Basf A.G.

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Basf A.G.

Carl-Bosch-Strasse 38
D-6700 Ludwigshafen-Rhine
Federal Republic of Germany
(0621) 601

Public Company
Incorporated: 1952 as Badische Anilin & Soda Fabrik A.G.
Employees: 130,173
Sales: DM 36.193 billion (US$ 18.637 billion)
Market value: DM 14.722 (US$ 7.581 billion)
Stock Index: Munich Frankfurt Bonn Hamburg
Zurich Basle Geneva Paris Vienna Brussels
Antwerp London Amsterdam

Since its founding in 1865 Badische Analin und Soda Fabrik AG (now known as BASF) has been a major influence in the world chemical industry. As one of the three largest German chemical companies, BASF’s influence from 1924 to 1947 extended far beyond dyes and nylons. When joined with Bayer and Hoechst to form the world’s largest chemical cartel, one of the most powerful cartels in history, BASF was instrumental in helping to secretly re-arm Germany.

For its role during these years the chemical cartel, known as the IG Farben, was broken up by the Allies, and BASF again existed as an independent company. Despite the fact that almost half of its plant in Ludwigshafen, West Germany was reduced to rubble during World War II, BASF has been able to re-establish its presence in the chemical industry. It is now the world’s fourth largest chemical company (after Du Pont, Hoechst and Bayer). Its main production facilities in Ludwigshafen extend for three and a half miles. BASF holds a significant share of the international market in mineral oil, natural gas, plastics, intermediaries for synthetic fibers, nitrogen compounds, and its original product, dyes.

BASF was founded in 1861 by Frederick Englehorn, a jeweler, along the banks of the Rhine River at Mannheim. Using the discoveries of the English scientist William Perkins, BASF became one of the first companies to manufacture dyes from coal tar. Its specialty was the bright bluish purple known as indigo. The attraction of BASF’s process lay in the fact that it took coal tar, a messy byproduct of gas distillation, and transformed it into something that replaced a more expensive and unreliable organic substance.

BASF’s synthetic dyes were less expensive, brighter, and easier to use than organic dyes. Profits from these dyes were used to finance BASF’s diversification into inorganic chemicals later in the century as well as new production facilities across the river in Ludwigshafen.

By the early twentieth century journalists were calling BASF “The World’s Greatest Chemical Works.” In 1910 the company employed over 8,000 people and by 1926 this number had grown to 42,000. Its production facilities in Ludwigshafen alone covered 2,787 acres. American journalists were impressed by BASF’s charity and reported that, “The company has given a great deal of attention to welfare work; especially to housing, hygiene and the care of the sick.”

BASF’s sanatoriums and dispenseries, along with its main production facilities, were financed in part by business arrangements that would be illegal today in either Germany or the U.S. Beginning around 1900 leaders of the German chemical industry began to dream of what was, in effect, the merger of most German chemical companies. Should this cartel be formed, said Carl Duisberg, the man who eventually set up the IG Farben, “... the now existing domination of the German chemical industry, especially the dye industry, over the rest of the world would then, in my opinion, be assured.”

By 1904 two major cartels had been formed. The first of these cartels included Bayer and BASF, the second cartel was anchored by Hoechst. Not only did these firms avoid competition and fix prices, but they also set up a quota system and even shared their profits. For instance, a marketing agreement was reached for the sale of indigo which was one of the most profitable dyes.

Both cartels played an important role during World War I. Not only was dye necessary for garments, but the basic chemical formulas for dyes could be altered slightly to make mustard gas and munitions. Companies like BASF provided gas and explosives for German troops and, previous to America’s entry into the war, they initiated economic activities that stunted the growth of the chemical companies important to the American war effort. For instance, BASF had sold aniline at below market prices to U.S. firms in order to discourage aniline production by U.S. companies. As part of the dye cartel it had also engaged in a practice called “full-line forcing.” If a dealer wanted to purchase item A for example, available only from BASF, the dealer was forced to purchase the whole product line, effectively eliminating U.S. producers.

After the war the German government recognized the importance of the chemical industry, especially the dye industry. Not only did the chemical industry bring in needed foreign currency, but it was critical to defense. Since the build-up of the chemical industry was so important to Germany, the cartels were granted government loans as well as a ten year tax deferment. The cartels also received a special allotment of coal, which was very scarce at the time.

In 1925 the top men in the chemical industry decided that the duplication of product lines and the maintenance of separate sales forces was wasteful. As a result, hundreds of German chemical companies formally merged with BASF. This new corporation, headquartered at Ludwigshafen, was renamed the Interessen Gemeinschaft Farbenwerke, or IG Farben. Later, the executives of IG Farben feared that leftists might triumph in Germany’s unstable political climate and that IG Farben itself would be nationalized. This led to the IG Farben’s support for Adolph Hitler. As early as 1931 its directors made secret contributions to the Nazi Party.

