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Imperial Chemical Industries PLC

Imperial Chemical Industries PLC

20 Manchester Square
London W1U 3AN
United Kingdom
Telephone: +44 (0) 207-834-4444
Fax: +44 (0) 207-834-2042
Web site: http://www.ici.com

Public Company
Incorporated: 1926
Employees: 38,596 (2001)
Sales: £6.425 billion (2001)
Stock Exchanges: New York London
Ticker Symbol: ICI

Imperial Chemical Industries PLC (ICI) has gone from being the premier chemical-manufacturing company of Great Britain to being one of the most innovative companies in the world. In more than 70 years, ICI has sought patents on more than 33,000 inventions, resulting in more than 150,000 patents worldwide for products ranging from chemotherapy drugs for cancer patients to insulating materials and polymers. Half of the most significant inventions since World War II are thought to have originated in Great Britain, where ICI has dominated the industry since its inception in 1926.

In 1993 the company reinvented itself as two new industrial giants: ICI, a continuing world leader in paint and explosives, expanding on the ICI tradition of developing heavy chemicals; and Zeneca Group, comprising specialty Pharmaceuticals and other biotechnology businesses. The new ICI offers a group of world businesses with leading positions in explosives, paints, titanium dioxide, and other versatile materials such as polyurethane, polyester film, and acrylics.

Nobel Beginnings: Four Chemical Companies Become One

Imperial Chemical Industries (ICI) was formed by the 1926 merger of Great Britains four major chemical companies: Nobel Industries Ltd.; Brunner, Mond and Company Ltd.; United Alkali Company; and British Dyestuffs Corporation. The birth of ICI coincided with the rise of the two other great chemical cartels: du Pont and I.G. Farben. Unlike its foreign competitors, however, ICI was never dismantled by the government.

Perhaps the most famous of the four companies that merged into ICI was the dynamite business founded by Alfred Nobel. The chemical industry of the late 19th century was largely shaped by Nobels inventions. Before Nobel invented dynamite, blasting for engineering purposes was done with gunpowder and previous experiments with the more powerful nitroglycerine had ended disastrously. Nobels contribution to explosives was twofold: He first mixed nitroglycerine with porous clay so that the nitroglycerine became relatively safe to handle, and then invented a detonating device that controlled the blast. More powerful and predictable than gunpowder, Nobels dynamite made ambitious civil engineering projects such as the Suez Canal possible.

By 1883, a mere 12 years after its founding, British Dynamite Company (soon changed to Nobels Explosives Ltd.) had grown into a company with significant annual sales. Due to the dangers associated with making dynamite, Nobels first large plant was located in a rural area of Scotland. Transportation was a problem for the company because Parliament had passed stringent laws concerning the transport of nitroglycerine. Many shipments of the explosive liquid had to be smuggled to factoriessometimes even in hatboxes.

Like the Swede Alfred Nobel, the founder of Brunner, Mond and Company was also a foreigner. Ludwig Mond was a university-educated German Jew who emigrated to England, first of all, because the alkali industry was there and, secondly, because anti-Semitism was on the rise in Germany. Despite an inauspicious beginning, in 1871 Mond and his partner John Brunner were able to build a strong alkali business on the grounds of a former girls school. Mond and Brunners contribution was to produce alkalis using the Solvay, rather than the Leblanc process.

The third alkali manufacturer that would become a part of ICI was the United Alkali Company. Capitalized at more than £8 million, the company at the time of its conception was the largest chemical business in the world. The United Alkali Company (UAC) began as an association of Lancashire producers who engaged in price-fixing and also set production quotas. Like its rival, Brunner, Mond, the UAC conducted a large business in China and Japan in the mid-19th century. Unlike Brunner, Mond, UAC failed to quickly realize certain technological advances (such as using electrolysis in the production of chlorine), and soon lost its position as a powerful entity.

The fourth segment of ICI, the British Dyestuffs Corporation, was formed much later than its three fellow companies. The BDC was formed as a response to the embargo of German dyes during World War I, which had seriously depressed some segments of British industry. In comparison with their American and German peers, British dye makers were not technologically advanced. This was in part due to the large English textile industry, which used its political and economic resources to keep dye prices low and thereby discouraged research into more sophisticated production methods.

