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Air Products and Chemicals, Inc.

Air Products and Chemicals, Inc.

7201 Hamilton Boulevard
Allentown, Pennsylvania 18195-1501
U.S.A.

Telephone: (610) 481-4911
Fax: (610) 481-5900
Web site: http://www.airproducts.com

Public Company
Incorporated:
1940 as Industrial Gas Equipment Co.
Employees: 19,900
Sales: $7.41 billion (2004)
Stock Exchanges: New York
Ticker Symbol: APD
NAIC: 325110 Petrochemical Manufacturing; 325120 Industrial Gas Manufacturing; 325211 Plastics Material and Resin Manufacturing

Air Products and Chemicals, Inc., is a leading global producer of industrial, specialty, and medical gases such as oxygen, nitrogen, argon, and hydrogen. Since the late 1990s Air Products has been focused on opportunities in the electronics, energy, and healthcare industries. Another growth platform was the commercialization of nanomaterials. The company also was building filling stations for hydrogen powered vehicles. Air Products has a reputation for both fiscal security and the safety of its workers. Formed around the concept of onsite industrial gases production, the development and growth of Air Products has been characterized by innovation. As former company president Dexter F. Baker noted in Research Management magazine in 1986, the company found success through the employment of four fundamental criteria: "Finding a market that is not being well-satisfied, creating a superior technical solution, commercializing the solution, and acting as an investor in one's own new creative solution."

Depression Era Origins

Air Products founder Leonard Parker Pool began his career as a teenager selling oxygen to industrial customers, and, by the age of 30, he was district manager for Compressed Industrial Gases. In 1938, when Pool began his work, the oxygen market was dominated by large companies such as Linde AG and the Air Reduction Company, which avoided price wars and did not intrude in each other's sales territory. Oxygen was inexpensive to distill, and the raw material from which it is distilled, air, is free, so the chief costs involved shipping oxygen in heavy containers. Pool's idea was to distill oxygen in the customer's plant; however, the cost of this plan would have been prohibitive unless a cheap oxygen generator could be designed.

Pool, the son of a boiler-maker, had only a high school education, so, to design the generator he needed, he hired a young engineer by the name of Frank Pavlis to work with him. Their design was revolutionary because it used a compressor lubricated with liquid oxygen and graphite. At that time, competitor compressors were lubricated with water due to the fear that the compressed oxygen, in contact with a lubricating oil, would ignite when exposed to the smallest spark. When oxygen was compressed using water, several steps were required to then remove the water from the oxygen. The new generator, however, could skip these steps and, as a result, it was less expensive to build, install, and maintain.

By 1940, Pool and Pavlis had a functioning generator. Pool quit his job, sold his insurance policy, and borrowed all the money that his wifea schoolteacherhad saved. With this capital, he founded Air Products Inc. and opened shop in a former mortuary. In these last years of the Great Depression, the American business climate was dismal, and Pool had a great deal of difficulty selling his generators.

With the onset of World War II, Air Products began to thrive, manufacturing mobile oxygen generators for the armed services and heavy industry. When the war ended, Air Products lost many of its clients and was forced to aggressively pursue new accounts. Although Air Products could provide oxygen at a cost 25 percent lower than its competitors, customers were slow to take advantage of the new system, which was offered through five- to ten-year leasing agreements, under which Air Products would maintain the generator and teach employees how to operate it. While customers found the idea appealing, many were locked into long-term contracts with a company that shipped oxygen to their plants.

In desperation, Pool traveled to Pittsburgh and used a sales technique called "door-stepping" to win a major contract with Weirton Steel. This sales technique involved staying at the customer's plant until the contract was signed. Pool said years later, "God, we just lived at Weirton Steel when we learned they were interested in our proposition." Indeed, Weirton was practically Air Product's only customer at that time.

In need of funds to construct a new plant, Air Products sent out a prospectus to potential investors. Pool acknowledged the company's inexperience, stating that Air Products "has no background in prewar civil business," and that in competing "by a new method of distribution in a well-established field against experienced competitors who have much greater resources" Air Products expected "to operate at a loss following the completion of its government contracts." The company's boldness and candor apparently impressed investors, and the necessary $300,000 was raised. Soon, Air Products had installed generators at several chemical companies and had built a huge generator for Weirton Steel, a generator 100 times larger than any that had been built before.

Pool attributed a large part of his company's success to his "tiger pack," a group of aggressive young engineers serving as sales staff at Air Products. Pool maintained a close watch over operations, and, although he became known for his sense of humor and his commitment to his employees, he was also capable of dealing out a tongue-lashing to anyone who misled a customer or lost a sale.

Space Age Spurring New Interest

In the late 1950s, Air Products profited from the launching of the first Soviet Sputnik, which American scientists surmised was powered by liquid hydrogen. When the U.S. defense department wanted liquid hydrogen, Air Products was asked to supply it. As a security precaution, new Air Products Company plants were provided with code names such as "Baby-Bear" and "Project Rover"; one large plant was disguised as the "Apix Fertilizer Company."

In addition to the production of liquid hydrogen, Air Products also branched out into new areas of chemistry, like fluorine chemistry and cryogenics (the science of ultra-low temperatures). The company's oxygen business also continued to grow. The company no longer leased generators but built multimillion dollar operations near major customers, including Ford Motor Co. and U.S. Steel, selling any excess capacity to smaller customers.

