Bayer A.G.

Werk Leverkusen
51368 Leverkusen
Germany
Telephone: (49)214 305-8992
Fax: (49)214 307-1985
Web site: http://www.bayer-ag.de

Public Company
Incorporated: 1881 as Farbenfabriken vorm. Friedr. Bayer & Co.
Employees: 120,400
Sales: $29.1 billion (2000)
Stock Exchange: Munich Bonn Hamburg Frankfurt Paris Luxembourg Vienna Zurich Basle Geneva London Brussels Antwerp
Ticker Symbol: BAYZY
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 32551 Paint and Coating Manufacturing; 551112 Offices of Other Holding Companies

Comprised of over 350 companies, Bayer A.G. operates as one of the world’s largest chemical manufacturers. Its four main business segments include Health Care, Agricultural, Polymers, and Chemicals. Within the Health Care division are the Pharmaceutical, Consumer Care, and Diagnostics business groups. The Agriculture division operates the Crop Protection and Animal Health groups. The Polymers division is made up of five segments including Plastics, Rubber, Polyurethanes, Coatings, and Colorants, and also includes fiber subsidiary Bayer Faser GmbH. The Chemicals division operates the Basic and Fine Chemicals unit, Specialty Products, and subsidiaries Haarmann & Reimer, H.C. Stark, and Wolff Walsrode. Bayer has operations in nearly every country in the world with a majority of its business in Europe, the Far East, and North America. The firm is among industry leaders in research and development, spending nearly 12 percent of its revenues on this segment.

1860s Origins

Bayer traces its history to the 1863 founding of a dyestuffs factory in Barmen, Germany, a region that later became part of the industrial city of Wuppertal on the Rhine river in West Germany. The factory was set up by Friedrich Bayer and Johan Friedrich Weskott, a master dyer. Only two years later, the men commenced global operations of sorts, acquiring a share in a U.S. coal tar dye factory and exporting the product. Subsequent expansion included a new factory in Moscow. By 1881, the growing company was being run by heirs of Bayer and Weskott, and they reorganized the concern as Farbenfabriken vorm. Friedr. Bayer & Co., a joint-stock company. A plant in northern France was established in 1883 and others throughout the homeland of Germany followed.

In 1884, chemist Carl Duisberg joined the company; he would oversee a period of remarkable innovation at Bayer. Expanding beyond the development and manufacture of dye-stuffs, the company established a pharmaceutical department in 1888. Although Bayer became a world leader in dyestuffs, its place in the history of early 20th-century chemistry was secured by its contributions to pharmacology. Specifically, at the turn of the century a Bayer chemist, Felix Hoffman, became the first to synthesize acetylsalicylic acid into a usable form. The result, aspirin, was patented in 1899 and went on to become the most popular pain reliever worldwide.

Moreover, in 1908, the basic compound for sulfa drugs was synthesized in Bayer laboratories. The immediate application of the compound was a reddish orange dye, which was soon discovered to be effective against pneumonia, a major health hazard of the early 20th century. Despite the lives that could have been saved if the sulfa drug had been released throughout Europe immediately, Bayer held onto the formula. Frustrated French chemists were forced to duplicate the drug in their own laboratories in order to introduce it to the market. In 1912, Bayer moved its headquarters to Leverkusan, where they would remain into the 21st century.

Unifying Under the German Government: 1920s–40s

Bayer chemists regularly tested dye compounds for their effectiveness against bacteria. In 1921, they discovered a cure for African sleeping sickness, an infectious disease that had made parts of Africa uninhabitable. Aware of the political as well as pharmacological implications of its compound, Bayer offered the British the formula to the drug, known as Germanin, in exchange for African colonies. Britain declined the offer. Non-cooperation continued as during World War I Bayer deprived the Allies of drugs and anesthetics whenever possible. In 1925, Duisberg, who had become president of Bayer, organized a merger of the major German chemical companies into a single entity known as the Interessen Gemeinschaft Farbenwerke, or I.G. Farben. From their inception, the German chemical companies had been organized into a series of progressively more powerful trusts, but with I.G. Farben, the last vestiges of competition in the chemical industry were extinguished. Other industries, such as steel, were undergoing a similar process in Germany.

In addition to setting quotas and pooling profits, I.G. Farben pursued political aims, working to prevent any possibility of a leftist uprising that would establish worker control over industry. In order to prevent such an uprising, I.G. Farben financed right-wing politicians and attempted to influence domestic policy in secret meetings with German leaders. The trust also exercised its influence abroad, with Bayer and other companies contributing an estimated ten million marks to Nazi Party associations in other countries. Money was also designated for propaganda. In 1938, Bayer forced a U.S. affiliate, Sterling Drug, to write its advertising contracts in such a way that they would be immediately canceled if the publication in which the advertising appeared presented Germany in an unflattering light.

Bayer and I.G. Farben profited handsomely from their support of Adolf Hitler. By 1942, I.G. Farben was making a yearly profit of 800 million marks more than its entire combined capitalization in 1925, the year the cartel was formalized. Not only was I.G. Farben given possession of chemical companies in foreign lands (it had control of Czechoslovakian dye works a week after the Nazi invasion), but the captured lands provided its factories in Germany with slave labor. In order to take full advantage of slave labor, I.G. Farben plants were built next to Maidanek and Auschwitz.

Many of the I.G. Farben plants contracted during the war were built in remote areas, often with camouflage. Thus, these factories did not sustain much physical damage, in contrast to the many German cities that were completely destroyed. By I.G. Farben’s account, only 15 percent of its productive capacity was destroyed by the Allies. The worst damage was sustained by the extensive BASF works and factories in eastern Germany, which were destroyed by I.G. Farben employees so that the buildings would not fall under Russian control.

Immediately after the war many members of I.G. Farben’s Vorstand, or board of directors, were arrested and indicted for war crimes. I.G. Farben executives were in the habit of keeping copious records, not only of meetings and phone calls, but also of their private thoughts on I.G. Farben’s dealings with the government; as a result, there was extensive written evidence incriminating the Vorstand. Despite this evidence and testimony from concentration camp survivors, the Vorstand was dealt with leniently by the judges at Nuremberg. Journalists covering the 1947 proceedings attributed the light sentences, none of which was longer than four years, to the fact that all the sentences handed down at the end of the trials tended to be less severe, as well as to the judges’ unwillingness to expand their definition of war criminals to include businessmen.

Bayer Independence from I.G Farben: 1950s

I.G. Farben plants operated under Allied supervision from 1947 until 1951, when the organization was dismantled in the interests of “peace and democracy.” The division of I.G. Farben generally adhered to the boundaries of the original companies; for example, the works at Leverkusen and Elberfield reverted to Bayer. Bayer also received the AGFA photographic works.