Industrial Products, Imperial Horizons

At the beginning of World War I, Nobels dynamite company was a major ammunition supplier. As the war progressed, however, there was less open warfare than predicted. Instead, the war developed into an extended siege and, as a result, came to rely more on high explosives than bullets. These high explosives were very different in composition from Nobels gunpowder. The TNT and lyddite that English troops needed to blast their way through German defenses included coal-tar derivatives, and these, forming the basis of aniline and anthracene dyes, came from the dye industry. So the British Dyestuffs Corporation, to its surprise, found itself a manufacturer of armaments. Since TNT could be used more economically when mixed with ammonium nitrate, Brunner, Mond and Company (by then a major supplier of ammonia) was also pressed into service, along with the United Alkali Company.

By 1926, Nobel Industries Ltd. and Brunner, Mond were the two largest companies in the otherwise enervated British chemical industry. Both had been shaken by the 1925 merger of many German chemical firms into I.G. Farbenthe largest cartel in the world. Since I.G. Farben was in direct competition with British companies for exports, it was feared more than the du Pont cartel, which operated primarily in the United States.

Both Nobel and Brunner, Mond initially considered joining I.G. Farben, but were unable to reach a satisfactory agreement with the Germans. After months of negotiations, they decided to form a British cartel, led by Sir Harry McGowen of Nobel Industries and Sir Alfred Mond. British Dyestuffs and the United Alkali, weakened by a worldwide depression, were in no position to withstand pressure from their more powerful competitors and also agreed to the merger. The newly formed British cartel was soon in contact with du Pont, Allied Chemical and I.G. Farben. The name Imperial, was chosen with careful consideration, intended to represent the companys ongoing importance to the British Empire and beyond. According to Sir Harry McGowen, in a note to a du Pont competitor, the formation of the Imperial Chemical Industries was the first step in a comprehensive scheme to rationalize the chemical manufacture of the world.

Reinventing Itself: Imperial Chemical Industries Is Born

ICI began doing business on January 1, 1927, with 33,000 employees. The newly formed company was divided into main product areas for alkalis, dyestuffs, explosives, general chemicals (including chlorine, acids, and synthetic ammonia), and metals. It also concentrated on producing cellulose products, fertilizers, lime, and a rubberized fabric known as leathercloth. By 1928, staff had occupied the newly built, monumental headquarters on Millbank, facing the Houses of Parliament in London.

Early in ICIs history, the company chose fertilizers as its main growth area, and 10 percent of its capital was concentrated in a £20 million fertilizer plant in Billingham, England. By 1929, the onset of the Depression in the United States caused the demand for fertilizer to fall and the native demand was not large enough to support the huge Billingham plant. To partially protect its investment, ICI signed an agreement with I.G. Farben, which established production quotas for nitrogen, the main ingredient in fertilizer. In 1935 the companies agreed that I.G. Farben would sell nitrogen in all of Europe, except for Spain and Portugal, as well as South and Central America, while ICI would control the markets in the United Kingdom, Spain, Portugal, Indonesia, and the Canary Islands. And they agreed to share the Asian market.

Despite the agreement with I.G. Farben, nitrogen sales for ICI decreased and the Billingham plant was eventually closed. Ids return on equity dropped to 4 percent in the early 1930s. The company then tried to produce oil from coal; however, despite government subsidies, the oil produced by ICI could not compete with regular oil. In the mid-1930s, with two failed plans behind it, ICI finally began to give more attention to its neglected Dyestuffs division.

Plastics: A New Line of Versatile Products

In the 1930s the word plastic began to be used to describe the wide variety of synthetic substitutes used for materials such as wood, leather, and metal. Unlike American and German dye makers, British dye makers had never used their knowledge of chemistry to diversify into plastics, specialty chemicals or pharmaceuticals.

Imperial Chemical Industries PLC 255

Company Perspectives:

Ids vision is to be the industry leader in creating value for customers and shareholders. ICI will succeed by operating at the highest levels of excellence, acquiring unrivalled knowledge of key markets and using technology creatively. The result will be products which deliver greater benefits for the companys customers, higher returns for shareholders and increased rewards for employees.

ICIs Dyestuffs division, with only a small research budget, was able to begin production of agricultural and rubber chemicals around 1929; however, it was the Alkali division and not the Dyestuffs division that discovered polyethylene.

