Chemical & Engineering News
January 12, 1998
Copyright © 1998 by the American Chemical Society

75 years of
industrial progress

From Coal Tar to Crafting a Wealth of Diversity

Shaped in part by the demands and spoils of war and in part by boundless ingenuity and entrepreneurial spirit, the chemical industry has changed the face of the world

Marc S. Reisch
C&EN Northeast News Bureau



A history of the chemical enterprise over the 75-year period from 1923 to 1998 doesn't begin with a single cataclysmic event or the birth of a specific company. Nor does it progress to a satisfying, tie-up-the-loose-ends conclusion.

Actually, this history can have no beginning, because the story of modern chemistry begins with Joseph Priestley, the 18th-century discoverer of oxygen, and his contemporary, Antoine-Laurent Lavoisier, who devised the modern method of chemical nomenclature. And this history cannot have an end, because the chemical enterprise is still vital and growing.

That said, it is obvious that the chemical enterprise has become a vastly more complex undertaking than it was in 1923, when "the chemical industry" was a handful of companies that made organic compounds and marketed them to users such as textile makers, pharmaceutical manufacturers, and explosives producers. A chronicle of events and people who made the industry what it is today, and of the people who financed the growth of the chemical enterprise, shows that "the journey, not the arrival, matters," as English editor Leonard Woolf observed about his own life.

Some of the more important raw materials for the journey of the last 75 years are coal, oil, gas, acetylene, sulfur, brine, and biomass. Each material has had greater or lesser importance depending on the knowledge available to use it, the technology in place to transform it, and the economics involved in its transformation, transportation, and use.

The raw materials have always existed. But it took an industrial revolution to get at the raw material, and then it took genius to develop technology to transform the dross of raw materials into the gold of refined fuels, chemical products, and medicines.

Modern-day alchemists were not interested in changing base metal into gold, but they were interested in changing base substances such as coal or petroleum into the stuff of life and death-including explosives for war, mining, and construction; plastics for airplane windshields, buttons, and toys; medicines to cure the wounded or the ailing; textile dyes to add color to business suits, cocktail party dresses, or military uniforms; and fertilizers to increase food production for an army or a nation.

Among the modern-day alchemists who applied their genius to newly available raw materials were nylon's inventor, Wallace Carothers; Ralph Landau, a chemical engineer who developed breakthrough processes in the manufacture of ethylene oxide, ethylene glycol, and p-xylene; Eugene Houdry, originator of petroleum cracking catalyst technology; Carl Bosch, developer of high-pressure chemical technology and later chairman of BASF; and Guilio Natta, of the Milan Polytechnic Institute, who developed polypropylene plastics technology.

It also took the organizational prowess and talent of industrialists to finance and then commercialize the advances of these chemists before and during the past 75 years. They include such people as George Eastman, who formed Eastman Kodak and Eastman Chemical; Franklin Olin, who started a munitions business now known as Olin Corp.; Carl Duisberg, who organized the I. G. Farben cartel in Germany in 1925; John F. Queeny, who formed Monsanto; Herbert Dow, who fashioned Dow Chemical; and Pierre DuPont, who transformed the premiere U.S. explosives maker, E. I. DuPont de Nemours, into the diversified chemical maker so well known today.

When this century was still young and C&EN was an infant, Europe especially, as well as the U.S. and Canada, had recently suffered through the bruising Great War of 1914-18 that killed 8.5 million and wounded 21 million people. The chemical industry had played its part in providing war materials, largely based on coal-derived chemicals. For instance, coal tar provided a source for synthetic dyes; coal coking furnaces provided the nitrogen for fertilizers and trinitrotoluene (TNT) explosives, and it also provided the toluene for those explosives.

These coal-derived chemicals were a by-product of the Industrial Revolution, which in Great Britain began in the late-18th century. Coal in Britain and subsequently in many other countries provided the energy and steam to run the railroad locomotives and steamships of the early-19th century, and it provided the energy to heat homes.

The destructive distillation of this versatile mineral also produced a gas to light the street lamps of early-20th-century city dwellers. And the process of heating coal to make coke-a raw material in the manufacture of high-carbon steel-also produces a number of chemically useful gases and by-products: coal tar, ammonia, and benzene. The distillation and refinement of these raw materials were the basis of a growing synthetic organic chemical industry, particularly in Britain, Germany, and in the U.S. at the turn of the century.

A capsule chronology
Coal was and still is an abundant raw material. It still represents nearly 75% of the world's total proven fossil fuel reserves. But beginning in the 1920s, petroleum producers and chemical manufacturers began to establish in-house research units to learn how to use petroleum and natural gas as a less expensive source for organic raw materials than coal. However, when the first News Edition of Industrial& Engineering Chemistry saw the light of day in 1923, coal was the engine of chemical industry growth.

1920s
Saccharin
Monsanto's "modern" packaging for saccharin, the company's first product.
1920s
Dupont
DuPont enters the chemical fibers business with this Buffalo, N.Y. rayon plant, shown here under construction in 1920.

The world depression of the 1930s did not significantly slow the development of the petrochemical industry. Union Carbide and the U.S. arm of Anglo-Dutch Royal Dutch/Shell led development of novel chemicals from petroleum distillates. But it was World War II starting in Europe and then spreading to Africa and Asia in the late thirties until its conclusion in 1945 that accounted for more than the development of advanced catalytic cracking of petroleum for fuel. The war also led to the large-scale manufacture of synthetic rubber, large-scale commercial production of wonder drugs such as penicillin, and the widespread substitution of natural fibers by synthetic fibers such as nylon.

With the end of World War II, production in the U.S. devoted to winning the war went to satisfying pent-up consumer demand for housing, appliances, and textile goods. During the 1950s, war-torn European chemical producers rebuilt their factories and began a new era of commercial development based on economical petroleum- and natural-gas-derived chemicals. The decade also saw the widespread introduction of new thermoplastics such as acrylic, polystyrene, polyethylene, and polypropylene into consumer markets.

In the 1960s, polymers accounted for more than half of the total production of U.S. chemical manufacturers. Industry overcapacity and product saturation in many markets lowered profits for most chemical producers. In response, many sought to diversify by integrating forward into consumer products, developing niches in specialty chemicals, or diversifying into related agricultural and pharmaceutical products.

During the 1970s, U.S. chemical makers were losing their textile dyes businesses to better integrated European producers. World chemical manufacturers also began a period of retrenchment, hurt first by the Arab oil embargo of 1973-74, which drove up energy and raw material prices, then by the growing government attention to industry's pollution of the environment.

Increasing competition because of overcapacity forced a number of U.S. producers to restructure their businesses in the 1980s and allowed European producers to buy a larger position in the U.S. market. In 1984, the accidental release of methyl isocyanate gas at Union Carbide's pesticide plant in Bhopal, India, made the industry rethink its production methods. And although environmental legislation hobbled or forced change for some chemical producers, the Bhopal incident provided further incentive to develop new chemical process routes in biotechnology for both pharmaceutical and agricultural applications.

U.S. producers were in good competitive shape to expand globally in the 1990s. Large European chemical producers began their own period of restructuring burdened by the high costs of labor in their home markets. Asian chemical producers that had built capacity in petrochemicals and fiber in the '80s became significant global competitors. All producers sought opportunities globally in this decade to take advantage of opportunities in Eastern Europe following the collapse of the Soviet Union and in newly industrialized Asian markets.

Dyes spur U.S. industry growth
By the early 1920s, the U.S. chemical enterprise had in large part made up for chemical privations that World War I had caused. A British blockade had effectively cut off U.S.-based textile industries from the textile dyes primarily imported from Germany. By the end of the war, many U.S. producers supplied textile dyes to U.S. mills, and U.S. manufacturers had also managed to supply many of the pharmaceuticals previously imported from the more advanced German chemical industry as well.

U.S. firms were still not able to produce dyes, pharmaceuticals, fertilizers, and other chemical materials as economically as German companies such as Bayer, Hoechst, Badische Anilin & Soda Fabrik (BASF), Kalle, and Cassella. The German university system, government support, and the commercial enterprise of German industrialists made those companies formidable competitors.