Throughout the 1960s, Air Products thrived; sales rose 400 percent, while earnings rose 500 percent. The expansion into merchant gas (gas sold in tanks) proved profitable for the company, although Air Products was a latecomer to the field. Air Products used its late entrance into the field to its advantage by conceding the saturated markets to its well established rivals, Linde and Air Reduction Company, seeking out smaller, more receptive markets instead. In fact, as Air Products saw its fortunes growing, competitors like Linde experienced decreased profits.

During this time, oxygen-fired furnaces became a popular alternative to the hearth-style furnaces used in the steel-making industry, increasing oxygen consumption considerably. Nitrogen, another Air Products specialty, was also in demand as a refrigerant. Air Products also began selling the implements necessary to handling gases, such as welding tools, anesthesia equipment, and cryogenic systems. Gases and gas-related equipment accounted for approximately three-fourths of Air Product's profits during the 1960s; the remainder came from chemicals and engineering services.

The diversification of Air Products into chemicals began in 1962 with the company's purchase of Houdry Chemicals and, later, Air Company, a specialty chemical company. When the Air Company was purchased by Air Products, it was losing money. To achieve a turnaround, Air Products took Air Company's acetylic chemicals and made them into specialty chemicals that fetched a higher price; the plant became profitable almost immediately. In 1969, Air Products purchased Escambia Chemicals, paying a cash price well below its market value. Escambia's attraction lay in a product called DABCO, regarded as the best catalyst for making urethane foam.

Weathering the 1970s and 1980s

Due to the energy crisis and a recession, the 1970s was a difficult period for many chemical companies. Although Air Products could not sustain the phenomenal growth it experienced in the 1960s, its annual sales and profits increased at least 9 percent and sometimes as high as 20 percent. During this time, the company held a strong position in industrial gases both in the United States and abroad, as its gases were used by virtually every major industry. The chemical division performed erratically, however, and, during the recession, its engineering services division, which designed pipelines and plants, yielded disappointing results. Nevertheless, Air Products' industrial gases kept the company afloat.

Company Perspectives:

Air Products touches the lives of consumers around the globe in positive ways every day. We serve customers in healthcare, technology, energy, and industrial markets worldwide with a unique portfolio of products, services and solutions, providing atmospheric gases, process and specialty gases, performance materials and chemical intermediates. The company has built leading positions in key growth markets, such as semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives.

The energy crisis had both positive and negative effects on Air Products. The industrial gases division, which consumed a large amount of electricity, was sensitive to rising utility rates. As the price of organic fuels rose, however, oxygen became a more popular fuel. The increased production costs of petro-chemicals and plastics were offset by higher demand for cryogenic equipment and gases to liquify natural gas. Like many other successful chemical companies, Air Products was thus able to benefit from the high energy prices in some cases.

During this time, the OPEC oil embargo convinced company management to invest in synthetic fuels. In 1980, Air Products, Wheelbraton Fry Inc., the state of Kentucky, and the U.S. Department of Energy formed a joint venture to produce a high-energy, low-pollution fuel from coal. Air Products invested $45 million in the project, while the bulk of the money, $748 million, came from the federal government. As none of the various synthetic fuel projects were successful, Air Products' only consolation was the high levels of oxygen consumed in the unsuccessful venture. Still, Air Products remained interested in energy development. In 1985, the company bought a methane recovery plant and accelerated development of a plant that converted garbage to steam and electricity.

A 12-year, $281 million contract to supply liquid hydrogen for the space shuttle bolstered earnings, as did the discovery of expanded uses for industrial gases. For instance, the food industry increased its use of hydrogen for hydrogenating vegetable oils, and flash-freezing, a process that required nitrogen, became an increasingly more popular technique.

In the 1970s and the early 1980s, Air Products, like other highly successful chemical companies of the same size, became concerned with having a product that could be used by a myriad of industries, in order to avoid overdependence on staple products linked to cyclical industries. Toward this end, Air Products focused on marketing oxygen and industrial gases to a wide variety of clients, so that dramatic downturns in an industrysuch as steel manufacturingwould not be fatal to the company.

Also during this time, Air Products established a reputation for hiring highly competent, professional engineers, chemists, and business staff. Rather than assuming responsibility for such hirings, company president Edward Donley delegated the job to the vice-presidents and line managers, whom, according to Donley, were better judges of an applicant's potential than professional recruiters. The applicants hired by Air Products sometimes spent up to three years working in different departments of their choice, in order to decide where their skills would be best employed. Air Products also believed the exposure of engineers and chemists to management positions would prove vital to future success.

Air Products also demonstrated a commitment to the health and safety of its workers. In the 1970s, when three employees died from PVC-induced cancer, Air Products periodically tested 492 other workers at two plants for possible exposure, and steps were taken to minimize health risks. In the late 1980s and early 1990s, the company developed "Responsible Care" objectives to promote safety, environmentalism, and health at its facilities. At the same time, however, the company initiated a legal challenge to industry regulations, claiming that many were unfeasible to implement.

New Environment-Energy Business for the 1990s

In 1986, Air Products embarked on a ten-year strategic plan that added a third core business, environment-energy, and focused on globalization of the firm. Between 1986 and 1993, the company invested $1 billion in European facilities as part of its strategy to replace older, less efficient plants, add new production capacity, and create new products. Significant investments in Asia resulted in the construction of seven industrial gas plants by 1992. The company also gained access to significant markets by buying mid-sized competitors and entering into joint ventures.