During World War II the IG Farben grew very large. At its peak it had controlling interest in 379 German firms and 400 foreign companies. It has been noted that one of the historic restraints on Germany was its lack of colonies to supply necessary products, like rubber for instance. During this time the IG Farben, synthesizing many of the country’s chemical needs with a native product, provided Germany with the self-sufficiency it lacked during World War I.

Near the end of the war the BASF production facilities at Ludwigshafen were bombed extensively. While factories built during the war were often camouflaged, the old BASF factories were more visible to American bombers which often flew over Ludwigshafen on the way back from other bombing raids and dropped any left-over bombs on the ammonia and nitrogen works. During the war BASF factories sustained the heaviest damage in the IG Farben with 45% of BASF buildings destroyed.

With the surrender of Germany, IG Farben’s problems had only just begun. From the very beginning the Allies disagreed over the fate of the IG Farben. The British and French favored a break-up of the company into large separate companies, while many American officials advocated that the company be divided into smaller and therefore less influential firms. Negotiations over the cartel’s fate lasted for several years. The French and British plan eventually prevailed.

In 1952 the IG Farben was divided into three large firms, including Bayer, Hoechst and BASF, and nine smaller firms. After this reorganization BASF was once again a small corporation located on its original Ludwigshafen site. Its share of the 30,000 IG Farben patents had been taken away; some of its trade secrets had been sold for as little as $1.00. It was isolated from its previous suppliers in Eastern Europe and, in fact, most of its basic supplies, such as coal, were insufficient. The 55% of its buildings that hadn’t been destroyed were filled with outdated equipment.

West Germany, lacking money to import chemicals from abroad, was in dire need for chemicals produced at home. By 1957, BASF’s sales of nitrogen and ammonia products were approaching their wartime levels. BASF initially lagged behind both Bayer and Hoechst in profits, in part because its product line included such items as fertilizers, plastics and synthetics which were easily challenged on the market by competitors. Between 1957 and 1962 sales grew 59%, less then either Bayer or Hoechst. As prices for plastics and fertilizers stabilized in 1963, however, sales for the company increased 19% in one year.

BASF’s growth during the post-war period was impressive. In the 10 years after the dissolution of the IG Farben, the company increased its capital from DM 81 million to DM 200 million. Employing only 800 workers in the late 1940’s, it employed 45,000 by 1963. Although BASF had lost all of its patents in 1952, within 10 years it had recovered a large number of them.

BASF began its second decade of independence from the IG Farben with a switch to oil as a base for most of its old, coal-based formulas. With the purchase of Rheinisch Oelfinwerke, BASF added petroleum to the long list of raw materials it was able to provide for itself. The company soon became the world’s largest producer of plastic, and provided an astonishing 10% of the international requirement for synthetic fibers.

Despite these gains, BASF was still faced with problems. It was the possessor of the old IG soda and nitrogen works, but these products were often in oversupply. BASF competed with other European producers who were not burdened with this product and who were situated in more petroleum-rich countries. Nevertheless, the company reached the DM 1 billion in sales during 1965. Chairman Bernard Timm attributed the company’s performance in 1965 to a judicious mix of plastics, farm chemicals, raw materials for coatings, dyes, and raw materials for fibers.

1968 was another significant year for BASF. BASF purchased Wintersall, which had half of the German potash market and produced a quarter of the country’s natural gas. This acquisition was the largest in German history, and with it BASF jumped over Bayer to become the nation’s second largest chemical company. A large new plastics plant at Antwerp made PVC, polyethylene, and caprolatum (a nylon intermediary) at an accelerated rate.

After the impressive growth of BASF during the 1960’s, the 1970’s started slowly. After much encouragement by the state of South Carolina in the U.S. to build a $200 million dye and plastics plant in an impoverished area near Hilton Head, the company’s plans were thwarted by an unlikely coalition of outside agitators, local residents, and Southern gentry who feared damage to the beautiful Carolina coastline. In 1971 large investments in fibers and plastics were lost due to overcapacity. Synthetic fibers, whose prices were low in relation to the petroleum used in their manufacture, continued to plague BASF throughout the decade.

Despite the problems with fibers, however, the company continued to grow. The growth plan favored by Bernard Timm, a research chemist who had directed BASF since 1954, featured vertical integration, expansion abroad, and emphasis on consumer products. Of the three successors to the IG Farben, BASF was the one left with the least attractive product line. In order to remedy this situation, BASF marketed its line of magnetic cassette tapes (a product it claims to have invented) and then ventured into video tapes. As for vertical integration, the company had ample access to raw materials and chose to modify existing raw materials rather than diversify into unfamiliar fields.