U.S. chemical companies got their start in some cases from technology imported from German partners-and expropriated from German competitors by the U.S. government after World War I, then sold to U.S. chemical companies. In this way, Bayer not only lost its hold on the U.S. aspirin market but also lost its name to Sterling Drugs. (Bayer recovered the U.S. rights to the Bayer name and the right to market Bayer aspirin in 1994 when it bought the assets of Sterling Winthrop from SmithKline Beecham for $1 billion.)

One of the first U.S. petrochemical plants is operated in Clendenin, W.Va., by Union Carbide.
petrochemical plant
1920s
1920s
production facility
A Rohm and Haas production facility for Amberol, a synthetic resin used to manufacture varnish.

After hostilities ended when the U.S. and its Allies signed an armistice with Germany in November 1918, Germany's chemical companies moved to protect their advanced technology and rebuild their markets. However, in many cases they were forced to reveal to the victorious Allies what had been until then proprietary process technology, such as the Haber-Bosch ammonia technology.

U.S. chemical industry executives worked hard to establish the industry. They worked for the passage of protective tariffs, secured patent positions formerly held by their largest competitors- German chemical companies-and established their own research positions starting with work on the German patents newly available to them. A few also began research work based on petroleum feedstocks.

These executives succeeded in securing protection against low-cost imports first with the Fordney-McCumber Tariff Act of 1922 and later with the Smoot-Hawley Tariff Act of 1930, which placed high tariffs on dyes imported into the U.S. Tariffs were based on the U.S. selling price rather than on the selling price of the item in its country of origin. This resulted in a much higher duty on imported dyes and helped U.S. dye makers maintain higher prices.

This tariff system lasted until the late 1960s, when the U.S. government dropped its protection of the domestic dyes industry and agreed to enforce the internationally negotiated General Agreement on Tariffs & Trade with the aim of ultimately eliminating protective duties. (Without protection, almost all U.S. dye makers- such as DuPont, Allied Chemical, and America Cyanamid-sold their dye businesses in the late 1970s and early '80s to more vertically integrated European competitors such as Hoechst, Ciba-Geigy, and BASF.)

Following World War I, in the U.S. the Chemical Foundation purchased German patents seized by the U.S. government as alien property during the war and worked to disseminate and sell those patents. Lawyer Francis Garvan headed the Chemical Foundation as president, and nearly all synthetic organic chemical makers held stock in the foundation. Garvan believed he had a patriotic duty to disseminate chemical know-how and support the development of the U.S. chemical industry. The patents the Chemical Foundation had purchased from the U.S. government for more than $270,000 covered dyes, nitrogen fixation, the Hoechst antisyphilitic drugs Salvarsan and Neosalvarsan, the Hoechst anesthetic Novocain, and various chemical processes.

In 1922, the Justice Department did attempt to recover patents sold to the Chemical Foundation in the court case USA v. The Chemical Foundation, citing the low purchase price paid and the great value of these patents. Scientists from U.S. universities and companies such as DuPont, Abbott Labs, and dyes maker Calco Chemical testified that the patents themselves were unworkable based on the descriptions they contained. To isolate the compound the patent secured required a great deal of additional research, and to make a commercially viable product required significant additional information that the patents did not contain.

In January 1924, Judge Hugh Morris of federal district court in Wilmington, Del., affirmed the Chemical Foundation's ownership of its patents. He ruled that even though the government sold the patents at less than market value, the patents were significant both to the U.S. industry and to national security. Their dissemination through the Chemical Foundation effectively prevented German manufacturers from securing the virtual monopoly over the supply of chemical products they had held before World War I. The court of appeals and the Supreme Court upheld the lower court ruling.

While the U.S. government helped protect the developing chemical industry with tariffs, the Justice Department appeared to hinder the development of the industry with its case against the Chemical Foundation. However, the Commerce Department was solidly behind the development of a U.S. chemical industry. In a speech before the newly formed Synthetic Organic Chemical Manufacturers Association (SOCMA) in 1921, then-Commerce Secretary Herbert Hoover promoted the industry because it used by-products that would otherwise pollute the environment.

Hoover encouraged synthetic organic chemical makers to advance their industry because "the very coke oven today that is not recovering its by-products, turning its by-products into the air, is turning a loss that can never be recovered. Your industries are the industries that take these derivatives and turn them to account ... If we are going to maintain our own in the world, we must turn all these waste factors into something productive, and an industry that is almost wholly founded on the recovery of those wastes naturally is worth cultivation and encouragement, not only by the country but by the government itself."

1930s
Houdry
Eugene Houdry discovers cyrstalline aluminosilicate catalysts that boost the amount of high-octane fuel that can be derived from the cracking process.
A Monsanto laboratory in St. Louis.
Monsanto
1930s

This close cooperation between the government and industry in the 1920s and '30s meant, for instance, that the newly formed SOCMA and its members worked closely with the government to set up a customs lab to test imported dyes for their similarity to dyes produced in the U.S. Counseling government lawyers on import tariff cases was one of the largest expense items in SOCMA's budget between 1923 and 1925.

During the 1920s, U.S. companies secured a measure of economic protection with tariffs, bolstered their patent positions with court victories, and found a staunch ally in the Commerce Department. DuPont built up a strong position in dyes on its own and through the purchase of Newport Co. in 1930. American Cyanamid, diversifying beyond calcium cyanamide fertilizers, also built up its dyes business with the purchase of Calco in 1929. Dow Chemical staked out a claim to the dyes business by developing a line of brominated indigo through a technical assistance agreement with Switzerland-based Ciba.

The 1920s also provided opportunities to develop synthetic resins-Leo Baekeland's phenol-formaldehyde-based resin Bakelite found use in the booming automotive market to make steering wheels, battery terminals, and spark plugs. Bakelite Corp. (bought by Union Carbide in 1939) also sold Bakelite to make the casing, knobs, and dials for a newly popular consumer item-radio sets.

Petrochemicals
The first commercial U.S. petrochemical unit was an isopropyl alcohol complex at the Standard Oil refinery in Bayway, N.J., which began operating in 1920. Later work on thermal cracking of light petroleum fractions led to the widespread development and use of petroleum-derived chemicals.

George Curme, a researcher at Mellon Institute, Pittsburgh, learned how to obtain ethylene and propylene from natural gas light petroleum fractions. In addition, his work at Mellon and later at Union Carbide led to a series of important ethylene derivatives. Among them were ethylene glycol, a product Carbide sold under the Prestone name for automobile and airplane engine antifreeze. Today, AlliedSignal owns the Prestone name and distributes the antifreeze (still made and, in part, supplied by Union Carbide). Other derivatives Carbide learned how to produce included ethylene oxide, ethylene glycol, dichloroethane, and ethyl alcohol. (Until Carbide developed its economical synthetic process, ethyl alcohol came from molasses fermentation.)

In 1920, Carbide converted a natural gas processing plant at Clendenin, near Charleston, W.Va., to develop manufacturing processes based on Curme's work. In 1925, Carbide set up a full-scale works in South Charleston, W.Va., to enlarge petrochemical production, drawing its raw materials from the surrounding West Virginia gas fields.

Another early pioneer in petrochemical development was Shell. Germany's I. G. Farben cartel had learned how to convert coal to gasoline and fuel oil, thus competing with Shell's fuel business. Shell decided it had to diversify. In the late 1920s, the Anglo/Dutch group set up a lab in Emeryville, Calif., near Berkeley. Headed by E. Clifford Williams, dean of the science faculty at London University, the lab learned how to produce secondary butyl alcohol-as well as methyl ethyl ketone- from thermal crude oil cracking operations. The ketone had only been available before as a by-product of wood distillation.

Work supervised by Williams at the Emeryville research site led to the production of synthetic gylcerin in 1937. The Shell process replaced glycerin available as a by-product of tallow for soaps, explosives, and alkyd resins.