In the first five years of its independence from I.G. Farben, Bayer concentrated on replacing outdated equipment and on supplying Germany’s need for chemicals. By 1957, Bayer had developed new insecticides and fibers, as well as new raw and plastic finished materials. Bayer’s resiliency in recovering from the war impressed U.S. investors, who held 12 percent of the company’s stock.

During the late 1950s, Bayer began to expand overseas and by 1962 was manufacturing chemicals in eight countries, including India and Pakistan. Most of the work done abroad was “final stage processing,” whereby active ingredients were sent from Germany and mixed with locally obtained inert ingredients that would be expensive to transport overseas. Final stage processing arrangements allowed Bayer to manufacture products, mostly farm chemicals and drugs, in developing countries more profitably.

High tariffs in the United States and high labor costs in Germany also provided incentives for Bayer to acquire production facilities in America. In 1954, Bayer and Monsanto formed a chemical company known as Mobay to manufacture engineering plastics and dyestuffs. Because Bayer did not have sufficient funds to build a plant in the United States, it provided technical expertise while Monsanto provided financial resources. Although Bayer had part and eventually full interest in Mobay, its promotional material was never allowed to mention Bayer’s name, because the American rights to the Bayer trademark had been given to Sterling Drug after World War I in retaliation for Bayer’s suppression of U.S. dye companies during the early years of the 20th century.

Company Perspectives:

Our aim is to be the world’s leading integrated chemical and pharmaceutical company, with core competencies in health care, agriculture, plastics, and specialty chemicals. Our aim is that our products should benefit humankind. We are committed to the principals of the international Responsible Care initiative in our research and development, manufacturing, marketing, and information policy.

Realizing that West Germany offered only limited opportunity for growth, Bayer worked to develop products for the U.S. chemical market, emphasizing value-added products for which Bayer held the patents, including pesticides, polyurethane, dye stuffs, and engineering plastics. Technical innovations that allowed Bayer to penetrate the U.S. market included the urethane compound that forms the familiar “crust” on urethane used in auto dashboards; before Bayer’s discovery, the porous quality of urethane limited its usefulness. During this period Bayer consolidated and slowly expanded its international operations, especially in the United States. Overall, the 1960s was a good decade for Bayer as domestic production increased 350 percent while foreign production increased 700 percent.

U.S. Expansion in the 1970s

In the early 1970s, Bayer began to increase its already substantial investment in the United States. Between 1973 and 1977, its investment rose from $300 to $500 million, which went to expand production capacity and develop its product line, which included dyes, drugs, plastics, and synthetic rubber. Although all patents held by Bayer before 1952 had been taken away as war retribution, by the mid-1970s Bayer had expanded its product line to include 6,000 items, many of them patented by the company.

Bayer increased its capacity by expanding existing plants and purchasing new ones. In 1974, Bayer purchased Cutter Laboratories, a manufacturer of nutritional products and ethical drugs, which had financial difficulties until 1977. Later, Allied Chemical sold its organic pigments division to Bayer. In 1977, a U.S. antitrust suit forced Bayer to buy Monsanto’s share of Mobay, which generated $540 million in sales. The following year Bayer purchased Miles Laboratories, manufacturers of Alka-Seltzer antacid and Flintstones vitamins.

Bayer had strong incentives to expand its U.S. operations. Due to the prevalence of strikes in Europe, which interrupted product shipments, U.S. retailers were wary of contracting with European suppliers who did not have large stockpiles of their products in the United States. Lower energy and labor costs made the United States even more attractive to Bayer. U.S. holdings also cushioned the negative effects of the strong deutsche mark on imports into the United States. By the mid-1970s, 65 percent of Bayer’s sales came from outside of Germany, making it critical that Bayer protect itself against currency fluctuations.

Restructuring and Cost-Cutting During the 1980s and 1990s

In the early 1980s, Bayer’s worldwide holdings had expanded such that its corporate structure needed streamlining. German law mandated a two-tier structure for corporations, with a management board similar in function to the board of directors of a U.S. corporation reporting to a supervisory board made up of major stockholders, labor representatives, and outside interests. This board served in a supervisory capacity, approved major decisions, and appointed board members. In 1982, Bayer created a third tier below the management board. This board consisted of senior managers and corporate staff members who took over management of specific product lines that had previously been the responsibility of board members.

The late 1980s and early 1990s were a time of stagnant revenues, cost containment efforts, and an increasing emphasis on non-European markets for Bayer. From 1988 through 1993, sales fluctuated between DM 40 billion and DM 43.3 billion, while profits leveled off. Business was affected by a serious recession in Western Europe, political changes in Eastern Europe, a cyclical downturn in the chemical industry, and government reforms in health care and agriculture. In 1993, Bayer’s sales of pharmaceuticals in Germany fell 20 percent as a result of government efforts to cut expenditures on pharmaceuticals; doctors, facing reduced drug budgets, began to prescribe more generic drugs in place of the expensive, proprietary drugs developed by Bayer. Agrochemical sales were dampened by the Common Agricultural Policy reform effort that reduced the amount of farmland in Europe and the amount of chemicals used in farming.

Part of Bayer’s response to this crisis was to drastically cut costs—$1.6 billion in expenditures were eliminated between 1991 and early 1995. Its worldwide workforce was slashed by 14 percent, and unprofitable operations were shed, including its polypheny lene sulfide unit. In 1992, Bayer integrated all of its U.S. holdings under its Miles Inc. subsidiary, based in Pittsburgh. The following year, under the leadership of a new chairman of the board of management, Manfred Schneider, Bayer committed to enlarging its Asian and North American operations in order to reduce its dependence on the European market. In Asia, Bayer focused its expansion efforts on joint ventures with firms in Japan, Hong Kong, Taiwan, and China. In 1993, Bayer signed an agreement with the Eisai Company of Japan to sell nonprescription drugs, and the following year several joint ventures were signed in China to set up Bayer and Agfa Gevaert production operations there.

Key Dates:

1863:

Friedrich Bayer establishes a dyestuffs factory.

1888:

The pharmaceutical department of the firm is created.

1899:

The Aspirin trademark is registered.

1912:

Company headquarters are moved to Leverkusen.

1925:

Merger of the major German chemical companies results in the Interessen Gemeinschaft Farbenwerke, or I.G. Farben.

1951:

Following postwar breakup, I.G. Farben is reformed as Farbenfabriken Bayer A.G.

1972:

The firm officially adopts the name Bayer A.G.

1978:

Miles Laboratories is acquired.

1982:

The firm restructures, creating a third tier below the management board.

1993:

Pharmaceutical sales in Germany fall by 20 percent as a result of government efforts to cut expenditures on pharmaceuticals.

1994:

Bayer purchases Sterling Drug for $1 billion.

1997:

Company begins restructuring its chemical operations.

1998:

Bayer purchases Chiron Diagnostics, becoming one of the world’s largest diagnostic system suppliers, and initiates plans to spin-off its Agfa subsidiary.

