s Tom Phillis at Clermont-Ferrand.

The 1961 MZ 125 was a rocketship. Another winter of noisy, sweaty toil on the dyno had rewarded Kaaden with another two horsepower, taking the MZ to 25 horsepower, its workable powerband a whole 400rpm wide: 10,000 to 10,400rpm. The MZ was now the fastest motorcycle in the world championship. It was also much more than that – it was the first normally aspirated engine in history to make 200 horsepower per litre, a landmark moment in the development of the internal-combustion engine. And the machine had finally been blessed with up-to-date front suspension and a stronger, more workmanlike frame for a dramatic improvement in handling. MZ and Degner were on their way to becoming world champions.

Suzuki knew they didn’t have the time to learn Kaaden’s secrets the honest way. That might take years. Eventually, company president Shunzo Suzuki had to admit that Degner seemed the only way out of the mess they’d got themselves into. And Matsumiya was the man to put the plan into action.

Degner and Matsumiya had first got to know each other during the 1960 TT when Suzuki and MZ had found themselves staying together at the Fernleigh. Kaaden couldn’t believe that a novice two-stroke manufacturer like Suzuki had booked into his usual TT hotel purely by chance, instructing his mechanics to ensure none of the Japanese even got a peak inside the MZ garage. But during that stay Degner and Matsumiya became acquaintances when they discovered a mutual love of jazz music. Mastumiya had a gramophone in his room; it was the perfect cover for their 1961 Island assignations.

The MZ minders were quite accustomed to cutting their star rider some slack. After all, he was MZ’s future world champion, so the team’s state-appointed chief minder Alfred Hartmann needed to indulge him, give him a longer leash than his MZ comrades. Degner had always been a shy man but his racing successes had made him more confident, more sociable and by now he was getting a taste for hanging out with people from western teams. With a bit of luck, his MZ shadows wouldn’t be too worried about what Degner and this snappily dressed Japanese character were up to. And they certainly wouldn’t hear what they were talking about; they played their jazz music far too loud for that.

Degner’s fondness for jazz was mostly a matter of taste and partly a symbol of rebellion, a sign that he rejected the values of the East and embraced the values of the West. The GDR authorities took a dim view of jazz music because it came from America. A liking for jazz could get you into serious trouble: in 1957 the GDR government tried famed East German jazz player Reginald Rudorf on trumped-up spying charges. Degner knew his value to the state; he believed that he could get away with a little bit of western decadence.

The Fernleigh hotel room liaison was Degner’s and Matsumiya’s first face-to-face meeting since Degner’s partner-in-crime Paul Petry had made contact with Suzuki earlier in the year. Degner and Petry were two Germans from two countries separated by a common language. Petry came from the West, the more comfortable side of the Iron Curtain. A quiet, hard-working man, he ran a motorcycle dealership in Saarbrücken, on the French/German border, with his wife Fidele. He was also a much-decorated two-stroke tuner who had already designed and built his own home-made rotary induction 50cc race engine.  The pair had met the previous summer during one of MZ’s all-German championship outings at St Wendel, near Saarbrücken. In MZ’s corner of the paddock they had struck up a conversation, then a friendship. The pair got together whenever Degner came west. Petry began to understand that his new friend wanted to stay west, which got them thinking…

Both men knew all about Suzuki’s trials and tribulations; they had discussed why the bikes were so rubbish and what the Japanese should do to get them going like the MZ. Then they had an idea. Degner knew the MZ engines inside out and Petry knew how to make a two-stroke fly. They wondered if they might offer their two-stroke expertise to the Japanese. It would be the perfect solution to Degner’s problem and it might just make both of them rich men. Petry would have to make the first move. Degner was watched by Stasi informers within the MZ team and by sportskommissar Hartmann, the urbane Communist Party man who kept an eye on things at every grand prix. Officially Hartmann attended races as director of sport for the Ministry of Engineering’s automotive department, the Allgemeiner Maschinenbau Landmaschinen und Fahrzeugbau. But everyone knew what he was really up to. To MZ workers he was an éminence grise, monitoring the team and secretly wielding power behind the scenes in East Berlin. “Herr Hartmann was a very well dressed, dignified gentleman who drove around in a smart Rover,” recalls Tommy Robb. “You never really knew what he was doing but he was always there, keeping tabs on the MZ guys to make sure the lads didn’t mix with the wrong company, step out of line or anything like that.” But Degner was already hanging out with the wrong company.

Petry contacted Matsumiya in May, told him what he thought he and his famous friend could do for Suzuki. It was a match made in heaven. They opened negotiations and pretty soon they were close to agreement.

These were the broad terms of the deal: Degner wanted £10,000 and a factory Suzuki ride for the full 1962 world championship. Ten grand was a king’s ransom back then, almost ten times more than Suzuki were to pay Frank Perris to partner Degner in 1962. Perris was the fastest 500 privateer in the world at the time. In other words, Suzuki weren’t just paying Degner for his riding skills. He would bring with him the full range of MZ’s engine secrets. He would then travel to Japan at the end of the season, accompanied by Petry, and spend the winter there, designing, building and developing Suzuki’s 1962 grand prix engine, using all the knowledge he had absorbed from Kaaden. The contract stipulated that Degner’s 125 must make at least 22 horsepower on Suzuki’s race shop dyno if he wanted the full £10,000.

