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German Industry and Global Enterprise, BASF: The History of a Company.

German Industry and Global Enterprise. BASF: The History of a Company. By Werner Abelshauser, Wolfgang von Hippel, Jeffrey Allan Johnson, and Raymond G. Stokes (Cambridge: Cambridge University Press, 2004. ix plus 677 pp. $75.00).

BASF (Badische Anilin- & Soda-Fabrik) has long been one the largest chemical companies in the world. Along with Bayer, Hoechst, and Agfa, it formed the core of I. G. Farben, which controlled the German chemical industry between 1925 and 1945. This volume is a both an academic and a company history. BASF provided access to all its records up to 1975, but did not exercise any editorial control on the team of authors, all of them distinguished business historians. Each of the four authors covers one of the major phases in BASF's development. Von Hippel describes BASF from its founding in 1865 to its emergence in 1900 as the world's leading manufacturer of artificial dyes. Johnson covers the creation of cartels, the First World War, and the creation of I. G. Farben. Stokes traces the history of I. G. Farben and the re-emergence of an independent BASF in 1952. Abelshauser covers the history of BASF from its re-founding to the 2000. The result is an excellent institutional history of one of the world's most important firms.

A jeweler turned entrepeneur in the gas lighting industry, Friedrich Engel-horn, founded BASF in 1865 as a joint-stock company. Although the legal seat of the firm was Mannheim, Ludwigshafen was, and remained, the site of the firm's plants. BASF succeeded by commercializing the results of the chemical revolution led by scientists such as Liebig and Perkin who created artificial dyes out of materials such as coal-tar rather than plants and roots.

BASF leaped ahead of its competitors for several reasons. Through sales of stock and internal reinvestment, BASF mobilized more capital than other companies and expanded aggressively. It avoided becoming dependent on banks by holding down dividends on shares to as low as 5 percent and pouring profits into expansion and research. BASF pioneered scientific industrial research. Already in 1867, Engelhorn hired Heinrich Caro, who was both a brilliant chemist and a excellent builder of ties to the rest of the scientific community. Under the leadership particularly of Heinrich von Brunck, BASF poured millions of marks into synthesizing indigo. A strategic set of cartels, mergers, and sales and research conventions modulated competition. Already in 1904, BASF formed a Dreibund, three member league, to coordinate sales with Bayer and Agfa. BASF thus concentrated on investments for long-term growth and research and development. It was the first user of electricity in Germany and created the first telephone connection in Bavaria in 1882. By 1876, BASF's workforce grew to 1,140. By 1900, it was 6,360, and by 1913, 9,200, making it perhaps the largest chemical company in the world, producing 24 percent of the world's coal-tar dyes (96).

BASF achieved its success in spite of having few controls on purchasing and maintaining weak internal accounting methods (89) The informality of its internal structure until the 1970s belies the stereotype of the bureaucratic big business corporation. Intense loyalty from directors and upper management, who made more money from fees and profit-sharing than from salaries, helped keep the firm successful. A collective leadership of the Vorstand, or Directorate, still allowed strong personalities to have influence. Carl Bosch, who joined BASF in 1899, won the Nobel Prize in Chemistry in 1931, and chaired the Aufsichtsrat, or Supervisory Board of Directors, from 1919 to 1925, is the prime example.

Success also depended on holding down labor costs: workers were paid only slightly above the average industrial wage for hard, often dangerous work. Gradually, the firm adopted social welfare measures to stem the huge employee turnover: in 1897-99, for every 100 workers, there were 74 new hires and 65 workers who quit (107). Strikes in 1906 and 1911 led to small wage increases, but management refused to negotiate with labor unions, used strikebreakers, and formed a "yellow" company union (147-49). Environmental concerns played little role until the 1960s. For decades, plants poured "acidic chlorine-manganese solution into the Rhine" (77).

BASF played a fundamental role in World War I. With Germany deprived of prewar nitrate sources for explosives, Bosch promised in September, 1914, to produce sodium nitrate for the military in six months' time. BASF's success saved Germany's war efforts. BASF also produced both chlorine and phosgene poison gas. Despite being bombed by French aircraft, BASF prospered. By 1918, it employed 22,000 workers, including POWs, Belgian forced laborers, and, for the first time, significant numbers of women. (174) Remarkably, despite reparation payments, strikes, inflation, a Communist uprising, and an accidental explosion which killed 550 people, the firm survived the postwar chaos. Manufacturing fertilizers, which had made nitrate production for the war effort possible, allowed the firm to survive the stagnation in the sales of dyes. Nitrates and ammonia made up 59 percent of sales in 1919.

The loss of overseas markets in the War led Bosch in 1925 to form I. G. Farben. Within I. G. Farben, Stokes argues, BASF did less well than Bayer and Hoechst initially because BASF had such an emphasis on research and innovation. The Depression hit the firm hard since its specialities meant little when investment in the future appeared futile. On the other hand, with rearmament and the Second World War, the BASF components grew more quickly than their former competitors (211) I. G. Farben, typically for major businesses, did little to support or oppose the Nazis, but easily accommodated itself to Nazi power. The old BASF components of I. G. Farben became heavily involved in expanding synthetic fuel production, producing synthetic rubber and plastics, and producing for the war effort rather than export. BASF, as part of I. G. Farben, operated a plant in Auschwitz supervised by the SS, produced Zyklon B to gas Jews and other victims of the Nazis, and employed forced foreign labor. It is no coincidence that executives from the former BASF was over-represented in the postwar trial of I. G. Farben in 1947, and that five of the seven defendants given heavy sentences were associated with former BASF operations (340)

The underlying strengths of BASF reasserted themselves when the company was reestablished by the Allies in 1952 after the break-up of I. G. Farben. Partly because of pressure from France, in whose occupation zone Ludwigshafen lay, banks were for the first time heavily represented on the supervisory board; in 1953, workers' representatives entered the board due to West German law (366). By the 1960s, retained profits, high quality and a broad product line rather than mass production, and an aggressive emphasis on research and innovation again brought the firm to leadership among the world's chemical companies. Even larger investments were made in workers' housing, welfare benefits, bonuses, and employee stock ownership, without, however, avoiding strikes and labor union opposition. Like Bosch in the 1920s, Bernhard Timm in the 1960s and 70s shaped the company as the most influential member of a small, tightly-knit group. Only stockholders' motions, lawsuits, and the pressure to conform to foreign stock exchanges' regulations forced BASF by the 1960s to publish relatively open financial statements (405-09).

Innovations included building plants for other firms. By the 1960s, engineering, which built plants and equipment for other companies, was the largest single division of the company (435). Just as fertilizers had displaced dyes in the interwar era, now plastics grew in importance. Natural gas distribution became the only other profitable new area. By 2000, BASF sold more products within North America than in Germany, with the latter accounting for only 20 percent of the firm's sales. As Abelshauser recounts, BASF continually failed in lines outside of chemicals--tape recorders, videocassetes, pharmaceuticals, and nuclear power. It succeeded only by re-focusing during the 1990s on its core business: chemicals, the construction of chemical plants, and chemical-based products such as plastics and fertilizers.

Well-written and researched, this volume has excellent indices of archives, corporations, persons, products and processes, and subjects, as well as a full bibliography. This is a major contribution to business history and the history of modern Europe.

Carl Strikwerda

The College of William and Mary
COPYRIGHT 2006 Journal of Social History
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Author:Strikwerda, Carl
Publication:Journal of Social History
Article Type:Book review
Date:Jun 22, 2006
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