1999:

Company celebrates the centennial of Aspirin.

2001:

A $1.64 billion alliance with CuraGen Corporation is forged.

In North America, Bayer began a drive not only to bolster its operations but also to fully regain the use of its name. After securing the rights to the Bayer name in the United States after World War I, Sterling Drugs went on to establish Bayer aspirin as a household name. In 1986, for $25 million, Bayer secured from Sterling partial rights to use its name in North America outside the pharmaceutical area. In 1994, Eastman Kodak sold Sterling to the British firm SmithKline Beecham PLC, and only a few weeks later SmithKline sold the North American side of Sterling to Bayer for $1 billion. With the purchase, Bayer not only won back the full rights to its name in North America, but also gained Sterling’s $366 million North American over-the-counter (OTC) drug business. In addition to the Bayer aspirin line, the Sterling acquisition included such familiar products as Midol analgesics and NeoSynephrine decongestant. The acquisition pushed Bayer into the top five producers of OTC products worldwide.

After the purchase of Sterling, Bayer changed the name of its Miles Inc. subsidiary to Bayer Corporation. The OTC operations of Miles and Sterling were then integrated into a single Bayer Corporation consumer care division. Another strategic step in North America, and one that brought added diversification to Bayer’s health care operations, was the 1994 purchase of a 29.3 percent stake in Denver-based Schein Pharmaceutical Inc., a maker of generic drugs. Bayer planned to expand Schein’s operations outside North America.

Bayer also beefed up its research and development (R&D) budget, particularly in health care. Its drug research efforts were already beginning to pay off in the mid-1990s, especially in North America. Bayer’s anti-infective drug Ciprobay had generated $1.3 billion in sales by early 1995, with the firm’s patent in effect until 2002. In 1993, Bayer introduced a hemophilia treatment called Kogenate, the company’s first genetically engineered drug. Other major drugs under development included a cholesterol reducer and treatments for asthma and Alzheimer’s disease.

As a result of its increasing diversification within its core businesses and its aggressive program of worldwide expansion, Bayer operated as a leading chemical and pharmaceutical company in the mid-1990s. Net income increased by 20 percent to DM 2.4 billion in 1995, the highest level the company had recorded in its history. The company’s chemical business played a large role in securing such an increase. However, results for the firm’s healthcare interests and its Agfa group were dim in comparison due to exchange rates, a decrease in demand, and increased pressure on prices.

The firm once again looked to restructure and control costs in order to maintain income levels. The financial success in 1995 was overshadowed by 3,800 job cuts and additional cuts were expected into the late 1990s. Underperforming assets and non-core assets were divested including the dental care and consumer businesses. As the German economy faltered, Bayer management continued to focus on cost-efficient operations. Chairman Schneider stated in an April 1996 Chemistry and Industry article, “if our German operations are to remain competitive, we must at least stop costs rising any further and actually start to reduce them again.” In order to do just that, the firm’s bulk chemical plants in Leverkusen, Dormagen, and Uerdingen, underwent a major restructuring in 1997 after recording a 79 percent decline in operating profits.

At the same time, Bayer looked for strategic alliances to secure top positions in niches of the industry. In March 1996, the firm acquired the styrenics business of Monsanto Co. for $580 million. The deal doubled Bayer’s North American plastics operations and secured its position as the second largest producer of engineering resins just behind GE Plastics. The firm also pledged to increase Asian business, which in 1996 secured 14 percent of company sales. Moreover, in September 1998, Bayer acquired U.S.-based Chiron Corp’s Diagnostics business for DM 1.9 billion. The deal gave Bayer the number one spot in the diagnostic systems industry and also increased its international customer base as well as its research operations.

Bayer teamed with Millennium Pharmaceuticals Inc., a genome research company, to form a discovery alliance related to drug testing for cardiovascular disease, cancer, osteoporosis, liver fibrosis, and viral infections. Bayer also teamed up with General Electric to form GE Bayer Silicones GmbH & Co. KG, a unit dedicated to developing the silicon business. The firm also partnered with Japanese firm Fujisawa to prevent worms in pets and livestock, and also began work in China on crop protection and household insecticides.

Aspirin celebrated its centennial in March 1999. Bayer celebrated by tenting its corporate headquarters in an Aspirin box while 50,000 spectators looked on. Amid the festivities, the firm continued to strengthen its core businesses and spun off 70 million shares of its Agfa-Gevaert business in order to raise capital for other operations. At the same time, the firm continued to face increased competition, consolidation in the pharmaceutical industry, and difficult market conditions in the agro-chemical field as well as in the chemicals segment. Strategic alliances remained a focus, and deals for the year included the purchase of the polycarbonate and polyester sheet business of Dutch-based DSM; the acquisition of Laserlite, an Australian plastic sheeting company; and Home & Garden Ltd, a plant protection and fertilizer manufacturer. Having spent the 1990s restructuring and selling off non core assets, Bayer’s key business segments included Health Care, Agriculture, Polymers, and Chemicals at the close of the 20th century.

Alliances for the New Millennium

Bayer entered the new millennium on solid ground, despite weakening market conditions in several of its business segments. The company’s strategy of strengthening its portfolio continued, and in April 2000 the firm acquired the polyols business of U.S.-based Lyondell Chemical Company for $2.5 billion. Bayer stood as the world’s largest polyurethane raw materials supplier after the deal.

Bayer also forged several key partnerships that were related to the firm’s drive for research and development as well as product innovation. A deal with Incyte Pharmaceuticals gave Bayer access to the U.S.-based company’s database of over 480 patented human genes that could be used for research. The company also partnered with LION Bioscience AG to do research in the life sciences including pharmaceuticals and diagnostics. In February 2001, Bayer teamed up with CuraGen Corporation to research, develop, and market pharmaceuticals related to metabolic disease. Bayer received the “President’s Service Award” and the “Presidential Green Chemistry Challenge Award” in 2000 due to its long-standing commitment to research and development.

Though overall sales for 2000 were impressive, the Chemicals segment of the business continued to struggle, and restructuring continued. Bayer’s focus on the future included expanding its research and technology operations, as well as continuing to shed unprofitable business. For example, in May 2001 the company ceded its 50 percent interest in EC Erdoelchemie to BP Energy in a deal valued at $500 million. During this time, Tweedy Browne & Co., a large shareholder, called for Bayer to split into three segments: chemicals, pharmaceuticals, and agchems. In response to the proposed split, chairman Schneider stated in a Chemical Week article, “we are sure such a move would not increase Bayer’s value in the long term. Our current structure facilitates the running of the business, enables us to capitalize on existing synergies, and gives us scope to respond swiftly should acquisition opportunities arise in the life science sector.” Indeed, shareholders voted down the proposal overwhelmingly, trusting management and the current structure to see the company to ever more profitable decades ahead.