By 1990, investments of $1.2 billion in the environmental-energy systems segment had expanded that division to include: a refuse-fired cogeneration facility; the American REF-FUEL joint venture with Browning-Ferris for building waste-to-energy facilities; a joint venture with Mitsubishi Heavy Industries to market flue gas desulfurization systems; and a methane gas reclamation business for landfills. Air Products' tire recycling program, which was undertaken in 1988, came to fruition in the early 1990s, as the rubber recovered from scrap tires promised to reduce the environmental and health hazards presented by scrap tires and offered cost savings for the production of rubberized asphalt, shoe soles, carpet underlay, and other products. Although Air Products faced well-established competition in the environmental arena, the rapid expansion of that market promised significant returns.

During this time, Air Products' earnings per share increased about 20 percent per year, double the rate of Standard & Poor's industrial index. In 1992, Harold A. Wagner, who had been a key proponent of the strategic plan, replaced Dexter Baker as chairperson and chief executive officer, and Air Products launched a two-year program to consolidate and restructure its $1.1 billion chemical business. The reorganization streamlined the chemicals segment from four to three divisions, realigned its management, and reduced its workforce by 7 to 10 percent, or 1,000 to 1,400 jobs. In 1993, Air Products achieved record cash flows, sold record volumes of industrial gases and chemicals, and ranked as the third largest supplier of industrial gases in the world. The company planned to continue expanding its global investment programs throughout the 1990s.

Key Dates:

1940:
Leonard Parker Pool forms Air Products.
1957:
Soviet Union's Sputnik launch spurs U.S. interest in Air Products' compressed hydrogen.
1962:
The company diversifies via acquisitions of Houdry Chemical and the Air Company.
1980:
Air Products joins a synthetic fuel venture.
1985:
A methane recovery plant is acquired.
1996:
The company divests most of its environmental-energy businesses.
2000:
The APD/Air Liquide $11 billion takeover of British Oxygen is scuttled on antitrust grounds.
2002:
American Homecare Supply is acquired.
2003:
Air Products acquires the $200 million electronic chemicals business of Ashland Specialty Chemicals.

Refocusing in the Mid-1990s

The second half of the 1990s was a period of intense consolidation in the industrial gases industry. To survive as a public company, Air Products had to keep meeting Wall Street's expectations. Air Products sold its share of the American Ref-Fuel business in 1996 for $400 million. The company was focusing on areas where it was a leader or expected significant growth, while maintaining a commitment to its energy and environmental segment. Industrial gases, however, which with sales of $2.5 billion accounted for 60 percent of total revenues, remained its core business, CEO Harold A. Wagner told Chemical Week.

Air Products acquired an intermediates business from Britain's Imperial Chemical Industries in 1997. This was soon supplemented with the purchase of Solkatronic Chemicals and the addition of a methylamines plant in Florida.

Air Products was aiming to grow its business in international markets. Its overseas gases business was built on enduring joint ventures and preferred to deal in higher-value gases such as those used in the electronics industry, which landed a number of key contracts abroad in the mid-1990s. The Asian industrial gas business was up 35 percent in one year, according to Chemical Week, and Air Products was preparing to enter the Indian market. Air Products had invested more than $1 billion in Europe since the mid-1980s and was establishing facilities in former Soviet satellites.

An $11 billion deal to acquire British Oxygen in cooperation with Air Liquide was scuttled by the Federal Trade Commission in 2000. According to Chemical Market Reporter, this failed takeover helped put a damper on consolidation activity across the entire industry. The industrial gases industry was considered highly consolidated, with five producers controlling two-thirds of the market, according to one consultant. Air Products was then reckoned to be the fourth largest global player, with a 9 percent share.

As noted in Forbes, around this time the company's CEO, John P. Jones, steered Air Products' research and development toward the fast-growing areas of energy, electronics, and healthcare, which together accounted for 30 percent of the company's total revenues of $5 billion in 1999. Within five years, these areas would provide half of all revenues.

The company divested slower growing businesses. Air Products exited a large but highly fragmented market in early 2002 when it sold most of its U.S. cylinder gas business to Airgas of Radnor, Pennsylvania for $236 million.

Acquisitions in Europe and America grew the home health-care business rapidly. In 2002, Air Products acquired the home respiratory business of German rival Messer Griesheim. American Homecare Supply (AHS) was acquired in October 2002. AHS, later renamed Air Products Healthcare, was a leading private supplier of home medical equipment. With this entry into the U.S. market, Air Products was supplying homecare services to more than 275,000 patients from more than 200 sites in 14 countries. It would soon buy several smaller healthcare businesses in the United States.

Air Products was able to complete the acquisition of the $200 million electronic chemicals business of Ashland Specialty Chemicals in August 2003. The deal went through despite a legal challenge by Honeywell.

Air Products and its rivals in the industrial gases industry weathered the recession better than their counterparts devoted to the chemicals business, noted Chemical Week. Air Products had a reputation as a strong performer during economic downturns. Most of its contracts were long-term and included provisions for passing on energy costs, noted Chemical Market Reporter.