Polyethylene is a versatile plastic produced when ethylene is subjected to extreme pressure. Reginald Gibson and Eric William Fawcett made the first recorded observation of the new polymer in an ICI laboratory on March 25, 1933. However, polyethylene experiments had exploded and ICI forbade its scientists to pressurize ethylene, restricting work to new safety cubicles. Then in 1935, however, ICI Researchers Michael Perrin, John Paton, and Edmond Williams and Equipment Engineer Dermot Manning tried again, producing 8.5 grams of the polymer. Despite infighting over which division would develop polyethylene, ICI patented and sold it as an insulating material. In June 1937, it was agreed that the newly formed Plastics division would take over development in its use as a moulding material, while the Dyestuffs division considered its textile uses and the Alkali division considered using polyethylene for electrical and other, unspecified uses.

ICIs work with polyethylene changed with the advent of World War II. Although production of the accidental invention had languished for five years, polyethylene actually found another important usage in radar. By the time the war broke out in 1939, scientists had found a way to use it to provide electrical insulation to radar masts.

War Brings Profits and Loss

When Britains rearmament began in 1936, ICI became a major producer for the British government. Although ICI dominated the British chemical industry, prewar production raised a problem in that the new plants built for the war effort might stand idle after hostilities ended and, consequently, lead the company to bankruptcy. ICI was reluctant to imitate du Ponts policy and charge higher prices for their products in order to pay for the new construction. Fortunately ICI and the British government reached an agreement whereby the government paid for the construction of new plants and ICI managed them for a reasonable fee.

Almost every industry in Britain required ICI chemicals: 25 plants produced materials ranging from light metals and guns, to mustard gas, detonators, and alloys. During this time, ICI unsuccessfully attempted to make an atomic bomb. As a result of a disagreement with the director of the Manhattan Project (the U.S. war effort to produce the atomic bomb), ICI company researchers were not allowed to work with American scientists on atomic research.

A New Era: ICI Struggles to Move Ahead

The end of the war brought two major changes for ICI. The first was a result of the antitrust suit brought by the United States against the 800 various agreements ICI had signed with du Pont to regulate competition. Although the legal decision against ICI-du Pont partnership was not rendered until 1952, the exchange of technical information and cooperation on prices and markets ended in 1948. The second important postwar event was the 1952 opening of a huge chemical complex in Wilton, England. The Wilton plant included a 4,000-ton nylon polymer unit, as well as ammonia and hydrogen plants, and production facilities for phenol and organic chemicals. Despite this new complex, however, most of ICIs productive capacity was obsolete.

Key Dates:

1926:
Four major chemical companies in Great Britain merge to become Imperial Chemical Industries (ICI): Nobel Industries Ltd.; Brunner, Mond and Company Ltd.; United Alkali Company; and British Dyestuffs Corporation.
1927:
ICI opens for business with 33,000 employees in five main product areas: alkali products, explosives, metals, general chemicals, and dyestuffs.
1929:
ICI signs a deal with I.G. Farben, establishing production quotas for nitrogen, the main ingredient in fertilizer.
1933:
ICI researchers discover polyethylene, which is later patented and sold as an insulating material.
1935:
Due to declining demand for fertilizer, ICI agrees to let I.G. Farben exclusively sell nitrogen in parts of Asia, Europe, and South and Central America.
1948:
The result of a U.S. antitrust suit, ICI and du Pont end the exchange of technical information and cooperation on prices and markets.
1952:
ICI opens a huge chemical complex in Wilton, England.
1965:
ICI begins an ambitious building plan in Britain, Germany, and the United States.
1972:
Britain joins the Common Market, focusing its attention on the United States.
1977:
ICI continues its American investment, with acquisitions that include a paraquat plant in Bayport, Texas.
1982:
Sir John Harvey-Jones assumes the role of chief executive, changing the companys focus from outdated products to drugs and specialty chemicals.
1986:
ICI turns its focus to paint and specialty products with the purchase of Beatrices Chemical division and Glidden Paint.
1993:
ICI demerges its bioscience businesses, splitting into two companies: ICI and the separate, publicly listed Zeneca Group, which later merges into Astra-Zeneca.
1997:
ICI makes its biggest-ever acquisition of four businesses from Unilever: National Starch, Quest, Unichema, and Crosfieldand moves into specialty products and begins the divestment of its bulk commodity businesses.
1999:
ICI forms Uniqema, a health and personal care products company, with the merger of five ICI businesses.