Principal Subsidiaries

Bayer Vital GmbH & Co. KG; Wolff Walsrode AG; Haarmann & Reimer GmbH; Bayer Faser GmbH; Rhein Chemie Rheinau GmbH; Bayer Corporation (U.S.); Bayer Inc. (Canada); Bayer Antwerpen N.V. (Belgium); Bayer Rubber N.V. (Belgium); Bayer A/S (Denmark); Bayer plc (U.K.); Bayer S.p.A. (Italy); Bayer International S.A. (Switzerland); Bayer Hispònia, S.A. (Spain); Química Farmaceutica Bayer, S.A. (Spain); Bayer de Mexico, S.A. de C.V.; Bayer Ltd. (Japan); Bayer (Singapore)Pte. Ltd.; Bayer (Proprietary)Ltd. (South Africa); DyStar Group (50%); H.C. Starck GmbH & Co KG (99.9%); Poly-merLatex GmbH & Co. KG (50%).

Principal Operating Units

Health Care; Chemicals; Polymers; Agriculture.

Principal Competitors

E.I. du Pont de Nemours and Co.; BASF A.G.; Novartis A.G.

Further Reading

“Bayer AG Announces US$100 Million Alliance in Life Science Research,” PR Newswire, June 24, 1999.

“Bayer Bids to Be No. 1 in Polycarbonate,” Plastics Technology, February 2000, p. 69.

“Bayer Buys Lyondell’s Global Polyols for US$ 2.5 Billion,” Polymers Paint Colour Journal, December 1999, p. 8.

“Bayer Continues Restructuring Plans,” Chemical Week, January 13, 1999, p. 6.

“Bayer, CuraGen Alliance,” Chemical Market Reporter, February 26, 2001, p. 7.

“Bayer Playing Catch-Up,” Med Ad News, March 2001. “Bayer Prepares Bulk Chemicals Restructuring,” Chemical Market Reporter, March 24, 1997, p. 8.

“Bayer Regains U.S. Rights to Name with OTC Buy,” Chemical Marketing Reporter, September 19, 1994, p. 3.

“Bayer to Sell Agfa-Gevaert Stock,” Chemical Market Reporter, May 24, 1999, p. 7.

Brierley, David, “Bayer Finds Breaking Up Is Hard to Do,” European, August 7, 1997, p. 24.

Hasell, Nick, “The View from Bayer,” Management Today, November 1993, pp. 60–64.

Hayes, Peter, Industry and Ideology: IG Farben in the Nazi Era, New York: Cambridge University Press, 1987, 411 p.

Hume Claudia, “Bayer Rejects Call for Split,” Chemical Week, March 21, 2001, p. 7.

Jackson, Debbie, and Emma Chynoweth, “Recession Reaches German Majors: Turnaround in 1991 Is Still Elusive,” Chemical Week, April 15, 1992, pp. 22–23.

Jackson, Debbie, “Bayer: Deals in the Pipeline as Decline Continues,” Chemical Week, December 8, 1993, p. 18.

——, “Bayer Mobilizes Resources to Counter Crisis at Home,” Chemical Week, April 21, 1993, pp. 24–31.

——, “Bayer under Pressure,” Chemical Week, March 24, 1993, p. 19.

“Job Losses Follow Best Year Ever,” Chemistry and Industry, April 1, 1996, p. 237.

Keenan, Tim, “Bayer Pumps Up Plastics Division,” Ward’s Auto World, March 1996, p. 133.

Kuntz, Mary, “Extra-Strength Aspiration: Can Bayer’s New Owners Expand the Market?,” Business Week, May 1, 1995, p. 46.

Mann, Charles C., and Mark L. Plummer, The Aspirin Wars: Money, Medicine, and 100 Years of Rampant Competition, New York: Alfred A. Knopf, 1991,420 p.

Miller, Karen Lowry, and Joseph Weber, “Bayer Group Eyes a Lost Continent: America,” Business Week International Editions, June 6, 1994.

Reier, Sharon, “Elephant Walk,” Financial World, February 28, 1995, pp. 38–39.

Rosendahl, Iris, “Out Miles, in Bayer,” Drug Topics, February 6,1995, p. 54.

—David E. Salamie
—update: Christina M. Stansell

Bayer A.G.

5090 Leverkusen
Bayerwerk
Federal Republic of Germany
0214-301

Public Company
Incorporated: in 1952 as Farbenfabriken Bayer A.G.
Employees: 63,954
Sales: DM 36.441 billion (US$ 18.765 billion)
Market value: DM 18.715 billion (US$ 9.637 billion)
Stock Index: Munich Bonn Hamburg Frankfurt Paris Luxembourg Vienna Zurich Basle Geneva London
Brussels Antwerp

Bayer, along with BASF and Hoechst, is heir to the German chemical cartel known as the IG Farben, which the Allies disbanded in 1952. Rising above its past, Bayer has again assumed a commanding position in the world chemical industry. The company now makes polyurethane, organic and inorganic chemicals, synthetic rubber and agrichemicals, as well as its original products which include dyes and pharmaceuticals.

Bayer A.G. was founded in Elberfield, West Germany by Friedrich Bayer. Bayer’s first product of note was a synthetic magenta dye. The works at Elberfield, built in 1865, were followed by additional production facilities at Leverkausen (1891) Uerdingen (1907) and Dormagen (1913). The man who presided over the expansion of Bayer, Carl Duisberg, also organized the IG Farben.

Although Bayer was a world leader in dyestuffs, its place in the history of early 20th century chemistry was secured by its contributions to pharmacology. A Bayer chemist, Felix Hoffman, discovered aspirin at the turn of the century. In 1908 the basic compound for sulfa drugs was synthesized in Bayer laboratories. The immediate application of the compound was a reddish orange dye, but it was soon discovered to be effective against pneumonia, a major health hazard in the early years of this century. Despite the lives that could have been saved if the sulfa drug had been released immediately, Bayer held on to the formula. Frustrated French chemists were forced to duplicate the drug in their own laboratories in order to introduce it to the market.

Bayer chemists regularly tested dye compounds for their effectiveness against bacteria. In 1921 they discovered a cure for African sleeping sickness, an infectious disease that had made parts of Africa uninhabitable. Aware of the political, as well as the pharmacological implications of its compound, Bayer offered the British the formula to the drug, known as Germanin, in exchange for African colonies. Britain declined the offer. This led to the policy during World War I where Bayer deprived the Allies of drugs and anesthetics whenever possible.

In 1925 the president of Bayer, Carl Duisberg, organized a merger of the major German chemical companies into a single entity known as the Interessen Gemeinschaft Farbenwerke, or I.G. Farben. Almost from its inception the German chemical companies had been organized into a series of progressively more powerful trusts, but with the IG Farben the last vestiges of competition in the chemical industry were extinguished. Other industries, such as steel, were undergoing a similar process in Germany.