Air Products fared even better as the recession began to ease. After three years of sliding profits, net income rose 18 percent to $604 million on sales of $7.4 billion for the fiscal year ended September 30, 2004. More good results were expected in the future as the lackluster economy improved.

Air Products was conducting considerable research on performance materials, another growth platform. It was in joint ventures with Nanotechnologies Inc. of Texas and Europe's Nanogate to develop materials with new properties. Air Products was at the forefront of applying other new technologies. By 2005, it had 30 filling stations for hydrogen-fueled vehicles up and running.

Principal Subsidiaries

Air Products Asia, Inc. (U.S.A.); Air Products Europe, Inc. (U.S.A.); Air Products Japan, Inc. (Japan).

Principal Divisions

Chemical Intermediates; Performance Materials.

Principal Operating Units

Chemicals; Gases and Equipment.

Principal Competitors

Air Liquide Group; Linde AG; Praxair, Inc.

Further Reading

Butrica, Andrew J., Out of Thin Air: A History of Air Products and Chemicals, Inc., 19401990, New York: Praeger, 1990.

Freedman, William, "Air Products' Second Wind: Setting the Trim for New Growth," Chemical Week, April 24, 1996, pp. 20ff.

Hunter, David, and Natasha Alperowicz, "Industrial Gases: Riding High, Despite Recession," Chemical Week, February 20, 2002, pp. 21ff.

Milmo, Sean, "BOC Gases Deal Collapses and Shakes Industry," Chemical Market Reporter, May 22, 2000, p. 8.

Nelson, Brett, "Suddenly Sexy," Forbes, February 14, 2005, p. 122.

Storck, William J., "Air Products on Course in Ambitious Strategic Plan," Chemical & Engineering News, October 5, 1992, pp. 4446.

Swaim, Will, "Air to the Throne," World Trade, February 1993, pp. 6668.

Teresko, John, "From Confusion to Action," Industry Week, September 2005, pp. 5662.

Tilton, Helga, "In Tough Times, Air Products Plays the Stability Card," Chemical Market Reporter, June 16, 2003, p. 18.

updates: April Dougal Gasbarre; Frederick C. Ingram

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Air Products and Chemicals, Inc.

Air Products and Chemicals, Inc.

7201 Hamilton Boulevard
P.O. Box 538
Allentown, Pennsylvania 18105-1501
U.S.A.
(610) 481-4911
Fax: (610) 481-6642

Public Company
Incorporated: 1940 as Industrial Gas Equipment Co.
Employees: 14,075
Sales: $3.33 billion
Stock Exchanges: New York Pacific
SICs: 2813 Industrial Gases; 2821 Plastics Materials and Resins; 2865 Cyclic Crudes and Intermediates; 2869 Industrial Organic Chemicals, Nee.; 2891 Adhesives and Sealants; 3443 Fabricated Plate Work (Boiler Shops)

Air Products and Chemicals, Inc. is the worlds third largest producer of industrial, specialty, and medical gases such as oxygen, nitrogen, argon, and hydrogen. Industrial gases contribute over half of the companys sales and nearly three-fourths of its profits. The companys chemicals and intermediates segment, which comprises about one-third of sales, claims U.S. leadership in polyurethanes, polymers, performance, and industrial segments. Air Products is also a fully-integrated supplier of industrial and specialty gases, equipment, and technical services to the electronics industry; the company dominated this market, with over one-fourth of the electronics industrys sales in the early 1990s. In the late 1980s and early 1990s, Air Products diversified into environmental energy systems, including waste-to-energy projects, tire recycling, and flue-gas desulfurization. Geographic expansion into Europe and the Pacific Rim has also opened new opportunities to the firm. The creation, development, and growth of Air Products has been characterized by innovation. As former company president Dexter F. Baker noted in Research Management magazine in 1986, the company found success through the employment of four fundamental criteria: finding a market that is not being well-satisfied, creating a superior technical solution, commercializing the solution, and acting as an investor in ones own new creative solution.

Air Products founder Leonard Parker Pool began his career as a teenager selling oxygen to industrial customers, and, by the age of 30, he was district manager for Compressed Industrial Gases. In 1938, when Pool began his work, the oxygen market was dominated by such large companies as Linde A.G. and the Air Reduction Company, which avoided price wars and did not intrude in each others sales territory. Oxygen was inexpensive to distill, and the raw material from which it is distilled, air, is free, so the chief costs involved shipping oxygen in heavy containers. Pools idea was to distill oxygen in the customers plant; however, the cost of this plan would have been prohibitive unless a cheap oxygen generator could be designed.

Pool, the son of a boiler-maker, had only a high school education, so, to design the generator he needed, he hired a young engineer by the name of Frank Pavlis to work with him. Pools and Pavliss design was revolutionary because it used a compressor lubricated with liquid oxygen and graphite. At that time, competitor compressors were lubricated with water due to the fear that the compressed oxygen, in contact with a lubricating oil, would ignite when exposed to the smallest spark. When oxygen was compressed using water, several steps were required to then remove the water from the oxygen. The new generator, however, could skip these steps and, as a result, it was less expensive to build, install, and maintain.

By 1940, Pool and Pavlis had a functioning generator. Pool quit his job, sold his insurance policy, and borrowed all the money that his wifea schoolteacherhad saved. With this capital, he founded Air Products Inc. and opened shop in a former mortuary. In these last years of the Great Depression, the American business climate was dismal, and Pool had a great deal of difficulty selling his generators.