Unlike the largest German and American chemical companies, ICI did not prosper during the 1950s. There were two reasons why this happened. The first reason was that the company had lost its monopoly over the chemical markets of Britain and its colonies. The second reason was its outmoded productive capacity and old-fashioned managerial style. ICI was not in a position to either defend its old territory or take advantage of the opportunities that decartelization offered.

Until the mid-1960s, ICI continued on its same course. It was a small company in relation to its product line and rather than specializing in a few products that it could have efficiently manufactured in large plants, ICI manufactured hundreds of products inefficiently. Forbes magazine, in describing this stage in Ids history, said that, Nothing short of a full-scale industrial revolution could have saved ICI.

Increased exports and larger and more efficient plants saved the company from bankruptcy. Beginning in 1965, ICI initiated an ambitious building plan that included an ethylene cracker (facilities used in chemical manufacturing) in Britain, fiber spinning operations in Germany, and a huge PVC plant in Bayonne, New Jersey. The course pursued by ICI had some inherent risks, and most important of these was overcapacity. Nonetheless, the expansion permitted ICI to produce chemicals at a more competitive price. After the building plan was underway in 1967, sales in Europe increased an average of 33 percent a year until the end of the decade.

While ICI expanded externally in the late 1960s, internal changes also took place; most important was a change in labor relations. Shop employees began to be paid weekly rather than hourly wages, and most enjoyed substantial raises. In return for higher wages, these workers began to assume duties and responsibilities that had previously been the concern of supervisors. By the early 1970s, productivity had climbed 11 percent, although ICI remained behind its competitors in this respect.

The 1970s did not begin well for ICI. Between 1970 and 1972, Ids profits declined 13 percent while profits for the largest U.S. chemical manufacturers increased 18 percent to 26 percent. Throughout the decade, Ids profits were erratic. For example, profits climbed to £568.6 million in 1974, but then they dropped 33 percent in 1975. Despite inexpensive natural gas from the North Sea, plastics and fibers depressed profits in 1975 and subsequent years.

Joining Europe, Rejoining the World

Although Britain had joined the Common Market in 1972, ICI focused its attention not on Europe but on the United States. In 1971, ICI purchased Atlas Chemical Industries and was almost immediately issued a restraint of trade judgment. As a result, ICI had to sell the Atlas Explosives division. Perhaps it was this experience that led management to concentrate more on American investments than on further acquisitions. ICIs U.S. investment in 1977 included a paraquat plant in Bayport, Texas and a new laboratory for ICI Stuart Pharmaceuticals division.

In Britain the companys fertilizer division proved to be a consolation. After the discovery of natural gas in the North Sea during the previous decade, ICI had signed a long-term contract for inexpensive gas. ICIs feedstock for its ammonium nitrate-fertilizer was so inexpensive that it would sell fertilizer for £60 a ton when the market price was £80. By 1975, ICI controlled over one half of the British market for ammonium nitrate. Prices fell so low that other fertilizer producers requested that the British government raise ICIs prices. The government, mindful of ICIs price-cutting escapades during the 1920s, threatened to introduce a pool-price system unless ICI increased its prices and refrained from keeping competitors out of the market.

All in all, the chemical company did not perform substantially better in the 1970s than it had in the previous two decades. It remained a large, but often inefficient company committed to many unprofitable products. The future began to look more promising in 1982, however, when Sir John Harvey-Jones took over the reins of ICI.

Out of the Laboratory and into the Marketplace

Known as the charismatic leader of ICI for the next five years, Harvey-Jones cut costs ruthlessly, laying off thousands of workers and closing dozens of plants in an effort to improve the company. Among his accomplishments, he ended ICIs dependence on bulk chemicals, which had accounted for 40 percent of profits in 1979 but dropped to just 16 percent after three years under his stewardship. He also de-emphasized polyethylene and concentrated on higher margin products such as drugs and specialty chemicals instead. The results were impressive; by 1983, profits had climbed to US$939 millionmore than double that of the previous year.

As part of ICIs revitalization program, Harvey-Jones began to look for additions to the companys product line. One of the more interesting products at that time was polyester produced by genetically engineered bacteria fed on starch and water. This bacteria-produced polyester had some initial success as a surgical stitching.