The IG Farben set quotas and pooled profits. But this large trust was more than an economic institution—it was a political organization. The chief political concern of the I.G. Farben was the possibility of a leftist uprising that would establish worker control over industry. In order to prevent such an uprising from occurring, the IG Farben financed right wing politicians and attempted to influence domestic policy in secret meetings with German leaders. Bayer also played a major role in the political influence exercised by the German chemical cartel abroad. In the years preceding America’s entrance into the war Bayer’s various foreign agencies gave an estimated 10 million marks to Nazi Party associations in other countries. The money was also designated for propaganda. In 1938 Bayer forced an American affiliate, Sterling Drug, to write its advertising contracts in such a way that the contracts would be immediately canceled if the publication presented Germany in an unflattering light.

Bayer, and the IG Farben in which it was an important member, profited handsomely from their support of Adolph Hitler and his foreign policy. By 1942 the IG Farben was making a yearly profit of 800 million marks more than its entire combined capitalization in 1925, the year the cartel was formalized. Not only was the IG Farben given possession of chemical companies in foreign lands (the IG Farben had control of Czechoslovakian dye works a week after the Nazi invasion), but the captured lands provided its factories in Germany with slave labor. In order to take full advantage of slave labor, IG Farben plants were built next to Maidanek and Auschwitz.

Many of the IG Farben plants contracted during the war were built in remote areas, often with camouflage. These factories did not sustain much physical damage in comparison to the many German cities which were completely destroyed. By IG Farben’s account, only 15% of productive capacity was destroyed by the Allies. The worst damage was sustained by the extensive BASF works and also the factories in eastern Germany, which were destroyed by IG Farben employees so that the buildings would not fall under Russian control.

Immediately after the war many members of the Vor-stand, or board of directors of the IG Farben, were arrested and indicted for war crimes. There was a large amount of written evidence incriminating the Vorstand, most of it written by the directors themselves. IG Farben executives were in the habit of keeping copious records, not only of meetings and phone calls, but also of their private thoughts on the IG Farben’s dealings with the government. However, despite the quantity of written evidence and testimony from concentration camp survivors, the Vorstand was dealt with leniently by the judges at Nuremberg. Journalists covering the 1947 proceedings attributed the light sentences, none of which was longer than four years, to the fact that all the sentences in the trials were becoming less severe towards the end, and to the judges’ unwillingness to lower the standards for active participation in war crimes to include businessmen.

The Potsdam Agreement referred to the necessity of dismantling the IG Farben in the interests of “peace and democracy.” From 1947 until 1952, when the cartel was disbanded, IG Farben plants operated under Allied supervision. The cartel was finally broken up according to the wishes of the English and the French, who insisted that it be split into sizable chunks instead of the scores of small firms the U.S. envisioned. The division of IG Farben generally adhered to the boundries of the original companies; for instance, the works at Leverkausen and Elberfield reverted to Bayer. Bayer also received the AGFA photographic works.

In the first five years of its independence from IG Farben, Bayer concentrated on replacing outdated equipment and on supplying Germany’s need for chemicals. By 1957 Bayer had developed new insecticides and fibers, as well as new raw and plastic finished materials. Bayer’s resiliency in recovering from the war impressed U.S. investors who held 12% of the company’s stock.

A plan of overseas expansion was implemented in the late 1950’s; and by 1962 Bayer was manufacturing chemicals in eight different countries including India and Pakistan. Most of the work done was “final stage processing,” that is, small amounts of active ingredients were sent from Germany and mixed with locally obtained inert ingredients that would be expensive to transport overseas. Final stage processing arrangements allowed Bayer to manufacture products, mostly farm chemicals and drugs, in Third World countries that would not have been profitable otherwise.

In addition, high tariffs in the U.S. and high labor costs in Germany provided incentives for Bayer to acquire production facilities in America. In 1954 Bayer and Monsanto formed a chemical company known as Mobay in order to manufacture engineering plastics and dyestuffs. At that time Bayer did not have sufficient funds to build a plant in the U.S., so it provided the technical expertise while Monsanto provided the financial resources. Even though Bayer had part and eventually full interest in Mobay, Mobay was never allowed to mention Bayer’s name in any promotional material. The American rights to the Bayer trademark were given to Sterling Drug after World War I in retaliation for Bayer’s suppression of American dye companies during the early years of this century.

Realizing that West Germany offered only limited opportunity for growth, even Bayer’s domestic facilities worked on developing products with the United States chemical market in mind. The emphasis was on exporting value-added products for which Bayer held the patents, including pesticides, polyurethane, dye stuffs and engineering plastics. The 1960 discovery of the urethane compound that forms the familiar “crust” on urethane used in auto dashboards is an example of the technical innovation that allowed Bayer to penetrate the U.S. market. Before Bayer’s discovery, the porous quality of urethane limited its usefulness. During this period Bayer consolidated and slowly expanded its international operations, especially in the U.S. Overall, the decade of the 1960’s was a good one for Bayer as domestic production increased 350% while foreign production increased sevenfold.

In the early 1970’s, Bayer began to increase its already substantial investment in the U.S. Between 1973 and 1977 its investment rose from $300 to $500 million, which went to expand production capacity and add to its product line. Bayer still manufactured dyes, drugs, plastics and synthetic rubber, and rather than adding new product lines Bayer diversified within them. Although all patents held by Bayer before 1952 had been taken away as war retribution, by the mid-1970’s Bayer had expanded its product line to include 6,000 items, many of them patented by the company.

Bayer increased its capacity by both expanding existing plants and purchasing new ones. In 1974 Bayer purchased Cutter Laboratories, a manufacturer of nutritional products and ethical drugs which had financial difficulties until 1977. Later, Allied Chemical sold its organic pigments division to Bayer. In 1977 a U.S. anti-trust suit forced Bayer to buy Monsanto’s share of Mobay which, with $540 milllion in sales, was an expensive transaction. The following year Bayer purchased Miles Laboratories, manufacturers of Alka-Seltzer and Flintstones vitamins.

Bayer had strong incentives to expand its U.S. operations. Due to the prevalence of strikes in Europe, U.S. retailers were wary of European suppliers who did not have large stockpiles in America should the flow of a certain product from Europe be interrupted by a strike. Lower energy and labor costs made America even that much more attractive to Bayer. U.S. holdings also cushioned the impact of the high Deutsche Mark. Since, by the mid-1970’s, 65% of Bayer’s sales came from outside of Germany, it was important that Bayer protect itself against currency fluctuations.