I. G. Farben
In Europe, World War I had taken its toll on German society and the German chemical industry. Inflation following the war drove the value of the German reichsmark from 4.2 to the U.S. dollar in 1914 to 49,000 to the dollar by 1923. To some extent, inflation helped German chemical producers boost exports and begin to recover from the war's effects. But German chemical leaders also formed the Interessengemeinschaft Farbenindustrie Aktiengesellschaft (I. G. Farben) cartel in 1925 to allow members' companies to recover from the war and reduce bureaucracy, prevent duplicative production efforts, and increase collective profits.

DuPont announces nylon - the first commercial synthetic fiber.
DuPont announcement
1938
1940
Sale
On May 15, crowds wait to purchase nylon stockings; 4 million pairs sold in a few hours.

The I. G. Farben name literally translates as the "community of interests of the dye industry corporation"-a measure of the importance of the dyes business. But it actually included other manufacturing operations: nitrogen, methanol, pharmaceuticals, pesticides, photographic products, and artificial fibers. The primary members were BASF, Farben Fabriken Bayer, Farbwerke Hoechst, Agfa, Chemische Fabriken vorm. Weiler-ter Meer, and Chemische Fabrik Griesheim-Elektron. Although Cassella & Co. and Kalle & Co. remained autonomous, they transferred management responsibility to I. G. Farben.

The cartel was headquartered in Frankfurt. Carl Bosch of BASF became chairman of the board of management and Carl Duisberg of Bayer became the chairman of the supervisory board. I. G. Farben ultimately had a controlling interest in 379 German firms and 400 foreign firms. In the U.S., I. G. Farben controlled the American I. G. Chemical Corp. The basis for that company's dyes businesses was I. G. Farben's 1928 purchase of the Grasselli Dyestuffs Corp. I. G. Farben sold the heavy chemicals operations to DuPont and renamed the dyes business the General Aniline Works. In 1942, the U.S. government took over those operations, then part of the I. G. Farben-controlled General Aniline & Film Corp. (GAF). The U.S. government sold GAF to the public in 1962.

Cartel operations were an acceptable means of running businesses in Germany in the 1930s and were allowed by German law. The U.S.-based, Rockefeller-owned Standard Oil was, in fact, the model on which I. G. Farben and its German predecessor cartels were based. In the U.S., the Sherman Antitrust Act of 1890 contributed to the breakup of Standard Oil in 1911. The U.S. government also used the act to break up DuPont in 1912 and forced the spin-off of half of its explosives businesses to two newly formed competitors that became well-known chemical producers on their own-Hercules and Atlas. Atlas was purchased by the British chemical maker Imperial Chemical Industries (ICI) in 1971 and formed the basis of ICI's expansion into the U.S.

In other countries, formal cartels may not have existed, but in some cases very large companies exerted power and influence over the rest of the industry by their sheer size. In England, ICI dominated chemical production. It was formed in 1926 by the merger of Brunner, Mond & Co., Nobel Industries, United Alkali, and British Dyestuffs Corp. In France, four big companies led the industry: St. Gobain, Péchiney, Kuhlmann, and Rhône-Poulenc.

Polymers come of age
The Great Depression did not slow chemical industry development. U.S. and European chemical firms began research on polymers. Work on nylon, polyester, high-density polyethylene, and synthetic rubber took on an unexpected urgency in the late 1930s and early '40s when warring governments helped to speed the development of these thermoplastic and thermoset polymers to meet the pressing material requirements to fight World War II.

Harvard professor Wallace Carothers joined DuPont in 1927, and by 1935 he had successfully produced a nylon 66 polymer that DuPont would ultimately produce in fiber form. The discovery was not only important for the textile fiber industry, but it also proved that a U.S. scientist could take the lead in developing new technology "from coal, air, and water," as DuPont announced to the world in 1938 when it decided to build its first commercial nylon plant in Seaford, Del. However, widespread availability of nylon for stockings-as well as for upholstery, carpeting, and tire reinforcement-had to wait for the end of the war, during which nylon was used to manufacture parachutes.

German scientists were not far behind DuPont in developing nylon. Paul Schlack of Aceta, a member of the I. G. Farben cartel, had successfully produced nylon 6 in 1938. However, the war interfered with the development of nylon in Germany, and Bayer built the first commercial plant for nylon after the Allies broke up I. G. Farben.

British scientists began work in 1939 to develop polyester. J. R. Whinfield and J. T. Dickson, working for an industrial lab operated by a group of printers, Calico Printers Association, filed the first patent for polyester fibers. ICI, which already produced the ethylene glycol monomer to make the new fiber, negotiated an agreement with Calico Printers to commercialize it.

The war effort drove development of polyester for fiber use, but the development efforts were not far enough along until the end of the war to be of any help to the war effort. DuPont scientists had also developed a polyester fiber in 1944 at the company's research station in Wilmington, Del. When the war ended, DuPont purchased U.S. rights to develop polyester from ICI. DuPont began commercial production of Dacron polyester in Seaford, Del., in 1953, and ICI began Terylene polyester production in Wilton, England, in 1955. Ultimately, what goes around comes around. In 1997, DuPont bought ICI's polyester business, which included production capability for film and bottle polymer resin.

1940
Pool
Leonard Parker Pool founds Air Products on the strength of a simple, but revolutionary concept: on-site production and selling of industrial gases, such as this shipboard oxygen-nitrogen generator (right).
1940
generator

ICI work in the 1930s also led to the discovery and development of low-density polyethylene (LDPE). By 1939, the company had a plant capable of producing 100 tons of the material per year. During the war years, LDPE was used for electrical insulation for ship and airborne radar systems. Union Carbide had also produced LDPE at about the same time, but ICI was the first to patent the material. After the war-in the 1950s-LDPE found its way as an insulator into power cables, television, and radio sets.

Other important polymer developments in the 1930s led to the discovery and production of synthetic rubber. Bayer scientist Fritz Hofmann first made synthetic rubber from butadiene during World War I. After that war, low natural rubber prices restricted synthetic rubber to specialty applications. Among the specialty rubber developments of the day were the oil-resistant polychloroprene (trade name Neoprene) that DuPont and Thiokol produced in the 1920s and early '30s. I. G. Farben scientists worked on the production of synthetic rubber in the 1930s to gain rubber self-sufficiency for Germany in the event war cut the country off from sources of natural rubber for truck and tank treads.

Soon I. G. Farben companies BASF and Bayer had developed Buna-S, a styrene-butadiene rubber (SBR). Buna-N included the same ingredients as well as acrylonitrile. In the U.S., Standard Oil Co. (New Jersey) reached a technology exchange agreement with I. G. Farben on the production of vulcanizable elastomers. By 1937, Standard Oil (which became Exxon in 1972) researchers William J. Sparks and Robert M. Thomas mixed and developed a "large" batch of butyl rubber (formed from isobutylene and butadiene) at the company's Linden, N.J., laboratory in a washing machine purchased from retailer Sears Roebuck. Butyl rubber's air-holding capacity made it ideal for tire inner tubes.

Because of the technology agreement with I. G. Farben, a U.S. congressional committee investigated Standard Oil on charges it conspired with I. G. Farben to retard the development of synthetic rubber. Standard Oil, in fact, shared the technology it had on Buna-S with the government and other U.S. companies. As a result, Goodyear, BF Goodrich, Firestone, and U.S. Rubber (later Uniroyal) built SBR plants under contract with the U.S. government.

Petrochemical buildup
Providing the rubber production program with the raw materials butadiene and styrene also required the buildup of an enormous petrochemical base. Dow Chemical had worked on styrene technology in the early 1930s and had built a styrene plant in 1937. (Dow and Monsanto had first produced the thermoplastic polystyrene based on Dow's monomer in the late 1930s.) The war effort meant rapid scale-up of styrene production by Dow, Monsanto, Union Carbide, and Koppers.

Grain alcohol was one source of butadiene, but the most important and least expensive route depended on petroleum. Standard Oil Co. (New Jersey) built a number of plants to make butadiene from hydrocarbon fractions. It also built butylene dehydrogenation plants to supply butadiene using technology from Phillips Petroleum and Houdry Co.