With the onset of World War II, however, Air Products began to thrive, manufacturing mobile oxygen generators for the armed services and heavy industry. When the war ended, Air Products lost many of its clients and was forced to aggressively pursue new accounts. Although Air Products could provide oxygen at a cost 25 percent lower than its competitors, customers were slow to take advantage of the new system, which was offered through five- to ten-year leasing agreements, under which Air Products would maintain the generator and teach employees how to operate it. While customers found the idea appealing, many were locked into long-term contracts with a company that shipped oxygen to their plants.

In desperation, Pool traveled to Pittsburgh and used a sales technique called door-stepping to win a major contract with Weirton Steel. This sales technique involved staying at the customers plant until the contract was signed. Pool said years later, God, we just lived at Weirton Steel when we learned they were interested in our proposition. Indeed, Weirton was practically Air Products only customer at that time.

In need of funds to construct a new plant, Air Products sent out a prospectus to potential investors. Pool acknowledged the companys inexperience, stating that Air Products has no background in prewar civil business, and that in competing by a new method of distribution in a well-established field against experienced competitors who have much greater resources Air Products expected to operate at a loss following the completion of its government contracts. The companys boldness and candor apparently impressed investors, and the necessary $300,000 was raised. Soon, Air Products had installed generators at several chemical companies and had built a huge generator for Weirton Steel, a generator 100 times larger than any that had been built before.

Pool attributed a large part of his companys success to his tiger pack, a group of aggressive young engineers serving as sales staff at Air Products. Pool maintained a close watch over operations, and, although he became known for his sense of humor and his commitment to his employees, he was also capable of dealing out a tongue-lashing to anyone who mislead a customer or lost a sale.

In the mid-1950s, Air Products profited from the launching of the first Soviet Sputnik, which American scientists surmised was powered by liquid hydrogen. When the U.S. defense department wanted liquid hydrogen, Air Products was asked to supply it. As a security precaution, new Air Products Company plants were provided with such code names as Baby-Bear and Project Rover one large plant was disguised as the Apix Fertilizer Company.

In addition to the production of liquid hydrogen, Air Products also branched out into new areas of chemistry like fluorine chemistry and cryogenics (the science of ultra-low temperatures). The companys oxygen business also continued to grow. The company no longer leased generators but built multi-million dollar operations near major customers, including Ford Motor Co. and U.S. Steel, selling any excess capacity to smaller customers.

Throughout the 1960s, Air Products thrived; sales rose 400 percent, while earnings rose 500 percent. The expansion into merchant gas (gas sold in tanks) proved profitable for the company, although Air Products was a latecomer to the field. Air Products used its late entrance into the field to its advantage by conceding the saturated markets to its well established rivals, Linde and Air Reduction Co., seeking out smaller, more receptive markets instead. In fact, as Air Products saw its fortunes growing, competitors like Linde experienced decreased profits.

During this time, oxygen-fired furnaces became a popular alternative to the hearth-style furnaces used in the steel-making industry, increasing oxygen consumption considerably. Nitrogen, another Air Products specialty, was also in demand as a refrigerant. Air Products also began selling the implements necessary to handling gases, such as welding tools, anesthesia equipment and cryogenic systems. Gases and gas-related equipment accounted for approximately three-fourths of Air Products profits during the 1960s; the remainder came from chemicals and engineering services.

The diversification of Air Products into chemicals began in 1962 with the companys purchase of Houdry Chemicals and, later, Air Company, a specialty chemical company. When the Air Company was purchased by Air Products, it was losing money. To achieve a turnaround, Air Products took Air Companys acetylic chemicals and made them into specialty chemicals which fetched a higher price; the plant became profitable almost immediately. In 1969, Air Products purchased Escambia Chemicals, paying a cash price well below its market value. Escambias attraction lay in a product called DABCO, regarded as the best catalyst for making urethane foam.

Due to the energy crisis and a recession, the 1970s was a difficult period for many chemical companies. While Air Products could not sustain the phenomenal growth it experienced in the 1960s, its annual sales and profits increased at least nine percent and sometimes as high as 20 percent. During this time, the company held a strong position in industrial gases both in the United States and abroad, as its gases were used by virtually every major industry. The chemical division performed erratically, however, and, during the recession, its engineering services division, which designed pipelines and plants, yielded disappointing results. Nevertheless, Air Products industrial gases kept the company afloat.

The energy crisis had both positive and negative effects on Air Products. The industrial gases division, which consumed a large amount of electricity, was sensitive to rising utility rates. However, as the price of organic fuels rose, oxygen became a more popular fuel. The increased production costs of petro-chemicals and plastics were offset by higher demand for cryogenic equipment and gases to liquify natural gas. Like many other successful chemical companies, Air Products was thus able to benefit from the high energy prices in some cases.

During this time, the OPEC oil embargo convinced company management to invest in synthetic fuels. In 1980, Air Products, Wheelbraton Fry Inc., the state of Kentucky, and the U.S. Department of Energy formed a joint venture to produce a high energy, low pollution fuel from coal. Air Products invested $45 million in the project, while the bulk of the money, $748 million, came from the federal government. As none of the various synthetic fuel projects were successful, Air Products only consolation was the high levels of oxygen consumed in the unsuccessful venture. Still, Air Products remained interested in energy development. In 1985, the company bought a methane recovery plant and accelerated development of a plant that converted garbage to steam and electricity.

