Germany: The Big Mix

In 1945, when the Allies confiscated the vast German chemical cartel, the output of the industry’s once peerless plants was reduced to little more than chlorine. Since then, in a remarkable resurgence, the Germans have rebuilt their industry at home and their markets abroad to the point where they are now pre-eminent in Western Europe.

In 1967, a recession year for the German economy and for many of the world’s chemical makers, German chemical sales increased by 4.3% to $9.4 billion. This year, led by the top three—Bayer, Hoechst and BASF, which together account for more than half of the country’s production—German sales are moving faster than ever.

Bayer’s remain the biggest. Having increased by 7.2% last year, to $1.8 billion, sales of products from Bayer’s 65 modern plants on five continents are running 15% ahead in 1968. “Bayer grows because it has to grow,” says Chairman Kurt Hansen. “Germany has to be economically independent, or we’ll have no say in our future.”

Benevolent Bonn. Hansen’s missionary zeal is typical of the German chemical industry, which has always had to overcome the handicaps of a lack of cheap hydroelectric power and of crude-oil sources. In the early 1950s, when the old I. G. Farben cartel was split up into Bayer, Hoechst and BASF, the most important of the surviving companies had the problem of developing new products* and sales staffs to maintain their independence of one another. The German market was not big enough to support them all, so they began to compete for exports, which now account for 56% of total sales.

For all their strength, the German chemical companies remain thinly capitalized, must borrow heavily to cover vital research and expansion budgets. Bayer, Hoechst and BASF must each pay $30 million a year in interest costs. To compensate, the Bonn government has instituted generous tax write-offs that permit the companies to maintain their traditionally high dividends.

Germany, as well, earns a dividend from the industry. At Bayer, 62% of sales come from products developed over the past two decades. And its $58 million research budget has helped the company to rank at the top in polyurethanes used in adhesives and foams, polycarbonates used in tough, heat-resistant plastics and synthetic rubber. Such achievements mean that the German chemical companies, unlike many European industries, are a refreshingly long way from being caught on the wrong side of a technological gap.

* By no means the first such bitter pill for Bayer. After World War I, when its U.S. subsidiaries were seized as alien property, Manhattan’s Sterling Drug Inc. paid $5,000,000 at a public auction for part of the business, including the right to make and market best-selling Bayer aspirin.