The expansion into foreign markets is, and has been, a cornerstone of BASF’s strategy for growth. There is little room to grow in Germany. In order to avoid U.S. tariffs BASF has formed numerous partnerships with American companies and has acquired others. Wyandotte was a major acquisition in 1969. The 1980’s began with the purchase of Fritzsche, Dodge and Ollcott, the third largest U.S. producer of flavors and fragrances, not to mention Cook Industrial Coatings and Allegheny Ludlums. This last acquisition puts BASF among the top 15 pigment manufacturers in the U.S. Although BASF’s foreign ventures are by no means limited to the U.S. (it does business in 33 countries), its emphasis on American expansion is understandable. The U.S. consumes 1/3 of the world’s chemical production. The company’s holdings in the U.S. also cushion BASF against fluctuations in the value of the deutschemark and the dollar. In general, a strong dollar works to BASF’s advantage, as U.S. chemical companies are eliminated from the international market.

Until recently, news coverage of BASF centered on its ventures into the U.S. market, but in 1986 labor problems received a large amount of publicity. The Oil, Chemical and Atomic Worker’s union decided to strike at a whollyowned subsidiary called BASF Corporation located in Geismar, Louisiana. Union allegations of unsafe working conditions have prompted the U.S. Congress to investigate conditions at the plant, but no conclusive evidence has yet surfaced. The union has announced a campaign of negative publicity directed against the company. The strike surprised the management at BASF which, with the exception of World War II, has generally treated workers well. Asked about the labor difficulties, a highly ranked BASF executive said, “We haven’t had a strike since 1924, except a work stoppage in 1947 to protest our president being tried for war crimes.”

Under the guidance of Matthias Seefelder, BASF seems well-positioned for the future. In the 1970’s the company had the foresight to move away from commodity chemicals and towards specialty chemicals. Its long range goals, including a broad international market and the establishment of a base in the U.S., are achieving success. The company has also invested 4 to 5% of sales (twice the U.S. average) on research and development in order to overcome a potential weakness, namely, the original heavy investment in the unprofitable chemicals that were its legacy from the IG Farben during World War II. Since its founding in 1861, BASF has been one of the world’s most important and successful chemical companies. This is unlikely to change in the foreseeable future.