Because of the war effort, improvements in petroleum refining also meant more petroleum by-products could be separated into feedstocks for the chemical industry. Technology to extract Pennsylvania and later Texas crude oil improved in the 1930s and '40s helped, in part, by Dow's brine oil well fracturing services. Automotive fuel demand and later military aviation fuel requirements during the war meant gasoline producers were under greater pressure to get more high-octane fuel out of a barrel of oil to power tanks, airplanes, and troop transport vehicles.

Reforms in steam and catalytic cracking of petroleum led not only to improvements in fuel manufacturing technology, but also to chemical derivative advances. Eugene Houdry's catalytic cracking process introduced in 1936 improved gasoline yield from oil and lowered reaction temperatures and pressures from then-current production methods. Sun Co.'s Marcus Hook, Pa., facility was the site of the first industrial Houdry fixed-bed catalyst unit. In addition to gasoline, new petroleum distillation processes produced quantities of ethylene, propylene, and butylenes. Although largely used for heating purposes at first, these distillates were the basis for many commercial chemical products after the war.

Monsanto's Texas City, Texas styrene plant before and after (right) it was destroyed as a result of an explosion on an offshore freighter loaded with ammonium nitrate fertilizer. This incident, which killed 512 people, made the pubic aware of the danger inherent in chemical manufacturing.
Monsanto before
1947
Monsanto after
1947

Another pioneering petroleum distillation technology company at this time was Universal Oil Products (UOP), which started out as Standard Asphalt Co. However, the name changed when the company purchased patent rights developed by Jesse Dubbs that included early thermal cracking patents. Under the direction of Jesse's son, the happily named Carbon Petroleum Dubbs, and Gustav Egloff, UOP sold licenses for Dubbs crude and gas oil cracking units. Patent disputes led Shell Oil and Standard Oil Co. of California to join forces in 1931 with other oil companies to buy UOP and eliminate litigation as well as reduce their royalty costs.

But antitrust concerns dogged UOP, and, in the end, the oil companies that owned stock in UOP set up a trust to hold ownership with the earnings going to the Petroleum Research Fund (PRF), administered by the American Chemical Society. In 1947, UOP's Vladimir Haensel developed the noble metal platforming process that used platinum as a catalyst in refining naphtha to produce high-octane gasoline. The trust sold UOP to Allied Chemical (now AlliedSignal) in 1959, providing the Petroleum Research Fund with a $70 million endowment. UOP survives today as a joint venture of AlliedSignal and Union Carbide. And PRF continues to provide millions of dollars in research grants each year, administered by ACS.

Catalyst technology enticed a number of companies through the past decades to develop the technology for fuels and chemical production. They have included Engelhard, Degussa, and the Davison Chemical business that W.R. Grace bought in 1953 and still owns.

Antibiotics development
Not all chemical business efforts went to the development of fuels and industrial chemicals. Before, during, and after World War I, many firms concentrated their efforts on refining medical and related compounds. Some of these companies were Pfizer, E. R. Squibb & Sons (now Bristol-Myers Squibb), Merck, Monsanto, and Mallinckrodt. Companies such as Squibb were already producing the anesthetic ethyl ether. Monsanto's first product was not itself a pharmaceutical but the artificial sweetener saccharin, which was used to cover up the taste of bitter medicines. During World War I, Monsanto developed phenol for use as an antiseptic and acetylsalicylic acid, the raw material for aspirin.

But after the war, Germany's chemical companies reasserted their leadership in pharmaceuticals. Gerard Domagk at I. G. Farben's Bayer operations discovered the sulfonamides. Meanwhile, in 1928, Britain's Alexander Fleming discovered the first antibiotic, penicillin, in a common mold. But it was not until 1939 that Oxford University's Howard Florey and his colleague Ernest Chanin extracted enough penicillin to allow clinical trials.

Driven by the need for pharmaceuticals in World War II, Merck scientists focused on penicillin, and it was among the first to commercially produce penicillin from natural molds grown in huge tanks. Pfizer was also in that lead group. Pfizer scientist Peter Regna delivered the first U.S. paper on the isolation and purification of penicillin. Other firms that produced penicillin included Squibb, Lilly, and Abbott Laboratories.

The war effort spurred pharmaceutical companies to increase their search for new antibiotic drug therapies after the war. Parke, Davis came up with chloromycetin; Pfizer, with terramycin; and Lilly, with erythromycin-all before 1952. Such work led scientists and the companies employing them to a better understanding of natural molecules and then to develop methods to modify or mimic these molecules to fight illness.

Another important development started during the war years led Merck to develop a complicated 37-step synthesis of cortisone from cattle bile. The drug, still in use, alleviates symptoms of rheumatoid arthritis and other inflammatory ailments.

Consumer markets
The defeat of the Axis powers at the conclusion of World War II meant that German chemical patents and processes were again available to enterprising U.S. and other chemical makers. Chemical engineers on loan from U.S. chemical enterprises to the Department of Commerce explored Germany's chemical works. Many of the plants they reviewed, along with French and British chemical engineers, allowed companies from Allied countries to exploit German process technology such as the Claus process to convert hydrogen sulfide to sulfur or the conversion of methane to acetylene.

U.S. industry, with its commercial plants unaffected by the destruction of war, was confident of the future and prepared for growth. That optimism, though, had to be tempered with reality. The industry's first huge disaster struck on April 16, 1947, when a French freighter, the S.S. Grandcamp, blew up at a dock 270 feet from Monsanto's Texas City, Texas, plant on the Gulf Coast. The freighter had 2,500 tons of ammonium nitrate on board. The blast destroyed Monsanto's styrene and new polystyrene facility. More than 200 people died at the plant-and including contractors and people living in nearby Texas City, a total of 512 perished.

1940s
WWII airplane
Rohm and Haas produced Plexiglas for World War II airplanes; after the war, the product found ligher hearted uses, like jukeboxes.
jukebox
1940s

Monsanto Chairman Edgar Queeny explained to Monsanto shareholders and employees that, "No manufacturing plant is designed as a fortress, nor could many fortresses withstand a blast such as came from the Grandcamp." Monsanto rebuilt its plant within two years after the accident. Although Monsanto did not cause the accident, and in fact took great pains to care for those injured in the blast and the families of workers killed and injured, the incident put people on notice that handling chemical products carried risks. Many in the industry would remember the Texas City incident in the next few decades as chemical products came under scrutiny, beginning in the 1960s, for the environmental health and safety hazards they posed.

The Korean War again diverted U.S. industry to supply materials to the war effort in the early 1950s, but the resumption of peacetime conditions after 1953 allowed many chemical companies to exploit the advances in technology brought about during the war. Plastics and fiber producers began to manufacture products for consumer articles and textiles. Plants developed in cooperation with the U.S. government to provide synthetic rubber for military uses were converted to supplying synthetic rubber for tires, belts, gaskets, and other items used in automobiles, trucks, and farm equipment needed to drive a civilian economy.

In the 1950s, Rohm and Haas, for instance, took the acrylic sheet technology developed in collaboration with Röhm of Germany during the 1930s and developed the sheets for illuminated signs and car lights. During the war, Rohm and Haas had developed the acrylic Plexiglas sheets as lightweight fighter plane cockpit enclosures.

One company, Air Products, took technology to manufacture mobile oxygen generators during the war and turned it into an opportunity to supply customers with on-site oxygen. Air Products' founder Leonard Pool, in the 1950s, enlarged a business of leasing oxygen generators to steel manufacturing customers into a major gas supplier. In 1961, he changed the name of the firm to Air Products & Chemicals as he built it into a major chemical maker, largely through acquisitions. In those early years, Air Products bought catalyst maker Houdry Process Corp., and Escambia Chemical, a producer of polyurethane resin precursors and other industrial and agricultural chemicals based on natural gas.