Despite the disappointment of the synfuel project, Air Products sales grew an average of 20 percent per year throughout the 1970s. A 12-year, $281 million contract to supply liquid hydrogen for the space shuttle bolstered earnings as did the discovery of expanded uses for industrial gases. For instance, the food industry increased its use of hydrogen for hydrogenating vegetable oils, and flash-freezing, a process which required nitrogen, became an increasingly more popular technique.

In the 1970s and the early 1980s, Air Products, like other highly successful chemical companies of the same size, became concerned with having a product that could be used by a myriad of industries, in order to avoid overdependance on staple products linked to cyclical industries. Toward this end, Air Products focused on marketing oxygen and industrial gases to a wide variety of clients, so that dramatic downturns in an industry such as steel manufacturingwould not be fatal to the company.

Also during this time, Air Products established a reputation for hiring highly competent, professional engineers, chemists, and business staff. Rather than assuming responsibility for such hirings, company president Edward Donley delegated the job to the vice-presidents and line managers, whom, according Donley, were better judges of an applicants potential than a professional recruiter. The applicants hired by Air Products sometimes spent up to three years working in different departments of their choice, in order to decide where their skills would be best employed. Air Products also believed the exposure of engineers and chemists to management positions would prove vital to future success.

Air Products also demonstrated a commitment to the health and safety of its workers. In the 1970s, when three employees died from PVC induced cancer, Air Products periodically tested 492 other workers at two plants for possible exposure, and steps were taken to minimize health risks. In the late 1980s and early 1990s, the company developed Responsible Care objectives to promote safety, environmentalism, and health at its facilities. At the same time, however, the company initiated a legal challenge to industry regulations, claiming that many were unfeasible to implement.

In 1986, Air Products embarked on a ten-year strategic plan that added a third core business, environment-energy, and focused on globalization of the firm. Between 1986 and 1993, the company invested $1 billion in European facilities as part of its strategy to replace older, less efficient plants, add new production capacity, and create new products. Significant investments in Asia resulted in the construction of seven industrial gas plants by 1992. The company also gained access to significant markets by buying mid-size competitors and entering into joint ventures.

By 1990, investments of $1.2 billion in the environmental-energy systems segment had expanded that division to include: a refuse-fired cogeneration facility; the American REF-FUEL joint venture with Browning-Ferris for building waste-to-energy facilities; a joint venture with Mitsubishi Heavy Industries to market flue gas desulfurization systems; and a methane gas reclamation business for landfills. Air Products tire recycling program, which was undertaken in 1988, came to fruition in the early 1990s, as the rubber recovered from scrap tires promised to reduce the environmental and health hazards presented by scrap tires and offered cost savings for the production of rubberized asphalt, shoe soles, carpet underlay, and other products. Although Air Products faced well-established competition in the environmental arena, the rapid expansion of that market promised significant returns.

During this time, Air Products earnings per share increased about 20 percent per year, double the rate of Standard & Poors industrial index. In 1992, Harold A. Wagner, who had been a key proponent of the strategic plan, replaced Dexter Baker as chairperson and chief executive officer, and Air Products launched a two-year program to consolidate and restructure its $1.1 billion chemical business. The reorganization streamlined the chemicals segment from four to three divisions, realigned its management, and reduced its work force by seven to ten percent, or 1,000 to 1,400 jobs. In 1993, Air Products achieved record cash flows, sold record volumes of industrial gases and chemicals, and ranked as the third largest supplier of industrial gases in the world. The company planned to continue expanding its global investment programs throughout the 1990s.

Principal Subsidiaries:

Air Products International Corp.; Air Products Manufacturing Corp.; Air Products REF-FUEL Holdings Corp.; Air Products REF-FUEL of Essex County, Inc.; Air Products REF-FUEL of Hempstead, Inc.; APCI (U.K.), Inc.; GSF Energy Inc.; Permea, Inc.; Prodair Corp.; Steams-Catalytic Corp.; Air Products S.A. (France); Air Products Management S.A. (Belgium); Air Products Gases Industriais Ltda. (Brazil); Air Products Canada; Air Products Japan Inc.; Prodair S.A.; Air Products Nederland B.V.; Air Products plc (United Kingdom); Air Products (GB) Ltd.; Air Products (U.K.) Ltd.; Air Products (B.R) Ltd.; Anchor Chemical Group plc; Air Products GmbH (Germany).

Further Reading:

Butrica, Andrew J., Out of Thin Air: A History of Air Products and Chemicals, Inc., 1940-1990, New York: Praeger, 1990.

Storck, William J., Air Products on Course in Ambitious Strategic Plan Chemical & Engineering News, October 5, 1992, pp. 44-46.

Swaim, Will, Air to the Throne, World Trade, February 1993, pp. 66-68.

updated by April Dougal Gasbarre

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Air Products and Chemicals, Inc.

Air Products and Chemicals, Inc.

