The origins of the firm go back to an engineering works founded in Karlsruhe in 1837 by Emil Kessler and Theodor Martiensen.
After a financial crisis resulting from the collapse of the bank funding the company, Kessler's engineering works also got into economic difficulties.
After a period when the factory was working to full capacity during the course of the First World War, there followed a slump in sales in 1925, because the Deutsche Reichsbahn ordered virtually no more new steam locomotives for several years.
The factory for the engineering works was initially located south of Karlsruhe's city centre at Karlstor.
During the first 30 years of its existence, a number of notable engineers worked for the Karlsruhe locomotive builders, including Emil Kessler, Niklaus Riggenbach, Carl Benz, Gottlieb Daimler and Wilhelm Maybach.