In 1984, still under the direction of the flamboyant Harvey-Jones, ICI launched a major acquisition campaign, expanding investments in its North American division. One of the first steps was the 1986 purchase of Beatrices Chemical division for US$750 million, followed by many smaller purchases and then the purchase of Glidden Paint, also in 1986. It proved to be a good move: In the next two years, the acquisition of Glidden ICIs paint shipments increased at a healthy rate of 7 percent, twice the industry average.

An ICI executive was quoted in 1986 as saying that ICI had enough cash to acquire two more companies the size of Glidden. Although it seemed poised for such acquisitions (asking to extend its borrowing limit to US$10 billion), the company still had problems. During 1985, profits slipped 12 percent. While ICI blamed the decline on the strength of the pound, The Economist magazine cited a continuing problem with bulk chemicals and decreased fertilizer sales. Additionally, the plastics market was plagued by overcapacity, and ICI had to adapt to become less dependent on its former staples.

Theorists say that ICI originated to dominate the British Empire, but when that dissolved, the company found itself laden with slow-moving products and unable to compete internationally. It wasnt until the 1980s, under the leadership of Harvey-Jones (before his retirement in 1987) that ICI finally began to reorient itself toward more profitable goods. By the 1990s, most Western chemical companies had reached the conclusion that bulk chemicals were no longer profitable.

Changes Again: One Company Becomes Two

It was in 1993 that ICI made the move to separate its bioscience businessesincluding agricultural chemicals, pharmaceuticals, seeds, and biological productsinto a publicly listed company, known as Zeneca Group (which later merged to become AstraZeneca). This demerger resulted in a substantial increase in company profitability, most notably four years later when ICI made its biggest acquisition to date with the US$8 billion purchase of four businesses from Unilever: National Starch, Quest, Unichema, and Crosfield. ICI officials called it a journey of change and transformation, explaining that the acquisition marked the companys first move into the modern age by focusing on specialty products and paints on a global scale.

By the end of 2000, under the direction of Chief Executive Charles Miller Smith, ICI completed that restructuring, enabling it to concentrate on growing the business and improving its performance and margins worldwide. Smith stated, In just over three years ICI has transformed itself into one of the worlds leading providers of specialty products, including food, flavor, and fragrance ingredients, as well as remaining a world leader in paints.

Since that acquisition, ICI sold off other entities in order to improve its focus on paint-related products. Between 1997 and 2001, ICI claimed to make more than £6.1 billion in divestments, selling its polyester businesses primarily to du Pont, acrylics to Ineos Acrylics, and other product lines and holdings to PPG and Hunstman. It also spent more than £5.7 billion in acquisitions, investing in entities such as the catalyst science company Systenix and the specialty chemical company Uniqema.

Focus and Refocus

By early 2002, ICI had ranked among the worlds largest producers of specialty products and paints, which it sold under a range of leading brand names, such as Dulux, Glidden, Valentine, Coral, Hammerite, and Cuprinol. In the past year, more than 45,000 employees produced in excess of 50,000 products at more than 200 locations in 55 countries. ICI also continued to be involved in the production of synthetic resins and polymers, silica-based and alumina-based chemicals, surfactants, and catalysts. In addition to paint, products that the company continued to produce included industrial adhesives, refrigerants, and specialty starch, fragrances, flavors and food ingredients.

Despite its refocus on paint, in its more than 75-year history to date, ICI had patented more than 33,000 inventions, ranging from plastics to Pharmaceuticals. On the plastics side, ICI developed polyester and its derivative terylene (the most widely used synthetic fabric in the world at the dawn of the 21st century), as well as perspex, a recyclable material used in a wide range of items, from lighting and signage to furniture. Well-used Pharmaceuticals developed by company scientists included beta-blocker heart drugs and the antimalaria drug Paludrine.

Carol Kennedy, in the book, ICI: The Company That Changed Our Lives, (a follow-up to the two out-of-print historical volumes written by the late company historian, Dr. W.J. Reader), credits ICI laboratories with many life-changing inventions and discoveries. Kennedy called the companys decision in 1993 to rebirth itself as two new industrial giants pioneeringsimilar to that of the work of the companys founding fathers, Alfred Nobel and Ludwig Mond, in bringing the company together years ago. The charismatic Sir John Harvey-Jones, who will later become a writer and lecturer, summarizes an industrial career as not just inventing some new product; it is creating something which wasnt there before.