P.O. Box 538
Allentown, Pennsylvania 18105
U.S.A.
(215) 481-4911

Public Company
Incorporated: October 1, 1940 as Industrial Gas Equipment Co.
Employees: 18,700
Sales: $2.040 billion
Market value: $2.632 billion
Stock Index: New York

As a teenager George Pool, founder of Air Products, sold oxygen to industrial users. By the age of 30 Pool was district manager for Compressed Industrial Gases. In 1938, when Pool began his work, the oxygen market was dominated by large companies like Linde and the Air Reduction Company which avoided price wars and did not intrude in each others sales territory. Oxygen is inexpensive to distill and the raw material from which it is distilled, namely air, is free. When Pool founded his company, now the second largest of its kind, the chief cost of oxygen to the customer was the cost of shipping it in heavy containers. Pools idea was to distill oxygen in the customers plant. The cost of this plan would have been prohibitive unless a cheap oxygen generator could be designed.

Pool, the son of a boiler-maker, had only a high school education, but he set out to design the generator he needed. He hired a young engineer by the name of Frank Pavlis to work with him. The design they came up with was revolutionary because it used a compressor lubricated with liquid oxygen and graphite. The competitors compressors were lubricated with water due to the fear that the compressed oxygen, in contact with a lubricating oil, would ignite when exposed to the smallest spark. However, when oxygen was compressed using water, several steps were required to then remove the water from the oxygen. Pools generator could skip these steps and, as a result, it was less expensive to build, install and maintain.

By 1940 Pool and Pavlis had a functioning generator. Pool quit his job, sold his insurance policy and borrowed all the money that his wife (a school teacher) had saved. With this money he founded Air Products Inc., and opened shop in a building that had been a mortuary. A mortuary was an appropriate place to start a new business given the gloomy business climate that prevailed during the last years of the Depression. In the beginning, Pool had a great deal of difficulty selling his generators.

The situation improved for Air Products during World War II because it manufactured mobile oxygen generators for the armed services and heavy industry. When the war ended Air Products found itself without customers and was forced to aggressively pursue new accounts. Although Air Products could provide oxygen at a cost 25% lower than its competitors, it had to convince its customers of the benefits of the new system, where the customer leased the generator on a 5-10 year basis. Air Products maintained the generator and taught the customers employees how to operate it. Many potential customers liked the idea, but were locked into long term contracts with a company that shipped oxygen to their plants.

In desperation, Pool went to Pittsburgh and used a sales technique called door-stepping to win a major contract with Weirton Steel. This sales technique involved staying at the customers plant until the contract was signed. Pool said years later, God, we just lived at Weirton Steel when we learned they were interested in our proposition. Indeed, Weirton was practically Air Products only customer.

Air Products knew it was in a precarious position and said as much in the prospectus they sent out to potential investors when the company needed funds for a new plant. The Company... has no background in prewar civil business... proposes to compete by a new method of distribution in a well-established field against experienced competitors who have much greater resources... expects to operate at a loss following the completion of its government contracts. The companys boldness and candor impressed investors and the necessary 300,000 dollars was raised. Soon Air Products installed generators at a number of chemical companies and built a huge generator for Weirton Steel (a generator 100 times larger than any that had been built before).

Air Products was a combative little company and part of its success was due to the tiger pack as Pool called the group of aggressive young salesmen-engineers that he surrounded himself with. Pool occasionally assumed the role of manager, dealing out a tongue-lashing to any of those young men who had misled a customer or lost a sale. Otherwise, he was reputed to have a good sense of humor and to take care of his employees.

In the mid-1950s Air Products gained an opportunity from the launching of the first Sputnik, which American scientists surmised was powered by liquid hydrogen. The U.S. also wanted liquid hydrogen, and Air Products was asked to supply it. As a security precaution the new Air Products Company plants were provided with code names like Baby-Bear and Project Rover. One large plant was disguised as the Apix Fertilizer Company.

Air Products was now making liquid hydrogen and also branching out into new areas of chemistry like fluorine chemistry and cryogenics (the science of ultra-low temperatures). The oxygen business continued to grow. The company no longer leased generators, but built multi-million dollar operations near major customers like Ford and U.S. Steel, and sold any excess capacity to smaller customers.

Throughout the 1960s the company was very successful. In the course of the decade sales rose 400% and earnings rose 500%. The expansion into merchant gas (gas sold in tanks) was profitable for the company, although Air Products was a latecomer to the field. Air Products used its Johnny-come-lately status to its advantage by conceding the saturated markets to its well-established rivals, Linde and Air Reduction Co., and sought out smaller, more receptive markets instead. During the time that Air Products saw its fortunes rising, competitors like Linde saw its profits decreasing.

In the 1960s oxygen-fired furnaces became more popular for steel-making than older, hearth-style furnaces, and this increased oxygen consumption. Nitrogen, another Air Products specialty, was in demand as a refrigerant. Air Products not only sold gas, but also the implements to handle it: welding tools, anesthesia equipment and cryogenic systems were numbered among its wares. Gases and gas-related equipment accounted for approximately 3/4 of Air Products profits during the 1960s. The remainder came from chemicals and engineering services.

The diversification of Air Products into chemicals began in 1962 with the companys purchase of Houdry Chemicals and later Air Company, a specialty chemical company. Air Products had better luck with Air Company than the previous owners. When the plant was purchased it was losing money, but the management at Air Products took Air Companys acetylic chemicals and made them into specialty chemicals which fetched a higher price. The plant became profitable right away. In 1969 Air Products purchased Escambia Chemicals (for cash) at a price well below its market value. Escambias attraction lay in a product called DABCO, supposedly the best catalyst for making urethane foam.

