John K. Smith, in: ENTERPRISE & SOCIETY (2004) Volume 5, Number 4, p. 710-12
Werner Abelshauser, Wolfgang von Hippel, Jeffrey Allan Johnson, and Raymond G. Stokes. German Industry and Global Enterprise, BASF: The History of a Company. New York: Cambridge University Press, 2004. ix +677 pp. ISBN 0-521-82726-4, $75.00 (cloth).
The BASF Company has a long and complex history that includes, among other things, three wars and two occupations. This comprehensive history of the company, much of it constructed from archival material, explores in detail a nearly one hundred and forty-year long story. The book is divided chronologically into four parts, each written by a separate author. The prose in the first and last sections, originally written in German, is not nearly as smooth as that in the other two sections. The history focuses an most aspects of business history: finance, labor, technology, markets, management, and environmental concerns. Much of BASF's story has been told before-the book has an extensive bibliography. This study's major contribution is in the fourth section covering the period from 1952 to the present. Although the book's authors do not attempt to put the BASF story into the larger context of the evolution of the chemical industry, the company's trajectory through years of great prosperity in the 1950s and 1960s and then afterward into decades of slowing growth and increasing competition provides an interesting comparison to the plight of other firms, many of which no longer exist.
The company got its start in 1865 making an aniline-based red dye. During the next several decades the company expanded its synthetic dyestuffs product line. The dye business yielded profits of over twenty percent an sales and provided sufficient cash fiow for additional investment. At the end of the nineteenth century, BASF introduced synthetic indigo after two decades of intensive work. The company also integrated backward into basic chemicals, including the development of a new catalytic process for making sulfuric acid. The emphasis an basic chemicals led BASF to develop Fritz Haber's process for making ammonia. Commercialized in 1913, this process allowed Germany to produce enough explosives and fertilizer to sustain its war effort for four years. In the postwar era, BASF provided the leadership and direction for the giant IG Farben, formed in 1925 with Bayer and Hoechst. At the time of the merger, BASF's synthetic ammonia business was nearly twice as large as the older dyestuffs line. The progenitor of the ammonia business, Carl Bosch, became the head of the IG and invested heavily in related technologies to make methanol and synthetic gasoline. This latter project led the company into trouble when new oil discoveries and the Great Depression sent gasoline prices plummeting. This situation forced Bosch to make deals with the new Nazi goverrunent to salvage the synthetic gasoline business and to underwrite new investment in synthetic rubber and other polymers. During the war period, as the German economy became increasingly controlled by the government, the IG narrowed its focus to technical concerns. One particular project, however, dragged IG into the Nazi moral abyss-a new integrated plant to be built in the east, far from Allied bombers. Labor shortages led IG to use laborers from the nearby Auschwitz death camp. IG soon built its own facility adjacent to the plant site. It is estimated that 20 to 25 thousand people died in this camp. By the summer of 1944, Allied bombers began systematically to target the BASF plants, causing production to plummet. After the war, the Allies reconfigured IG Farben into new firms roughly corresponding to the old BASF, Bayer, and Hoechst.
BASF benefited from the rapid expansion of the chemical industry in Western Europe and the United States. Polymers in the form of plastics and fibers were the main engines of growth and BASF had a solid background in plastics dating back to the 1930s. To make them from petroleum instead of coal, the company built a petrochemical complex. BASF saw its sales increase fourfold in the First decade after its restructuring.
However, by the early 1960s BASF management was becoming concerned about maintaining such a high rate of growth. Also annoying were the increasingly unfavorable comparisons to its two siblings, Bayer and Hoechst, both of which had major investments in synthetic fibers and pharmaceuticals, the most glamorous sectors of the industry. In the early 1960s BASF launched numerous initiatives to maintain its rates of growth and profitability. One was the verbund concept of having large integrated plant complexes that made thousands of products from a small number of raw materials. With this system, BASF could be the low cost producer of most petrochemicals. It was also flexible; production could easily be shifted from one product to another. BASF could be both a commodity and specialty chemical company. The other major initiatives were attempting to gain a larger share of the huge American market and diversifying into new products. The American venture took over a decade to become profitable, but eventually became an important part of BASF. The company's belated attempts to diversify into synthetic fibers and pharmaceuticals both failed after considerable time and money went into each venture. Another unsuccessful diversification was an attempt to move from magnetic tape, a BASF innovation, into consumer electronics, a market BASF management knew nothing about. When its program of diversification by forward integration failed, BASF rededicated itself to the verbund. Following this strategy, it is today the world's largest chemical company, although its most profitable business is oil and gas.
There is a central thesis that emerges in the narrative: BASF has been, throughout its history, a technology-centered company that focused an efficient production and quality products. Generally, the firm shied away from getting too close to ultimate consumers; it preferred to produce goods for industrial customers-whether dyestuffs for textile manufacturers or polymers to be processed into plastics and fibers. Overall, the company's seif-image as one run by no-nonsense technocrats served BASF well in the turmoil that enveloped Germany throughout most of the twentieth century.
John K. Smith, Lehigh University