At the beginning of the 1980’s Bayer’s world-wide holdings expanded to the point where its corporate structure needed to be reorganized. German law mandates a two-tier structure for corporations. One tier consists of a management board similar in function to the board of directors of an American corporation. Above the management board there is a supervisory board consisting of major stockholders, labor representatives, and outside interests. This board serves a supervisory capacity as well as approves major decisions and appoints board members. In 1982 Bayer created a third tier below the management board. This board consists of upper management and corporate staff who took over the responsibilities for specific product lines which had previously been the responsibility of board members. Board members are now assigned a specific region. Bayer’s matrix structure, where executives are responsible to more than one supervisor, was left intact at the lower levels of the company.

Bayer began the 1980’s by increasing its already large debt. The company’s response to the oil crisis, when things looked particularly bleak at home, was to increase its expenditures in the U.S. Between 1976 and 1983 Bayer doubled its indebtedness. At home and abroad Bayer found it necessary to extricate itself from the fibers business and commit itself more deeply to chemicals.

1982 was a difficult year for Bayer because AGFA, Bayer’s photographic materials division, was hurt by the high price of silver and the Mobay plastic intermediaries plant was closed. However, in 1983 Bayer wisely used its improved cash flow to make large purchases of raw materials whose prices went up shortly thereafter. In addition, the performance of the U.S. dollar worked to Bayer’s advantage in 1984 and helped to increase pre-tax profits 73%. “We couldn’t be happier with the high dollar,” Bayer’s finance director remarked, “the dollar is knocking out U.S. competition in foreign markets.”

Bayer’s transition from one of the members of the IG Farben to one of the four largest chemical companies in the world is impressive, but not unexpected. Bayer was a member of that group of German dye companies from which modern industrial chemistry evolved. Furthermore, whatever one may think of the company’s well-documented relation to the Nazi regime, Bayer remains unequaled in technical ability and financial management. Since its rebirth in 1952, the company has attempted to expand abroad, especially in the United States. Unlike the American chemical companies which are trying to adapt to changing market conditions by moving into specialty chemicals, Bayer is forging ahead with pharmaceuticals which require less capitalization. Agricultural chemicals, in which Bayer is a world leader, will also be important to the company’s future.

Principal Subsidiaries

Bayer Chemiefaser Verkaufsgesellschaft mbH; Bayer Verwaltungsgesellschaft für Anal-gevermogen mbH; Bayer Diagnostic Electronic GmbH; Bayer Diagnostik GmnH; Bayer-Anhydrit-Verkaufsges-wellschaft mbH; Bayer-Kaufhaus GmbH; Bayropharm GmbH; Bunawerke Huls GmbH; Correcta GmbH; Drugofa GmbH; Dunning & Krausse GmbH; EC Erdol-chemie GmbH; Esarom GmbH; Farbenfabriken Bayer GmbH; Faserwerke Lingen GmbH; Filofarm Arzneimettel GmbH; Fluβ-und Schwerspatwerke Pforzheim GmbH; Formflex GmbH; Frucade Essenzen GmbH; GbR Deutsche BP AG, Hamburg, und Bayer AG; GbR Suddeutsche Zucker AG, Mannheim, und Bayer AG; Gerhard Peter KG; Gesellschaft für Farben-und Chemikalien-Handel mbH; GVC Gesellschaft für Venture Capital Beteiligungen mbH; GVW Garnverediungswerke GmbH; Haarman & Reimer GmbH; Hansa Beteiligungsgesil-schaft mbH; KVP Pharma-und Veterinar-Produkte GmbH; LINDAUER ZAHNE DENTAL GmbH; Makroform GmbH Chemiewerkestoffe; Maschinenfabrik Hennecke GmbH; Metzeler Kautschuk GmbH; Metzeler - Lord Gimetall GmbH; Metzeler Schaum GmbH; Palatinit Su Bungsmittel GmbH; Pallas Versicherung Aktiengesellschaft; Pro Chemie Handelsgesellschaft mbH; Rhein-Chemie Rheinau GmgH; Rheinhold & Mahia GmbH; Sauerstoff-und Stickstoffrohrleitunge-gesellschaft mbH; Schimmel & Co. GmbH; SEKUSA-Spezialgipsfabrik GmbH; Suberit Kork GmbH; Tropon-werke GmbH & Co. KG; Troponwerke GmbH; Wolff Walsrode Aktiengesellschaft; Ylopan Folien GmbH. The company also lists subsidiaries in the following countries: Angola, Argentina, Australia, Austria, Bangladesh, Barbados, Belgium, Bermuda, Bolivia, Canada, Chile, Colombia, Costa Rica, Denmark, Dominican Republic, Ecuador, El Salvador, Ethiopia, Finland, France, Greece, Guatemala, India, Indonesia, Iran, Italy, Ivory Coast, Japan, Kenya, Luxembourg, Malaysia, Mexico, Morocco, Namibia, The Netherlands, New Zealand, Nigeria, Norway, Pakistan, Peru, Philippines, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Kingdom, United States, Venezuela, Zaire, and Zimbabwe.

Further reading

Industry and Ideology: IG Farben in the Nazi Era by Peter Hayes, London, Cambridge University Press, 1987.

Bayer A.G.

Bayerwerk
51368 Leverkusen
Germany
0214-301
Fax: 0214-303-620

Public Company
Incorporated: 1952 as Farbenfabriken Bayer A.G.
Employees: 153,866
Sales: DM 41 billion
Stock Exchanges: Munich Bonn Hamburg Frankfurt Paris
Luxembourg Vienna Zurich Basle Geneva London
Brussels Antwerp
SICs: Industrial Organic Chemicals; 2834 Pharmaceutical Preparations; 2851 Paints, Varnishes, Lacquers, Enamels; 6719 Holding Companies

Bayer A.G., along with BASF and Hoechst, is heir to the German chemical cartel known as I.G. Farben, which the Allies disbanded in 1952 for its close association with the Nazi Party and active participation in war crimes. Rising above its checkered past, Bayer has again assumed a commanding position in the world chemical industry. The diversified company now operates in six broad areas: health care (pharmaceuticals and self-medication), industrial products (including polyurethane), polymers (fibers, plastics, and rubber), imaging technologies (including photographic products), organic products (dyes, pigments, and organic chemicals), and agrochemicals.

Bayer A.G. was founded in Elberfield by Friedrich Bayer in 1865. Bayer’s first product of note was a synthetic magenta dye. The works at Elberfield were followed by additional production facilities in Leverkusen (1891), Uerdingen (1907), and Dor-magen (1913).

Although Bayer was a world leader in dyestuffs, its place in the history of early twentieth-century chemistry was secured by its contributions to pharmacology. A Bayer chemist, Felix Hoffman, discovered aspirin at the turn of the century. In 1908 the basic compound for sulfa drugs was synthesized in Bayer laboratories. The immediate application of the compound was a reddish orange dye, but it was soon discovered to be effective against pneumonia, a major health hazard of the early twentieth century. Despite the lives that could have been saved if the sulfa drug had been released immediately, Bayer held on to the formula. Frustrated French chemists were forced to duplicate the drug in their own laboratories in order to introduce it to the market.