Due to the energy crisis and a recession, the 1970s was a difficult period of time for many chemical companies. Air Products could not sustain the phenomenal growth it experienced in the 1960s, but each year its sales and profits increased at least 9% in bad years and over 20% in good ones. The company held a strong position in industrial gases both in the U.S. and abroad, and its gases were used by virtually every major industry. Its chemical division performed erratically, and during the recession its engineering services division (which designs pipelines and plants) yielded disappointing results, but industrial gases kept the company afloat.

The energy crisis had a strong influence on the company in both positive and negative ways. The industrial gases division, which consumed a large amount of electricity, was sensitive to rising utility rates. However, as the price of organic fuels rose oxygen became a more attractive fuel to burn. The increased production costs of petro-chemicals and plastics were offset by higher demand for cryogenic equipment and gases to liquify natural gas. Air Products, like many other successful chemical companies, found a bright side to high energy prices.

The oil embargo convinced the management at Air Products to invest in synthetic fuels. In 1980 Air Products, Wheelbraton Fry Inc., the State of Kentucky and the U.S. Department of Energy formed a joint venture to produce a high energy, low pollution fuel from coal. Air Products invested $45 million in the project; however, the bulk of the money, $748 million, came from the Federal Government. None of the various synfuel projects were successful, so Air Products only consolation was the high levels of oxygen consumed in the unsuccessful venture. Yet Air Products remains interested in energy development. In 1985 it bought a methane recovery plant and accelerated development of a plant that converts garbage to steam and electricity.

Despite the disappointment of the synfuel project, Air Products sales grew an average of 20% per year throughout the 1970s. A 12-year $281 million contract to supply liquid hydrogen for the space shuttle helped, and so did the discovery of expanded uses for industrial gases. For instance, the food industry increased its use of hydrogen for hydrogenating vegetable oils and flash-freezing, a process which requires nitrogen, became an increasingly more popular technique.

In the 1970s and the early 1980s as well, Air Products shared certain qualities with other highly successful chemical companies of the same size. One was finding a way to turn the energy crisis to its advantage, even if escalating petroleum costs posed some minor problems. The second was having a product that was used by a myriad number of industries so that the company was not in a situation where the fortunes of its staple products were linked to the fortunes of a cyclical industry. For example, the American steel industry is a major customer for Air Products oxygen, but there are so many other customers for its industrial gas that the depressed market for steel is not fatal to the company. In its annual reports Air Products rarely mentions the obvious advantages it has over other chemical companies with a less diverse product mix. Instead, it attributes its success to its employees, in particular, to those with technical training.

Although statements about the importance of people-power are obligatory in its annual reports, nevertheless, Air Products emphasis on employees at times is more than a mere recitation of platitudes. One indication of this is the companys recruitment policy. Rather than leaving recruitment to professionals the company President, Edward Donley, the vice-presidents, and the 57 line managers all spend some time interviewing graduating engineers, chemists and M.B.A.s. Donley has said that he likes to visit college campuses in order to find the best possible job candidates. The high level company executives, he says, are better judges of an applicants potential than a professional recruiter. The applicants who are eventually hired by Air Products may spend up to three years working in different departments of their choice in order to decide where their skills will be best employed. Air Products believes the exposure of engineers and chemists to management positions will be helpful later on in their careers.

The companys attitude towards the health of lower echelon workers compares favorably with most other chemical companies. In the 1970s, when three employees died from PVC induced cancer, Air Products periodically tested 492 other workers at two plants for possible exposure. Steps were taken to minimize health risks. At the same time, the company initiated a legal challenge to OSHA regulations, which it claimed were unfeasible to implement.

For the next decade or two Air Products will most likely continue its slow but steady growth. Industrial gases will remain a staple product, and should be relatively safe from most economic problems. The company plans to invest in its core industries: gases, chemicals, engineering equipment and engineering services. Amines and urethane will continue to be important chemicals. The chemical division, while profitable, has never realized Donleys goal of providing 50% of total profits. Its contribution to company profits tends to hover around 30%, but Donley has no intention of giving up. In fact, the chemical division will likely be strengthened by the acquisition of small companies. The company has no plans for diversification into unfamiliar areas. If any division causes a problem it will be the engineering services division which provides 5-10% of revenues and is not recession-proof.

Principal Subsidiaries

Air Products, Inc.; Air Products Capital Corp.; Air Products Manufacturing Corp.; American REF-FUEL Co. of Texas; Arcain Co.; Catad, Inc.; Catalytic, Inc.; GSF, Inc.; GSF Energy Inc.; Middletown Oxygen Co., Inc.; Prodain Corp.; Stearns-Catalytic Corp.; Stearns-Roger, Inc.; Steams-Roger Manufacturers, Inc. Air Products also has subsidiaries in the following countries: Belgium, Brazil, Canada, France, The Netherlands, United Kingdom, Virgin Islands and West Germany.

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"Air Products and Chemicals, Inc.." International Directory of Company Histories. . Encyclopedia.com. 19 Oct. 2017 <http://www.encyclopedia.com>.

"Air Products and Chemicals, Inc.." International Directory of Company Histories. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/air-products-and-chemicals-inc

"Air Products and Chemicals, Inc.." International Directory of Company Histories. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/air-products-and-chemicals-inc