Atochem S.A.

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Atochem S.A.

La Defense
10 Cedex 42
92091 Paris
France
(1)49 49 00 80 80

Wholly-owned subsidiary of Société Nationale Elf
Aquitaine
Incorporated: 1983
Employees: 11,800
Sales: FFr 19.98 billion (US$ 2.646 billion)

Atochem was created in 1983 as part of a government-sponsored program to “rationalize” the French chemical industry, which during the previous decade had lost its ability to compete effectively with foreign companies in both domestic and international markets. The rationalization program created three large chemical product producers, CdF Chimie, Rhône-Poulenc and Atochem. Each company’s product line was restructured to reduce competition in the domestic market so that they could better compete with foreign companies in the international market.

The merger, from which Atochem was created, combined three chemical companies, Ato Chimie, Chloé Chimie and Produits Chimiques Ugine Kuhlmann (PCUK). The largest of these companies was Ato, which was formed in 1971 as a joint subsidiary of Aquitaine and Total. Chloé was created in 1980 as a second joint subsidiary which specialized in the production of chlorine and ethylene. PCUK was an independent company specializing in chlorine and fluorine.

Aquitaine, which merged with Elf-Erap in 1976, and Total continued to operate Ato and Chloé until 1982, when the government’s rationalization program was announced in May. At that time Total announced its intention to sell the 50% interest it held in both companies for $406 million. Later that year Elf Aquitaine agreed to take over ownership and responsibility for a new company formed from Ato, Chloé and PCUK.

As part of a restructuring program in 1983 Atochem sold its ethylene oxide operations at Choques to Imperial Chemical Industries of Britain in exchange for ICI’s polyethylene plant at Rozenburg. Other changes were made which further narrowed the scope of Atochem’s operations to three product lines. In basic chemicals, Atochem’s “steam crackers” at Feyzin and Gonfreville produced raw materials for chemicals and plastics, including ethylene, propylene, benzene and styrene. In the area of plastics, Atochem manufactured a variety of technical and fluorinated polymers (finished plastics made from basic chemicals). Atochem was also a world leader in specialty chemicals such as hydrazine (a fuel), thio-chemicals (sulfer derivatives), and chlorofluorinated products.

Elf Aquitaine’s chemicals director René Sautier was placed in charge of Atochem. He expressed confidence that Atochem could be made profitable by 1986, but only if the government would ease price controls. At the time chemical product prices were about 20% lower than in other European Community countries. By October several of Atochem’s secondary plants were either sold, exhanged, or closed.

At the end of 1983 Atochem reported a $188 million loss. During the next year, however, the company’s sales of speciality chemicals increased sharply. Stronger demand for Atochem’s ethylene products kept its factories operating at nearly full capacity. By the end of 1984 sales increased by 14% to $2 billion. The company’s profit, however, was only about $5 million.

In November the executive commission of the European Economic Community charged five European chemical companies with conspiracy to fix prices and supplies of chemical products between 1961 and 1980. The commission fined Atochem, Solvay, L’Air Liquide, Degussa and Laporte a total of $6.7 million.

Atochem reported a $3 million profit in 1985 on sales of $3 billion. During the year, however, the company increased its investment in itself by 20% to about $148 million. With the restructuring almost completed, Atochem’s production of ethylene and vinyl chloride was reduced by 30%. In addition, Atochem’s plants at Feyzin, Lavéra and Jarrie were closed. When the ICI plant at Choques closed, production was transferred to Atochem’s facilities at Mont and Balan. Atochem also continued to be adversely affected by the high cost of electricity being supplied by Electricité de France, an issue which Atochem protested strongly.

BP Chimie, the French chemical subsidiary of British Petroleum, combined its polypropylene (PP) production with Atochem’s. In the summer of 1986 the two companies merged their PP operations. According to Atochem’s president Jacques Puéchal, “In petrochemicals, the zone of action is Western Europe.” Individually the two companies lacked sufficient capacity to compete effectively in the Western European PP market. A second Atochem-BP joint venture called Appryl was established to produce resins at a lower cost.

The determination to break into foreign markets is very strong at Atochem. Jacques Puéchal told Chemical Week, “In 1983 there was a piercing realization that [French] companies lacked international penetration.” The company has since established additional joint ventures to produce hydrogen peroxide with L’Air Liquide in Quebec and Dainippon Ink and Chemicals in Japan.

Early in 1985 Elf Aquitaine redistributed its chemical operations around two “poles.” Non-organic chemical materials were assigned to Atochem, while organic materials, or biotechnology, was turned over to Elf Aquitaine’s other chemical subsidiary, Sanofi.

In March of 1986 a conservative government was elected to serve the last two years of socialist President Mitterand’s 7-year presidential term. The government announced that it would be drastically reducing its share of ownership in state-controlled companies, including Rhône-Poulenc and Atochem’s parent company Elf Aquitaine. During this period, however, the declining value of the American dollar made French products less competitive in international markets. For the time being, at least, Atochem’s value will be depressed as long as the franc remains strong against the dollar.