Bayer chemists regularly tested dye compounds for their effectiveness against bacteria. In 1921 they discovered a cure for African sleeping sickness, an infectious disease that had made parts of Africa uninhabitable. Aware of the political, as well as the pharmacological, implications of its compound, Bayer offered the British the formula to the drug, known as Germanin, in exchange for African colonies. Britain declined the offer. This led to a policy during World War I whereby Bayer deprived the Allies of drugs and anesthetics whenever possible.

In 1925 the president of Bayer, Carl Duisberg, organized a merger of the major German chemical companies into a single entity known as the Interessen Gemeinschaft Farbenwerke, or I.G. Farben. From their inception, the German chemical companies had been organized into a series of progressively more powerful trusts, but with I.G. Farben the last vestiges of competition in the chemical industry were extinguished. Other industries, such as steel, were undergoing a similar process in Germany.

In addition to setting quotas and pooling profits, I.G. Farben pursued political aims, working to prevent any possibility of a leftist uprising that would establish worker control over industry. In order to prevent such an uprising, I.G. Farben financed right-wing politicians and attempted to influence domestic policy in secret meetings with German leaders. The trust also exercised its influence abroad, with Bayer and other companies contributing an estimated ten million marks to Nazi Party associations in other countries. Money was also designated for propaganda: in 1938 Bayer forced an American affiliate, Sterling Drug, to write its advertising contracts in such a way that they would be immediately canceled if the publication in which the advertising appeared presented Germany in an unflattering light.

Bayer and I.G. Farben profited handsomely from their support of Adolf Hitler. By 1942 the I.G. Farben was making a yearly profit of 800 million marks more than its entire combined capitalization in 1925, the year the cartel was formalized. Not only was the I.G. Farben given possession of chemical companies in foreign lands (the I.G. Farben had control of Czechoslo-vakian dye works a week after the Nazi invasion), but the captured lands provided its factories in Germany with slave labor. In order to take full advantage of slave labor, I.G. Farben plants were built next to Maidanek and Auschwitz.

Many of the I. G. Farben plants contracted during the war were built in remote areas, often with camouflage. These factories did not sustain much physical damage, in contrast to the many German cities that were completely destroyed. By I.G.’s account, only 15 percent of its productive capacity was destroyed by the Allies. The worst damage was sustained by the extensive BASF works and factories in eastern Germany, which were destroyed by I.G. Farben employees so that the buildings would not fall under Russian control.

Immediately after the war many members of I.G. Farben’s Vorstand, or board of directors, were arrested and indicted for war crimes. I.G. Farben executives were in the habit of keeping copious records, not only of meetings and phone calls, but also of their private thoughts on I.G. Farben’s dealings with the government; as a result, there was extensive written evidence incriminating the Vorstand. Despite this evidence and testimony from concentration camp survivors, the Vorstand was dealt with leniently by the judges at Nuremberg. Journalists covering the 1947 proceedings attributed the light sentences, none of which was longer than four years, to the fact that all the sentences handed down at the end of the trials were less severe, as well as to the judges’ unwillingness to expand their definition of war criminals to include businessmen.

I.G. Farben plants operated under Allied supervision from 1947 until 1952, when the organization was dismantled in the interests of “peace and democracy.” The division of I.G. Farben generally adhered to the boundaries of the original companies; for example, the works at Leverkusen and Elberfield reverted to Bayer. Bayer also received the AGFA photographic works.

In the first five years of its independence from I.G. Farben, Bayer concentrated on replacing outdated equipment and on supplying Germany’s need for chemicals. By 1957 Bayer had developed new insecticides and fibers, as well as new raw and plastic finished materials. Bayer’s resiliency in recovering from the war impressed U.S. investors, who held 12 percent of the company’s stock.

During the late 1950s Bayer began to expand overseas and by 1962 was manufacturing chemicals in eight countries, including India and Pakistan. Most of the work done abroad was “final stage processing,” whereby active ingredients were sent from Germany and mixed with locally obtained inert ingredients that would be expensive to transport overseas. Final stage processing arrangements allowed Bayer to manufacture products, mostly farm chemicals and drugs, in developing countries more profitably.

High tariffs in the United States and high labor costs in Germany also provided incentives for Bayer to acquire production facilities in America. In 1954 Bayer and Monsanto formed a chemical company known as Mobay to manufacture engineering plastics and dyestuffs. Because Bayer did not have sufficient funds to build a plant in the United States, it provided technical expertise while Monsanto provided financial resources. Although Bayer had part and eventually full interest in Mobay, Mobay’s promotional material was never allowed to mention Bayer’s name, because the American rights to the Bayer trademark were given to Sterling Drug after World War I in retaliation for Bayer’s suppression of American dye companies during the early years of the twentieth century.

Realizing that West Germany offered only limited opportunity for growth, Bayer worked to develop products for the U.S. chemical market, emphasizing value-added products for which Bayer held the patents, including pesticides, polyurethane, dye stuffs, and engineering plastics. Technical innovations that allowed Bayer to penetrate the U.S. market included the urethane compound that forms the familiar “crust” on urethane used in auto dashboards; before Bayer’s discovery, the porous quality of urethane limited its usefulness. During this period Bayer consolidated and slowly expanded its international operations, especially in the United States. Overall, the decade of the 1960s was a good one for Bayer as domestic production increased 350 percent while foreign production increased 700 percent.

In the early 1970s, Bayer began to increase its already substantial investment in the United States. Between 1973 and 1977 its investment rose from $300 to $500 million, which went to expand production capacity and develop its product line, which included dyes, drugs, plastics, and synthetic rubber. Although all patents held by Bayer before 1952 had been taken away as war retribution, by the mid-1970s Bayer had expanded its product line to include 6,000 items, many of them patented by the company.

Bayer increased its capacity by expanding existing plants and purchasing new ones. In 1974 Bayer purchased Cutter Laboratories, a manufacturer of nutritional products and ethical drugs which had financial difficulties until 1977. Later, Allied Chemical sold its organic pigments division to Bayer. In 1977 a U.S. antitrust suit forced Bayer to buy Monsanto’s share of Mobay, which generated $540 million in sales. The following year Bayer purchased Miles Laboratories, manufacturers of Alka-Seltzer and Flintstones vitamins.

Bayer had strong incentives to expand its U.S. operations. Due to the prevalence of strikes in Europe which interrupted product shipments, U.S. retailers were wary of contracting with European suppliers who did not have large stockpiles of their products in the United States. Lower energy and labor costs made the United States even more attractive to Bayer. U.S. holdings also cushioned the negative effects of the strong deutsche mark on imports into the United States. By the mid-1970s 65 percent of Bayer’s sales came from outside of Germany, making it critical that Bayer protect itself against currency fluctuations.