In the 1950s, European chemical producers rebuilt their industry largely along the lines of the U.S. chemical industry. Just about all chemical manufacturers saw petroleum and gas as the most versatile and economic raw materials, even though European companies had to import oil from Saudi Arabia and other oil-producing states in the Persian Gulf. The discovery of natural gas fields off the Dutch coast at Groningen in the '50s and the subsequent discovery of large natural gas deposits in the North Sea, led to the further development of petrochemical stocks for both fuel and petrochemicals in Europe. Aiding chemical trade within Europe was the Treaty of Rome in 1957 and subsequent amendments that formed the European Economic Community as a trading bloc.

By 1951, the Allied countries controlling West Germany finally broke up the old I. G. Farben. Three major companies-Bayer, BASF, and Hoechst-emerged along with a few smaller companies such as Chemische Werke Hüls, Cassella, and Anorgana. They all began to rebuild their organizations and foreign associations just as their predecessors had done after World War I.

In 1954, Bayer, for instance, began to expand into the U.S. with a new class of materials: polyurethanes. Together with Monsanto, Bayer created Mobay to manufacture the isocyanates and polyols used to form polyurethane foams for auto seats. The chemistry, a product of Otto Bayer's polyurethane research in Germany beginning in 1937, allowed Bayer to get a foothold in the U.S. with the formation of Mobay. Monsanto provided much of the financing while Bayer provided much of the technology and know-how. In 1977, Bayer bought out its partner because of U.S. antitrust actions.

1962
Floyd and Gottwald
Floyd (left) and Bruce Gottwald, shown here in 1994, owners of Albemarle Paper, buy Ethyl Corp. in what was then the largest leveraged buyout on record.

Mobay formed the basis for Bayer's present $9 billion-per-year North American operation, which now not only includes polyurethanes, but also pharmaceuticals, analgesics, crop protection chemicals, inorganic pigments, and spandex fibers. In a recent deal with its old partner Monsanto, Bayer acquired Monsanto's styrenics business.

Polymers accelerate
The 1950s and '60s were a period of general optimism for the chemical industry in the U.S. and Europe as technical advances formed the basis for new chemical product lines. Bayer and General Electric developed polycarbonates simultaneously in the mid-1950s, although large-scale commercialization did not begin until 1960. Dow Corning, set up as a joint venture between Dow Chemical and Corning Glass Works in the early 1940s, grew in the '50s as a major supplier of silicone elastomers and lubricants. General Electric was also an early producer and competitor in the silicones market.


TO SIDEBAR: Historic chemical icons become landmarks


Advances in polyethylene and polypropylene in the 1950s also helped establish these useful plastics as universal materials. Although ICI and DuPont were already producing high-pressure polyethylene for applications such as electric wire insulation, Germany's Karl Ziegler isolated a low-pressure crystalline polyethylene that seemed promising. Ziegler had begun work on ethylene polymerization in the 1930s at the Kaiser Wilhelm Institute for Coal Research in what was to become East Germany after the war, and he carried the work to completion on organometallic catalysis of polyethylene at the Max Planck Institute formed in Mülheim in West Germany after the war. Hercules started up the first low-pressure crystalline polyethylene unit in the U.S. in 1957 based on a license from Ziegler's patents; Koppers and Union Carbide soon followed.

Ziegler's was not the only new process for producing polyethylene. Phillips Petroleum had perfected its own process to make crystalline polyethylene. By the time the Hercules plant was operating, Grace, Celanese, and Allied Chemical were also producing polyethylene using Phillips' process. Ultimately, 15 U.S. companies became polyethylene producers.

Giulio Natta, a chemical engineer working at the Milan Polytechnic Institute, in 1954 discovered another polyolefin- polypropylene-which had a melting point of 170 °C. The melting point of Ziegler's polyethylene was 145 °C. Financed largely by Italian chemical maker Montecatini, Natta had pursued an extension of Ziegler's catalysis technology allowing the use of propylene instead of ethylene. For their work, Natta and Ziegler shared the 1963 Nobel Prize in Chemistry.

Natta's polypropylene was particularly suited for molded objects such as housewares, textile fibers, and film. Whereas 17 U.S. producers eventually made polypropylene, Hercules became the world's first commercial crystalline polypropylene producer in 1957 and for many years was the leading producer.

Rapid growth and the resulting corporate restructuring has affected many of the chemical industry's products and their manufacturers. The disposition of Hercules' original polypropylene unit over the past 40 years is a paradigm for many other chemical businesses and is proof of corporate ingenuity if nothing else.

Hercules started with about 10 million lb of annual polypropylene capacity in 1957. In 1983, Hercules formed a joint venture called Himont with Italy's Montedison. The venture then had 2.5 billion lb of annual capacity and $750 million in sales. The partners sold a 22% interest in Himont to the public in 1987, and later that year Hercules sold its remaining interest to Montedison. Himont's 1987 sales exceeded $981 million and its annual capacity approached 3 billion lb.

By 1990, Montedison had bought the outstanding public shares of Himont-a company that then had annual sales nearing $2 billion and polypropylene capacity of almost 4 billion lb. Montedison made Himont into another of the many subsidiaries that the byzantine company controlled. In 1995, Montedison merged Himont into a joint venture with Shell Chemical's polypropylene business to form Montell, creating a producer with more than $3 billion in annual sales and more than 7 billion lb of polypropylene capacity. And just last year, Shell worked out an agreement to buy out Montedison for $2 billion. Montell now has nearly 8 billion lb of annual polypropylene capacity and sales approaching $4 billion per year.

Advances in other fields also helped enlarge chemical companies' involvement in useful products. Not only were some firms involved in the production of fertilizers, but many others isolated new compounds to protect crops from insects and fungal attack. Early I. G. Farben work on organophosphorus compounds disclosed after World War II led American Cyanamid to develop the insecticides parathion and malathion. Union Carbide successfully developed carbamate insecticides in the 1950s, and sold them under the trade name Sevin. American Chemical Paint put the herbicide 2-4-D on the market in the late 1940s, and DuPont developed substituted ureas as herbicides in the early '50s.

1970s
consumer
Consumers have come to expect having a variety of personal care and over-the-counter pharmaceutical products to choose from.
consumer

Chemical engineering
Aiding much of the capacity buildup in the chemical industry during the 1950s and subsequent years were the many chemical engineering companies. M. W. Kellogg, Stone & Webster, Bechtel, Lummus, and Foster Wheeler played an important part in both building and spreading technology, not only in the U.S., but also in Europe and in more recent years to Eastern Europe, Latin America, and Southeast Asia.

Among the most enterprising chemical engineering firms was Scientific Design Co., founded in 1946 by Ralph Landau, Harry Rehnberg, and Robert Egbert. Working in a New York City office building, Landau and his team developed a novel fixed-bed oxidation process to make ethylene glycol. The process was thought to be more economical than Carbide's in the early '50s. Landau and his colleagues licensed the process first to a British firm, Petrochemicals Ltd. (Shell bought the company in the mid-1950s.) Scientific Design also sold a license to Naphthachimie, a joint venture of French firms Pechiney and Kuhlmann, allowing the partners to build an ethylene oxide and ethylene glycol plant in Lavera, France. Others followed.

Scientific Design also developed processes and sold licenses to make chlorinated solvents and maleic anhydride. One of the biggest breakthroughs was the firm's development of a catalyst to oxidize p-xylene into purified terephthalic acid, an essential ingredient in the manufacture of polyester fibers as well as, in more recent years, bottle polymers. Scientific Design licensed the technology to ICI, which had been working on a similar process for its Terylene polyester production. In 1956, Scientific Design sold worldwide rights to the process to Amoco Chemicals. The Chicago-based subsidiary of the big oil refiner and gasoline marketer is now one of the largest producers of purified terephthalic acid.

Scientific Design later became Halcon International SD. Landau and his associates developed a process for the production of propylene oxide and styrene through oxidation of propylene. In 1967, Atlantic Richfield Co. (Arco) and Halcon formed a joint venture, Oxirane, to produce styrene, propylene oxide, and tert-butyl alcohol. In 1980, Arco bought out Halcon's interests and consolidated the venture within its Arco Chemical Co., now based in Newtown Square, Pa. Halcon had fallen upon hard times because of losses from an experimental ethylene glycol unit the company built and operated.