Principal Subsidiaries

BASF Farben & Fasern AG, Hamburg; BASF Kraftwerk Mark GmbH, Marl; Dr. Beck & Co. AG, Hamburg; Burbach-Kaliwerke AG, Kassel (98.9%); Chemag AG, Frankfurt/Main; Chemische Fabrik Kalk GmbH, Cologne; Chemische Fabrik WIBARCO GmbH, Ibbenbueren; Chemische Werke Minden GmbH, Minden; CompaktaWerke Baustoff-GmbH, Traunreut; COMPO GmbH Produktions-ub Vertriebsgesellschaft, Muenster-Handorf; Deltaplast Kunststoff-Technik GmbH, Lemfoerde; Elastogran GmbH, Lemfoerde; Elastogran Kunststoff-Technik GmbH, Lemfoerde; Elastogran Maschinenbau GmbH, Lemfoerde; Elastogran Polyurethan-Systeme GmbH, Lemfoerde; Erdol-Raffinerie Mannheim GmbH, Mannheim; Gewerkschaft Auguste Victoria, Marl; Gewerkschaft Victor Chemische Werke, Castrop-Rauxel; Guano-Werke AG, Hamburg (98.5%); Kali und Salz AG, Kassel (71.7%); Knoll AG, Ludwigshafen; LUWOGE Wohnungsunternehmen GmbH, Ludwigshafen; M.R. Kunststofftechnik GmbH, Diepholz; Nordmark-Arzneimittel GmbH, Vetersen; Schiwa GmbH, Glandorf; Transpharm GmbH, Ludwigshafen; Vaerst (AG & Co.), Hamburg (87.5%); Wintershall AG, Celle/Kassel; Wintershall Mineralol GmbH, Duesseldorf; Wintershall Roholver-sorgungs-GmbH, Kassel; Ammonia Unie B.V., Utrecht (50%); BASF America Corporation, Parisppany, New Jersey; BASF Antwerpen N.V., Antwerp; BASF Argentina S.A., Buenos Aires; BASF Australia Ltd., Melbourne; BASF Brasileira S.A., Industrias Quimicas, Sao Paulo; BASF Canada Inc., Montreal; BASF de Mexico, S.A de C.V., Mexico, D.F.; BASF Espanola S.A., Barcelona; BASF Farben & Fasern Ges. m. b. H., Vienna; BASF Finance Europe N.V. Arnhem; BASF India Ltd., Bombay (50%); BASF Japan Ltd., Tokyo; BASF Nederland B.V., Arnhem; BASF Osterreich Ges. m. b. H., Vienna; BASF Quimica Colombiana S.A., Medellin; BASF Rohstoffhandelsgesellschaft mbH, Ludwigshafen; Elastogran Polyurethan-Elastomere GmbH, Lemfoerde; Haidkopf GmbH, Celle/Kassel; BASF Belgium S.A., Brussels; BASF Corporation, Parsippany, New Jersey; BASF Danmark Als. Copenhagen; BASF Inmont Canada Inc., Brampton, Ontario; Fishburn Printing Ink Co. Ltd., Watford; Inmont Italiana S.p.a., Milan; Inmont Ltd., Wednesfield; Inmont S.A., Clermont-de-l’Oise (99.7%); Mitsubishi Yuka Badische Co. Ltd., Yokkaichi (50%); Pigmenti Italia S.p.a., Cesano Maderno; Wintershall Nederland B.V., The Hague; BASF (Schweiz) AG, Waedenswil, Au; BASF Svenska AB. Goeteborg; BASF United Kingdom Ltd., Cheadle, Cheshire; BASF Venezolana S.A., Caracas; Compagnie Francaise BASF S.A., Levallois; Delfzee Dubai Petroleum N.V., The Hague; Glasurit-Beck Ltd., Slinfold; Glasurit do Brasil Ltda., Sao Bernardo do Campo; Glasurit S.A., Madrid (99.6%); Interknoll AG, Liestal; Knoll AG, Liestal; Knoll S.A., Rio de Janeiro; Laboratoires BIOSEDRA S.A., Malakoff; Nupharma AG, Liestal; Peintures & Encres BASF S.A., Le Bourget (95.1%); Produits et Engrais Chimiques du Rhin S.A., Ottmarsheim (50%); Rheinische Oelfinwerke GmbH, Wesseling (50%); Suma S.A., Gilen (Loiret); Yuka Badische Company Ltd., Yokkaichi (50%).

Unconsolidated Subsidiaries: Auguste Victoria-Grundstucke oHG, Marl; BADICHEM Chemiegesell-schaft GmbH, Ludwigshafen; BASF Beteiligungs-GmbH, Ludwigshafen; BASF Handels-und Export-Gesellschaft mbH, Ludwigshafen; BASF Terratec GmbH, Ludwigshafen; Chemische Dungerfabrik Rendsburg GmbH, Rendsburg; Deutscher Strassen-Dienst GmbH, Kassel; Erdol-Raffinerie Franken GmbH, Eggolsheim; Fritzsche Dodge & Olcott GmbH, Hamburg; Gewerkschaft Beienrode, Koenigslutter/Kassel (89.9%); Gewerkschaft des konsolidierten Steinkohlenbergwerks; Breitenback, Ludwigshafen; Gewerkschaft Rochling, Marl; Gewerkschaft Uchte, Uchte; Gewerkschaft Ummendorf, Kassel; Glasurit GmbH, Hamburg; Herbol GmbH, Cologne; Kali und Salz Consulting GmbH, Kassel; Kali-Bank GmbH, Kassel; Kali-Transport Gesellschaft mbH, Hamburg; Kali-Union Verwaltungsgesellschaft mbH, Kassel; Kohlen-Handelsgesellschaft Auguste Victoria oHG, Marl; Montangesellschaft mbH, Cologne; SAWIKO Salzvertriebsgesellschaft mbH, Kassel; Taberg Grundstucks-Gesellschaft mbH, Hamburg; Tensid-Chemie Vertriebsgesellschaft mbH, Dueren; Twyford Pharmaceuticals GmbH, Ludwigshafen; Untertage-Speicher-Gesellschaft mbH, Nordenham; Vitamultina Pharmazeutische Praparate GmbH, Hamburg; Winter-shall Beteiligungs-GmbH, Kassel; Wohnbau Salzdetfurth GmbH, Bad Salzdetfurth; Dr. Wolman GmbH, Sinzheim; BASF-Altershilfe GmbH, Ludwigshafen; Dr. Heinrich von Brunck Gedachtnis-Stiftung für Werksangehorige der BASF GmbH, Ludwigshafen (95%); Gewerkschaft Victor Chemische Werke; Unterstutzungskasse GmbH i.L. Castrop-Rauxel