Degner had already been dreaming about getting out for a year or two. But he was a favoured son of the GDR, he had a car, a nice apartment and MZ were going to make him world champion. “As the situation in the country got worse we talked about leaving more and the chance to escape got smaller,” says Gerda. “Ernst was always delaying defection because he wanted to be world champion. He couldn’t decide for quite a while. What was more important, the world championship or freedom?”

In the end, though, he had had enough and he wanted to bring up his boys in the free world (Gerda had given birth to their second son Boris in early 1961). He also wanted those mind-boggling western luxuries that he jealously watched his grand prix rivals enjoy whenever he raced in the West. He was already starting to look more like a westerner, dressing à la mode and wearing a fashionable close-cropped haircut, setting himself apart from his cheaply dressed Rennkollektiv colleagues. And each time he came home from a grand prix he brought Gerda presents – sometimes fresh fruit and vegetables that couldn’t be bought in the GDR, on other occasions it was western shoes and fashion, until pretty soon she was the best-dressed lady in Karl Marx Stadt. But that wasn’t enough.

Things were gloomy in the GDR, even if you didn’t have the Stasi on your back. Some economic progress had been made in the 1950s, but food queues were a daily grind and much of the consumer goods that made it into the shops were shoddy ersatz rubbish, poor-quality copies of western products. Walter Kaaden used to beg a bag or two of decent coffee from friends whenever he visited the West. And unbeknown to the Rennkollektiv boss, several of his mechanics welded up a special fuel tank with a secret compartment, in which they secreted western luxuries like coffee and nylon stockings to smuggle them over the border. Olaf Degner remembers being allowed back into the GDR with his mother to visit his grandparents during the early 1970s. “I couldn’t understand why people were queuing for bananas at five in the morning,” he recalls. And it took years for an average citizen to get a car – in the 1960s there was a several-year waiting list for a Trabant.

The East Germans who could afford genuine western goods available only on the black market fetishised their purchases, displaying unopened boxes of western soap and hair products in their bathrooms to impress visitors.  The Communist Party proclaimed idiotic Orwellian slogans to convince its downtrodden citizens that they had never had it so good. ‘Chemistry brings bread, prosperity, beauty’ was a favourite of 1958.  And the Party instigated Seven Year Plans and Five Year Plans that suggested the East would soon overtake the prosperity of West Germany, then in the grip of a major economic boom.

Few East Germans believed the propaganda any more. Two million had fled the GDR in its first decade: 17 per cent of the population, a mass exodus that was pushing the country towards social and economic collapse. Now as many as 20,000 were going west each month through the open Berlin border despite increasingly strict visa restrictions. The GDR laughingly described the exodus as ‘people trafficking’. And there were growing rumours that the state might soon tighten the border some more. The rumours weren’t wrong. During March 1961 GDR head of state Walter Ulbricht had met Russian president Nikita Khrushchev in Moscow, where Khrushchev had given his GDR puppet the okay to shut the border, for good. Degner suspected the clock was ticking; it was time to start working on an exit plan.

MZ’s world title hope wasn’t the first East European star to defect and he certainly wouldn’t be the last. Just days after Degner’s Island meeting with Matsumiya, legendary Russian ballet dancer Rudolf Nureyev defected during a visit to Paris with the Kirov ballet company. Nureyev broke away from his KGB minders at Paris airport and threw himself into the arms of French police, screaming “I want to be free!”

Nureyev’s defection was a major PR coup for the West in an ever-louder war of words between the opposing powers. But this wasn’t just a war of words; people were dying in the Cold War and it looked like a whole lot more might die as the USSR and the US ratcheted up the rhetoric day by day. Most of the many conflicts around the world were already marked by East/West tensions: Guatemala, Cuba, Iran, Korea, Congo, Tibet, Poland, Hungary, Egypt, Laos and Vietnam. In the summer of 1960 the Russians had shot down an American U2 spy plane in USSR air space. When Khrushchev and US President Eisenhower met in Paris to try and calm tensions, the summit broke up amid acrimony. As Degner plotted his escape, Armageddon didn’t feel so far away.

Inevitably, the Superpowers took their contest for superiority out of this world, the Russians winning the next leg of the space race, putting Yuri Gagarin into orbit in April 1961, two months before the Americans sent someone to the heavens. The following week a US-supported invasion of Cuba was repulsed by Fidel Castro, the Russians immediately offering to help the Cubans against the US. A few months later in Berlin, Russian and American tanks would face each other, just yards apart, for the only time in the Cold War. Khrushchev was playing a fast-and-loose game of brinkmanship over Berlin. The Russians had made no secret of the fact that they wanted to absorb the entire former German capital into the GDR. “Berlin is the testicles of the West,” said Khrushchev, a gambler by nature. “Every time I want to make the West scream, I squeeze on Berlin.”