During the 1950s and into the 1960s, as the industry advanced technologically, the demand for chemical products increased at double-digit rates, and the size and complexity of its plants grew. Tire companies had been involved in the synthetic rubber plants built during World War II, and Goodyear, Goodrich, Firestone, and U.S. Rubber maintained their involvement after the war, adding other chemicals to their portfolios as well. Some oil companies had been involved in petrochemical production in the 1930s and '40s, including Shell and Standard Oil Co. (New Jersey). But many expanded into petrochemicals in a big way in the heady 1950s-Arco, for example, and Continental Oil Co. (Conoco, now a subsidiary of DuPont), Standard Oil of Ohio (now owned by British Petroleum), and Amoco.

Other entrants into the chemical business at this time included natural gas transmission companies Tenneco and El Paso Natural Gas. Textile companies such as Beaunit and J. P. Stevens also set up chemical units, as did the big shipping outfit W.R. Grace. Albemarle Paper Manufacturing Co., controlled by the Gottwald family of Richmond, Va., acquired Ethyl Corp., a producer of tetraethyl lead gasoline octane improver, from owners General Motors and Standard Oil Co. (New Jersey). By borrowing $200 million in 1962, Albemarle successfully acquired a company 18 times its size in what was at that time the largest leveraged buyout on record. (A leveraged buyout provides for a loan guarantee against the value of the assets acquired.)

Pittsburgh Plate Glass (PPG), a major glass producer, had actually been involved in chemicals through the manufacture of sodium carbonate for glass and in the manufacture of paint. But PPG enlarged its chemical involvement after World War II, setting up a separate chemicals division in 1961 through which it manufactured chemical products such as chlorine, caustic soda, chlorinated solvents, and vinyl chloride.

A number of chemical companies diversified in downstream consumer products. Dow introduced its Saran plastic film wrap in 1954 and enlarged a consumer product franchise that included Ziploc bags and cleaners in the 1960s, '70s, and '80s. (Dow recently announced the sale of its DowBrands consumer products business to S. C. Johnson & Son in order to focus on its upstream chemical businesses.)

Bethlehem Steel's plant produces coke from coal, with by-products that include tar, naphthalene, and light oil.
Bethlehem Steel
1970s
1976
bronze statues
A bronze statue commemorates the creation of Genentech, one of the first major U.S. biotechnology-based pharmaceutical companies. The decision to form the company was made during a discussion over a beer between University of California, San Francisco biochemist Herbert Boyer (right) and financier Robert Swanson.

Successful growth meant that a number of companies expanded into new chemical markets. It also meant that chemical makers would become more acquisitive. Sometimes, the acquisition attempts were roundly rebuffed. In 1962, for instance, ICI tried to take over English textile maker and synthetic fiber producer Courtaulds without success.

Sometimes expansion into new chemical markets meant expansion into foreign countries. Indeed, the chemical industry has long been a global affair. Beginning in the 1950s, U.S. companies such as Dow built a complex in Terneuzen, the Netherlands, near Rotterdam, to produce styrene, polystyrene, ethylene oxide, and glycols. It also set up electrolysis units in Stade in Germany. Monsanto set up a headquarters in Brussels and produced fibers in Northern Ireland and Luxembourg. It also produced polystyrene, polyvinyl butyral, and rubber chemicals in Britain, Belgium, France, and Germany. Union Carbide set up chemical production units in Sweden, Belgium, India, and Australia.

Environmental issues
But even as expansions and rearrangments of assets took place in the 1960s, the industry came under attack because of the health effects of some of its products and also for its housekeeping practices. Rachel Carson's 1962 book, "Silent Spring," indicted the industry for the reckless misuse of chemical pesticides. She charged that pesticides spilling off cropland killed fish, birds, and other wildlife. And she wrote that these same pesticides also posed dangers to domestic animals as well as to human beings.

Many of these charges continue to haunt the chemical industry. Napalm-a chemical firebomb consisting of polystyrene, benzene, and gasoline-seemed to embody the very essence of a chemical threat. Although first used in World War II, napalm was widely used against Viet Cong soldiers, and in some cases against civilians, in the unpopular war the U.S. fought against the establishment of a communist government in Vietnam. Dow was the major producer of this "jellied gasoline," but other producers included United Technology, a subsidiary of United Aircraft, and Witco.

Another chemical threat that still looms large in retrospect is agent orange. Hercules, Dow, Diamond Shamrock, Monsanto, Uniroyal, and others manufactured the defoliant to clear the thick jungle growth as the U.S. fought in Vietnam. Many veterans claim exposure to the chemicals made them ill.

Public concern about the nature of chemical plant operations and their products forced a number of government actions. In the U.S., the federal government enacted a number of environmental restrictions that forced many chemical companies to change not only their product lines, but also their production and waste treatment methods. Beginning in 1965, the U.S. government enacted the Water Quality Act, and then followed with other major pieces of legislation including the Clean Air Act of 1970; the Occupational Safety & Health Act of 1970; the Federal Insecticide, Fungicide & Rodenticide Act of 1972; the Safe Drinking Water Act of 1974; the Resource Conservation & Recovery Act of 1976; and the Toxic Substances Control Act of 1976. European governments also passed environmental legislation.

Energy crises
The chemical industry continued to grow and prosper in the 1960s and into the early '70s despite the environmental imperatives confronting chemical producers. But as chemical companies continued to build new plants to satisfy growth expectations, overcapacity began to compromise some chemical producers. An oil crisis in 1973, and then again in 1979, put a real kink into the flow of industry profits, and the subsequent inflation and currency exchange rate problems also hurt profits.

The Organization of Petroleum Exporting Countries (OPEC), a cartel of major petroleum-producing countries, first forced world oil prices from $3.00 to $12 per barrel in 1973. The group, led by Arab oil-producing countries, attempted to embargo shipments of oil to countries that supported Israel in the Arab Israeli war of 1973. Later in the decade, the Iranian Revolution also put a crimp into world oil supplies, and prices per barrel of oil rose as high as $40.

The resulting high prices for energy and feedstock forced a number of chemical companies to consolidate. Some firms were isolated from the oil shock somewhat, such as Dow because of its Brazos Oil & Gas Division. DuPont simply went out and bought an oil company, Conoco, in 1980 to insulate itself from the effects of fluctuating oil and gas availability and gyrating prices.

1970s
admittance
The hazards of chemical waste dumping - Love Canal, N.Y. (left) and the so-called Valley of the Drums (right), near West Point, Ky., are two examples - lead to many new federal regulations.
drums
1984
Cain
Gordon Cain spends $506 million to create Vista Chemical from the surfactant and polyvinyl chloride operations of DuPont's Conoco subsidiary.

Because of these rough times, many producers realized they had too many operations, particularly in petrochemicals, and began to shed them. Among the willing buyers in the mid-1980s was Jon Huntsman, who began to build a large commodity chemical business with the purchase of styrene and polystyrene operations from Hoechst.

Gordon A. Cain also took advantage of the business climate at that time. In 1984, he and his investment banking operation, Sterling Group, created Vista Chemical out of the former DuPont Conoco surfactant and polyvinyl chloride chemical operations. In 1986, his group created Sterling Chemicals with the purchase of Monsanto's Texas City plant, which produced styrene, acrylonitrile, acetic acid, and other commodity chemicals. Cain Chemical, created in 1987, assembled an ethylene and ethylene derivatives giant with assets purchased from DuPont, ICI, Solvay, Union Pacific, and PPG.

Cain and his group anticipated a resurgence in demand for petrochemicals. Cain and those who invested with him, including plant managers and line operators, sold Cain Chemical to Occidental Chemical in 1988, netting a 44 to 1 payout. Cain himself had invested $2 million and walked away with about $100 million. Vista went public in 1986 and then was bought by Germany's RWE and merged with its Condea operations. Sterling went public in 1988 and was repurchased by the Sterling Group in 1996 after the firm rebuffed an offer from Huntsman Corp.