In the early 1980s Bayer’s worldwide holdings expanded to the point that its corporate structure needed to be reorganized. German law mandates a two-tier structure for corporations, with a management board similar in function to the board of directors of an American corporation reporting to a supervisory board made up of major stockholders, labor representatives, and outside interests. This board serves in a supervisory capacity, approves major decisions, and appoints board members. In 1982 Bayer created a third tier below the management board. This board consisted of senior managers and corporate staff members who took over management of specific product lines that had previously been the responsibility of board members.

The late 1980s and early 1990s were a time of stagnant revenues, cost containment efforts, and an increasing emphasis on non-European markets for Bayer. From 1988 through 1993, sales fluctuated between DM 40 billion and DM 43.3 billion, while profits leveled off. Business was affected by a serious recession in Western Europe, political changes in Eastern Europe, a cyclical downturn in the chemical industry, and government reforms in health care and agriculture. In 1993 Bayer’s sales of pharmaceuticals in Germany fell 20 percent as a result of government efforts to cut expenditures on pharmaceuticals: doctors, facing reduced drug budgets, began to prescribe more generic drugs in place of the expensive, proprietary drugs developed by Bayer. Agrochemical sales were dampened by the Common Agricultural Policy reform effort that reduced the amount of farm land in Europe and the amount of chemicals used in farming.

Part of Bayer’s response to this crisis was to drastically cut costs—$1.6 billion in expenditures were eliminated between 1991 and early 1995. Its worldwide workforce was slashed by 14 percent, and unprofitable operations were shed, including its polyphenylene sulfide unit. In 1992 Bayer integrated all of its U.S. holdings under its Miles Inc. subsidiary, based in Pittsburgh. The following year, under the leadership of a new chairman of the board of management, Manfred Schneider, Bayer committed to enlarging its Asian and North American operations in order to reduce its dependence on the European market. In Asia, Bayer focused its expansion efforts on joint ventures with firms in Japan, Hong Kong, Taiwan, and China. In 1993 Bayer signed an agreement with the Eisai Company of Japan to sell nonprescription drugs, and the following year several joint ventures were signed in China to set up Bayer and Agfa Gevaert production operations there.

In North America, Bayer began a drive not only to bolster its operations but also to fully regain the use of its name. After securing the rights to the Bayer name in the United States after World War I, Sterling Drugs went on to establish Bayer aspirin as a household name. In 1986, for $25 million, Bayer secured from Sterling partial rights to use its name in North America outside the pharmaceutical area. In 1994 Eastman Kodak sold Sterling to the British firm SmithKline Beecham PLC, and only a few weeks later SmithKline sold the North American side of Sterling to Bayer for $1 billion. With the purchase, Bayer not only won back the full rights to its name in North America, but also gained Sterling’s $366 million North American over-the-counter (OTC) drug business. In addition to the Bayer aspirin line, the Sterling acquisition included such familiar products as Midol analgesics and NeoSynephrine decongestant. The acquisition pushed Bayer into the top five producers of OTC products worldwide.

After the purchase of Sterling, Bayer changed the name of its Miles Inc. subsidiary to Bayer Corporation. The OTC operations of Miles and Sterling were integrated into a single Bayer Corporation consumer care division. Another strategic step in North America, and one that brought added diversification to Bayer’s health care operations, was the 1994 purchase of a 29.3 percent stake in Denver-based Schein Pharmaceutical Inc., a maker of generic drugs. Bayer planned to expand Schein’s operations outside North America.

Bayer also beefed up its R&D budget, particularly in health care. Its drug research efforts were already beginning to pay off in the mid-1990s, especially in North America. Bayer’s anti-infective drug Ciprobay had generated $1.3 billion in sales by early 1995, with the firm’s patent in effect until 2002. In 1993 the company introduced a hemophilia treatment called Kogenate, Bayer’s first genetically engineered drug. Other major drugs under development included a cholesterol reducer and treatments for asthma and Alzheimer’s disease.

As a result of its increasing diversification within its core businesses and its aggressive program of worldwide expansion, Bayer seemed well positioned in the mid-1990s to continue to operate as one of the leading chemical and pharmaceutical companies in the world.

Principal Subsidiaries

Agfa AG; Agfa Gevaert S.A.; Bayer Capital Corporation N.V.; Bayer Finance S.A.; Bayer-Kaufhaus GmbH; Bayer-Wohnungen GmbH; BeCom Video- und Audio-Communikationsmittel GmbH; Compur-Electronic GmbH; Correcta GmbH; Desowag-Bayer Holzschutz GmbH; EC Erdolchemie GmbH; Flubb- und Schwerspatwerke Pforzheim GmbH; GEFIL Gesellschaft fur Internationalen Laborservice mbH; Gemeinnutzige Wohnungs-Ges. mbH; Hansa Beteili-gungsgesellschaft mbH; Maschinenfabrik Hennecke GmbH; Pallas Versicherung AG; Schelde Chemie Brunsbuttel GmbH; Bayer Corporation (U.S.); Chemdesign Corporation (U.S.); Deerfield Urethane, Inc. (U.S.); Haarmann & Reimer Corporation (U.S.); H. C. Starck, Inc. (U.S.); Rhein Chemie Corporation (U.S.); Wolff Walsrode (U.S.).

Further Reading

“Bayer Regains U.S. Rights to Name with OTC Buy,” Chemical Marketing Reporter, September 19, 1994, p. 3.

Hasell, Nick, “The View from Bayer,” Management Today, November 1993, pp. 60–64.

Hayes, Peter, Industry and Ideology: IG Farben in the Nazi Era, New York: Cambridge University Press, 1987, 411 p.

Jackson, Debbie, “Bayer: Deals in the Pipeline as Decline Continues,” Chemical Week, December 8, 1993, p. 18.

_____, “Bayer Mobilizes Resources to Counter Crisis at Home,” Chemical Week, April 21, 1993, pp. 24–31.

_____, “Bayer under Pressure,” Chemical Week, March 24, 1993, p. 19.

_____, and Emma Chynoweth, “Recession Reaches German Majors: Turnaround in 1991 Is Still Elusive,” Chemical Week, April 15, 1992, pp. 22–23.

Kuntz, Mary, “Extra-Strength Aspiration: Can Bayer’s New Owners Expand the Market?,” Business Week, May 1, 1995, p. 46.

Mann, Charles C., and Mark L. Plummer, The Aspirin Wars: Money, Medicine, and 100 Years of Rampant Competition, New York: Alfred A. Knopf, 1991, 420 p.

Miller, Karen Lowry, and Joseph Weber, “Bayer Group Eyes a Lost Continent: America,” Business Week International Editions, June 6, 1994.

Reier, Sharon, “Elephant Walk,” Financial World, February 28, 1995, pp. 38–39.

Rosendahl, Iris, “Out Miles, in Bayer,” Drug Topics, February 6, 1995, p. 54.

—updated by David E. Salamie