Eisenhower rattled his sabre, too. “If the Russians want war over the Berlin issue, they can have it,” he said, announcing his readiness to use nuclear weapons. Now another clock was ticking – the Doomsday clock. The whole world was teetering on the brink in the summer of 1961.

Degner had his very own reasons to be nervous. Because he had a wife and children he knew that his defection could never be as straightforward as Nureyev’s. The GDR authorities weren’t stupid and they would never let him go abroad with Gerda and the kids. Instead the family stayed home in Karl Marx Stadt as hostages. Somehow he had to find a way of getting the family out while he was at a grand prix. The only border crossings still open were in Berlin – and even these were getting to be a bit hit and miss. So that’s where it would have to happen.

Meanwhile, he had a world championship to win. After a breakdown at the 1961 TT- where MZ had been assailed by a suspicious run of engine blow-ups – he arrived at Assen for round five, equal on points with Phillis, the dry-humoured Australian shaping up to be his toughest title rival. Phillis’s twin-cylinder Honda RC144 was fast and reliable, though two or three horsepower down on the MZ, and the Aussie was using a radical ‘lean-off’ riding style to improve handling ten years before anyone else thought of riding like that and twenty years before everyone rode like that.

Honda was establishing itself as a real force for the first time. Back then there was no inevitability about Japanese success, the country’s reputation was still for gimcrack products and plagiarism. Honda had only won its first grand prix victory that April when Phillis won the 125 race at Barcelona. Six weeks later at the Isle of Man TT the marque took the first five positions in both the 125 and 250 races. No doubt about it, the global balance of power was starting to shift and the world of motorcycling was changing.

Japan was boomtown. During the early 1950s the Americans had used their occupied former enemy as a supply base for Korea, where they were fighting the communist North Koreans. Politically and commercially Japan was therefore a western nation – pro-West, anti-communist. Billions of dollars flowed into the economy during the Korean war, the Tokyo stock market leapt 80 per cent in just 18 months. The Japanese economic miracle was go. Now Honda could afford to do anything, it seemed. Kaaden believed that Honda’s race budget was 50 times bigger than his own.

Degner and Kaaden had reason to be confident anyway. Four of the next five tracks – Assen, Spa, Sachsenring and Monza – were ultra-high-speed layouts that would suit the two-stroke’s slight straight-line performance advantage.

Then disaster. During practice for the Assen 250 race Degner’s MZ was struck by the whispering death. The engine seized at speed, hurling him to the ground and breaking his right elbow. Arm in plaster, he watched Phillis win the all-important 125 race from Redman – Phillis now on 28 points, Degner on 20 and Redman now just three points adrift in third place. Suddenly, things weren’t looking so good.

Degner’s broken right elbow may have stopped him riding at Assen but he could still hold a pen and write. Just as well, because Petry was in town. The time had come to sign their contracts. After much soul searching, Suzuki’s management had finally agreed to the pair’s impressive financial demands. During a secret meeting in town Degner and Petry signed individual contracts with the Suzuki Motor Company that would change the face of motorcycle racing for the next half-century. The deed had been done.

That weekend the two Germans also discussed their plan to get Gerda, Olaf and Boris over the border. Everything was in place, Petry assured Degner, they should put the plan into action over the weekend of the Ulster grand prix during August.

In theory, it shouldn’t have been too much of a problem to get the family over the Berlin border, so long as they travelled on the S-Bahn train which crossed between the Soviet and British zones.  This busy overland city railway was used by East Berlin workers who commuted to and from jobs in the west of the city. It was one of the last loopholes along the Berlin border, would-be refugees taking advantage of the confusion of the enormous Friedrichstrasse station complex just yards from the border. There was a good chance that Gerda and the boys could make it through without the Trapos (the GDR transport police) taking too much of an interest in their identity cards. And what if they got caught? He might never see them again. Degner and Gerda discussed what they should do. From their sources in East Berlin they knew that the odds were definitely on their side. The risk was worth it.

There was one other problem, of course. Degner had a broken elbow and the next race was the Belgian grand prix at Spa-Francorchamps the following weekend. The MZ team took the desperate decision to rush Degner back to East Berlin where he underwent innovative open-reduction and internal-fixation surgery. Pinning and plating bones was pioneering medical practice in the early 1960s, carrying serious risk of infection and other complications, but it was worth a go, there was a world championship at stake.

When he turned up at Spa, announcing he was good and ready to ride, the paddock couldn’t quite believe it. “I have a minor sensation to report,” wrote Motor Cycle News reporter Mick Woollett. “Ernst Degner will be racing. He’s had an operation on his arm, a steel pin has been inserted to ‘bolt’ things together.”

This excerpt has been reprinted with permission from Stealing Speed: The Biggest Spy Scandal in Motorsport History, published byHaynes Publishing, 2010.

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