While Cain and Huntsman took advantage of industry asset disposals, others reshuffled operations to build positions where they believed they had or ought to have market strength. Many companies profited from the dismemberment of Stauffer Chemical, especially European-based chemical producers that saw the U.S. as an attractive, low-cost environment in which to conduct business.

The dismemberment of Stauffer had its beginning in 1985 when Chesebrough-Pond's, a diversified manufacturer of consumer goods-including cosmetics, clothing, and sporting equipment-acquired Stauffer. The chemical maker had suffered from declining profits because of weakness in its fabricated plastic products business and in agricultural chemicals.

While Chesebrough-Pond's hoped to eliminate itself as a takeover target with the purchase of Stauffer, it did not scare off Unilever, an Anglo/Dutch conglomerate. Unilever bought Chesebrough-Pond's in a $3.1 billion deal completed early in 1987. However, Unilever was not interested in the Stauffer Chemical businesses and sold those to ICI for $1.7 billion by mid-1987. Since its purchase of Atlas Powder in 1971, ICI had built a large base of chemical operations in the U.S.

But ICI was only interested in retaining Stauffer's agricultural chemicals businesses, which boosted ICI to the fifth largest U.S. agricultural chemical producer from 20th place. ICI had sold much of its bulk chemical interest to Cain's group a few years earlier and did not want Stauffer's. By September 1987, ICI had a deal to sell Stauffer's basic chemicals segment to France's Rhône-Poulenc for $522 million. ICI was not interested in the specialty chemical operations either. It sold them a few months earlier to the Dutch chemical maker Akzo (now Akzo-Nobel, following its 1994 merger with Sweden's Nobel industries) for $625 million.

Takeovers, litigation
In the competitive environment of the 1980s, any liability could provide an opportunity for one chemical enterprise to enlarge its franchise with the purchase of a weaker competitor. In 1984, Union Carbide's 51%-owned Bhopal, India, plant leaked a fatal cloud of methyl isocyanate, the base ingredient for the insecticide Sevin. The company came under attack by the Indian government seeking compensation for thousands of victims, environmental activists who questioned the company's operating methods, and opportunists who saw an excuse to acquire a major petrochemical company-cheap. Carbide had to fight for its life.

GAF Chairman Samuel J. Heyman, a lawyer and real estate developer who had taken over GAF after a proxy fight in 1983, made a bid for Carbide stock in 1985. Carbide first fought back through the legal system and through an offer to shareholders to repurchase their shares with cash and securities valued at more than Heyman's offer. Although Heyman did not succeed, the fight bruised Carbide. Under duress from the continuing aftermath of the Bhopal disaster, the company shed a number of businesses including its consumer battery and antifreeze operations and its carbon business.

Heyman made a nice profit on the Carbide shares he had bought. The acquisitive Heyman also made a bid in 1987 for plastics maker Borg-Warner. But the investment banking company Merill Lynch succeeded in buying that firm. Here, too, Heyman made good money on the shares he sold to the buyer. General Electric ultimately bought Borg-Warner in 1988.

1980s
plastics
Recycling of plastics - such as polyethylene terephthalate bottles - gains popularity among consumers; the technology and economics follow.
1984
Union Carbide
Accidental, massive release of methyl isocyanate gas from Union Carbide's majority-owned pesticides plant in Bhopal, India, results in thousands of deaths.

The Bhopal accident and the accumulation of environmental charges leveled against the chemical industry following" Silent Spring" finally resulted in unified action by the chemical industry. Led in part by Carbide itself, the industry began in 1985 to put together the now well-known Responsible Care program.

Under the auspices of the Chemical Manufacturers Association, nearly all major U.S. manufacturers have adopted programs to ensure safeguards for employees, users, and transporters of chemicals. The program includes initiatives to inform local communities about plant operations. Modeled after a program started by the Canadian Chemical Producers Association, the goal of the Responsible Care program is to ensure a climate ultimately allowing for the continued and safe production of chemical products.

The complex business environment has also forced major chemical companies to consider carefully the impact their products may have on litigious users. Legal suits in the 1970s and '80s against U.S. companies that produced agent orange under government contract were only an early warning. Dow Chemical had to defend its Merrell Dow Pharmaceutical subsidiary against charges that its drug to treat pregnant women for morning sickness caused birth defects. And although Dow never paid a claim and won a landmark U.S. Supreme Court decision in 1993 that requires the use of peer-reviewed science in federal courts, the product liability suits have kept coming.

Among the most notable are court fights over alleged damages DuPont's fungicide Benlate caused on crops in the early 1990s. Another court fight involved allegedly defective materials-acetal resins supplied by DuPont and Hoechst and polybutylene resins supplied by Shell- to manufacturers of pipes and connectors for plumbing.

And, of course, there is the quintessence of all chemical industry litigation, that alleging illnesses caused by silicone gel breast implants in women, which began in 1994. The avalanche of lawsuits has resulted in the bankruptcy of one implant maker, Dow Corning, a joint venture of Dow Chemical and glass maker Corning. And it has tied up other implant makers- including Bristol-Myers Squibb, 3M, and Baxter Health Care-in court for years.

The litigious climate has forced chemical producers to carefully consider to whom they sell their materials. Because of concerns over product liability, Hoechst, Dow, and DuPont, among others, have said they will not sell their polymers for use in any medical devices implanted into the human body.

Focus on core competencies
Although a number of large chemical companies have continued to focus on bulk commodity chemicals, many have developed specialty chemicals from their commodity base to boost their profits and product offerings. ICI, for instance, has made efforts in recent years to enlarge its paints franchise. In the U.S., ICI bought Glidden in 1986, and it continues to acquire large and small paint operations around the globe. A complex, and in recent years not very profitable, company, ICI has taken the gospel of specialty chemicals more to heart than most of its competitors.

When it split off its Zeneca pharmaceuticals and fine chemicals business to shareholders in 1993, the remaining ICI businesses were largely committed to bulk chemicals. Last year, ICI cut ties to most of its huge titanium dioxide and polyester businesses, selling them to DuPont. It also sold off its ICI Australia commodity businesses. In their place, ICI spent some $8 billion to purchase Unilever's specialty chemicals operations, which include U.S.-based adhesives producer National Starch & Chemical; fragrances and flavors maker Quest International; oleochemicals producer Unichema International; and Crosfield, a maker of inorganic silica- and alumina-based compounds.

With myriad products even within specialty categories, it is no wonder that chemical companies that once thought they could encompass all salable economic disciplines within the confines of one company are choosing to specialize. Although ICI separated itself from the fine chemicals and pharmaceuticals business and now prefers specialty chemicals, Hoechst, Monsanto, Rhône-Poulenc, Ciba-Geigy, and Sandoz have chosen to focus on life sciences.

The current reformation of some large, diversified chemical manufacturers into focused chemical groups is a bit like a game of three-card monte. The object is to determine who owns which assets as the firms reinvent themselves and continue to globalize their operations.

1980s
Belanger
Jean Bélanger, president of the Canadian Chemical Producers Association, convinces his board of directors to approve a program that will become Responsible Care.
BASF's Ludwigshafen, Germany, complex, which covers more than 1,700 acres, employs more that 44,000 people who develop, test, produce, and sell more that 8,000 different products.
BASF
1990s


TO SIDEBAR: Responsible Care to the rescue


Hoechst, which acquired the U.S.-based Celanese operations in 1987, is now prepared to separate from its Celanese basic chemicals and acetate company and other units so that Hoechst can concentrate on its agricultural and pharmaceutical life sciences businesses. Ciba and Sandoz combined their life sciences businesses to form Novartis in 1996. Ciba's specialty chemicals business has retained the Ciba name. Prior to the merger with Ciba, in 1995 Sandoz spun off its dyes and specialty chemicals business into a company called Clariant. And last year, Clariant acquired Hoechst's specialty chemicals operations.

Also last year, Monsanto engineered a split into two companies: a life sciences company that retains the Monsanto name, and a chemical company now called Solutia. Rhône-Poulenc is separating its chemical business, including large U.S. operations, into a new company called Rhodia in order to concentrate on its life sciences sector, which includes the U.S. pharmaceutical company Rhône-Poulenc Rorer.

Joint-venture plants in Asia - like this polystyrene plant in Nanjing, China, built by BASF in Sinopec Yangzi - are seen by global chemical companies as a way to tap the large Asian market.
polystyrene plant
1990s
1995
silicone
Women's disease claims force leading silicone gel breast implant maker Dow Corning - a joint venture of Dow Chemical and glassmaker Corning - into bankruptcy.

Dow and DuPont continue to survive as broad-based chemical companies. While pursuing large markets for their chemical products, both companies have also focused on the life sciences business. Dow did sell its Marion Merrell Dow pharmaceuticals business to Hoechst in 1995. However, it bought out its partner Eli Lilly in the agricultural biotechnology and life sciences company DowElanco last year and took a majority position in Mycogen, a developer of genetically enhanced crops and biopesticides.

DuPont has separated its pharmaceutical businesses in the DuPont Merck Pharmaceutical alliance but has beefed up its own interest in agricultural biotechnology through the formation last year of a research alliance with Pioneer Hi-Bred and the purchase of Protein Technologies from Ralston Purina. Both the Dow and DuPont focus on biotechnology, as well as pharmaceutical companies' interest in the technology, dates to the discovery of recombinant DNA technology in the 1970s.

Biotechnology
U.S. government investment in basic biomedical research in the late 1970s and early '80s led to the development of biological techniques to produce new pharmaceuticals and detect human disease. These new genetic manipulation techniques found their way into other disciplines and led to the development of pollution-degrading microbes, herbicide-resistant plants, and a host of other potential new products.

Venture capital available from U.S. entrepreneurs and the investment arms of U.S. chemical firms led to the founding of hundreds of small companies dedicated to developing products using biotechnology techniques. Among them were Chiron, Cetus, Biogen, Centocor, DNA Plant Technology, Calgene, and Crop Genetics.

A number of biotechnology firms have already introduced commercial biotechnology products. Among such companies are Amgen, which introduced erythropoetin in 1989 for anemia resulting from dialysis, and granulocyte colony-stimulating factor in 1991 to mitigate chemotherapy treatment effects. Genentech introduced its Activase tissue plasminogen activator in 1987 for myocardial infarction and human growth hormone in 1985 to treat children with physical development difficulties.

The activity in biotechnology has attracted a large number of U.S. and European pharmaceutical companies. For instance, Hoffmann-LaRoche bought a controlling interest in Genentech in 1990. In 1989, American Cyanamid (now part of American Home Products) acquired biotechnology vaccine developer Praxis and, in 1992, a stake in Immunex. American Home Products has recently acquired Genetics Institute.

Biotechnology investments in agricultural products have also had some success. Monsanto received government approval to sell recombinant bovine growth hormone in 1994 to increase cow milk production. And Monsanto has developed a number of herbicide-resistant crops, including soybeans and cotton resistant to its Roundup herbicide and potatoes resistant to the Colorado potato beetle because they contain a gene capable of producing the insect toxin from Bacillus thuringiensis.

The interest of many large firms in biotechnology techniques promises many new products for the future. Some hope to extend their use to the production of what are now considered industrial petrochemicals. DuPont, for instance, says it is developing an enzymatic process to manufacture 1,3-propanediol.

A global industry
Without a doubt, companies engaged in the chemical enterprise will take additional twists and turns as they confront new issues. As Saudi Arabia's Saudi Basic Industries Corp. expands its position as a producer of petrochemicals with a seemingly inexhaustible supply of oil and gas feedstock, U.S. and European companies may have to shift strategies in the future. One route many European and U.S. companies are taking is to move production to the developing countries of Asia.

Many Western companies made relatively small investments in Asia, Eastern Europe, and Latin America before liberalization of trade with China in the late 1980s and the breakup of the Soviet Union in 1991. But they now have major investments in these regions. No more is economic ideology-along with language and culture barriers-the excuse for a firm centered in the U.S. or Europe to not invest outside traditional markets.

Dow Chemical, for instance, has made a massive investment in the development of the Buna Sow Leuna Olefinverbund chemicals site formerly run by the now-defunct communist East German government. The collapse of the Berlin Wall in 1989 and the reintegration of the Germanies have opened trade and development possibilities. Dow sees eastern Germany as an entry into markets cut off from most trade with Western firms, as do others such as Solvay, Akzo, and Hüls.

These and other firms are also investing in South America, where governments have newly liberalized trade and investment rules. For instance, Eastman Chemical has made large investments in Mexico for polyethylene terephthalate bottle polymer. Dow Chemical bought a controlling interest in Estireno do Nordeste in Brazil, making Dow the largest South American producer of polystyrene, and ICI gained a sizable foothold in the South American paints business with the purchase of Brazil-based Bunge Paints.

The greatest investment activity over the past decade, however, has been in Asia-Pacific countries. Many U.S. and European companies have rushed into Asia to take advantage of growing markets and opportunities they see in countries such as Singapore, Malaysia, and Indonesia. Dow Chairman William S. Stavropoulos estimates that "55% of global economic growth will take place in Asia over the next 10 years." Dow has made plans to continue its growth in Asia and recently opened plants in Thailand and Indonesia.

In Singapore, a joint venture between a unit of Royal Dutch/Shell and 57 Japanese companies operates a huge ethylene and propylene complex. Mobil and Exxon are considering placing ethylene facilities on this small island city-state. Here, DuPont has made its second largest investment in Asia-after Japan-with polyacetal, nylon, and adipic acid facilities in place. German chemical producer BASF moved its world headquarters for its textile, leather chemicals, and dyes business to Singapore.

In Indonesia, the petrochemical industry has grown from one or two plants operating on the Merak Peninsula west of Jakarta in 1990 to more than 40. U.S. and European firms are active in the country, with BP Chemicals, DuPont, Amoco Chemical, and Arco Chemical constructing new plants. Japanese investors are very active in the area, too. A joint venture of Mitsubishi Chemical and a local group, Bakrie Brothers, produces 1.3 billion lb annually of purified terephthalic acid there.

And China, largely closed to Western trade until the late 1980s, has become a particular favorite of Western companies' investment. Despite a lack of infrastructure and clear operating rules, Western companies have invested large sums in China. They have started wholly owned operations in some cases, but more often they form joint ventures with Chinese chemical firms. Bayer has recently opened a pharmaceutical plant in Beijing. Together with Chinese companies Sinopec and Yangzi Petrochemical, BASF is planning a massive ethylene and derivatives facility in Nanjing. And with DuPont, BASF plans to build a nylon intermediates venture with facilities likely to be built in China.

Despite the currency crisis in Asia in late 1997, particularly affecting Thailand, Malaysia, and South Korea, most Western chemical firms and local producers remain optimistic about long-term prospects for their industry. Although it's likely that few consumers in Asia are familiar with DuPont's one-time slogan," Better things for better living through chemistry," many are seeing it in action.

Asia, Latin America, and Eastern Europe are at a point in their economic and industrial development at which most would have to acknowledge the improved quality of life chemical products make possible. But most consumers in already industrialized nations are well past the stage when each new chemical advance is a marvel. And most people living in industrialized countries are well aware of the environmental risks that accompany a higher standard of living.

Current development of "green chemistry" processes that turn out zero waste, that rely on recycling usable content of goods past their service life, and that extend biotechnology techniques to the production of what are now considered industrial petrochemicals hold much promise for the future. Perhaps they will reprise the role for the future that the development of petroleum-derived chemicals played in the 1930s.

In fact, some of the old techniques are being revisited today for the promise they hold in the future. Where petrochemical sources of such products as industrial ethanol have displaced fermentation techniques, the biotechnology industry uses fermentation to cultivate drug-producing microorganisms. And interest in utilizing coal in a clean and efficient manner to displace petrochemical feedstocks was revived with Eastman Chemical's start-up in 1983 of a coal-to-acetyl chemicals plant in Tennessee.

In both developing and developed countries, DuPont's promise still rings true. Chemists and chemical companies do not have all the answers today. But their collective know-how has fueled a chemical enterprise that has improved the quality of life over the past 75 years.