Principal Subsidiaries

ICI Paints; National Starch and Chemical Company; Performance Specialties (Uniqema and Synetix); Quest International.

Principal Competitors

Ciba Specialty Chemicals; Clariant International Ltd.; Degussa AG; Akzo Nobel; Sherwin-Williams; PPG; IFF; Givaudan; Firmenich.

Further Reading

British Industry Today: Chemicals, pamphlet prepared for British Information Services by the Central Office of Information, London: 1978, p. 76.

Clarke, Ian M., The Spatial Organization of Multinational Corporation, London: Croom Helm, 1985, New York: St. Martins Press, 1986, p. 287.

Kennedy, Carol, ICI: The Company That Changed Our Lives, 2nd ed., London: Paul Chapman, 1993, p. 240.

Mattera, Phillip, World Class Business: A Guide to the 100 Most Powerful Global Corporations, New York: Henry Holt and Company, 1992, pp. 378-384.

Pettigrew, Andrew, The Awakening Giant: Continuity and Change in Imperial Chemical Industries, Maiden, Mass: 1985, p. 536.

Reader, W.J., Imperial Chemical Industries: A History: The First Quarter Century, 1926-1952, Vol. 2, London: Oxford University Press, 1975, p. 569.

, W.J., Imperial Chemical Industries: A History:: The Forerunners

1870-1926, Vol. 1, London: Oxford University Press, 1970, p. 563.

Stauffer Chemical to Be Sold to Parent of ICI Americas, Washington Post, June 8, 1987, p. F34.

Warren, Kenneth, Chemical Foundations: The Alkali Industry in Britain to 1926, London: Oxford University Press, 1980, p. 208.

update: Melissa London

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Imperial Chemical Industries Plc

Imperial Chemical Industries Plc

Imperial Chemical House
Millbank, London SW1P 3JF
England

Public Company
Registered: December 7, 1926
Employees: 118,600

Sales: £10.114 billion (US$ 14.868 billion)

Market Value: £7,038 billion (US$ 10.346 billion)

Stock Index: New York London

Imperial Chemical Industries was formed by the 1926 merger of Great Britains four major chemical companies: Nobel Industries Limited, the United Alkali Company, the British Dyestuffs Corporation and Brunner, Mond and Company Limited. The birth of the ICI coincided with the rise of the two other great chemical cartels, namely, Du Pont and the IG Farben. Unlike its foreign competitors, however, the ICI was never dismantled by the government.

Perhaps the most famous of the four companies that merged into the ICI was the dynamite business founded by Alfred Nobel. Before Nobels invention of dynamite, blasting for engineering purposes had been done with gunpowder. Previous experiments with nitroglycerine, a more powerful substance, had ended disastrously. Nobels contribution to explosives was twofold. He first mixed nitroglycerine with porous clay so that the nitroglycerine became relatively safe to handle. He then invented a detonating device that controlled the blast. Nobels dynamite, more powerful and predictable than gunpowder, made ambitious civil engineering projects like the Suez canal possible. Dynamite was also important in clearing land for railroad tracks.

By 1883, 12 years after its founding, Nobel had built his British Dynamite Company into a company with £1 million in annual sales. Due to the dangers associated with making dynamite, Nobels first large plant was located in a rural area of Scotland. Transportation was a problem for the company because Parliament had passed stringent laws concerning the transport of nitroglycerine. Many shipments of the explosive liquid had to be smuggled to factoriessometimes even in hat-boxes.

Like the Swede Alfred Nobel, the founder of Brunner, Mond and Company was also a foreigner. Ludwig Mond was a university-educated German Jew who emigrated to England, first of all, because the alkali industry was there and, secondly, because anti-semitism was on the rise in Germany. Despite an inauspicious beginning, in 1871 Mond and his partner John Brunner were able to build a strong alkali business on the grounds of a former girls school. Mond and Brunners contribution was to produce alkalis using the Solvay, rather than the Leblanc process.

The third alkali manufacturer that would become a part of the ICI was the United Alkali Company. The United Alkali Company began as an association of Lancashire producers who engaged in price-fixing and also set production quotas. Like its rival, the Brunner, Mond Company, the UAC conducted a large business in China and Japan in the mid-nineteenth century.

The fourth segment of the ICI, the British Dyestuffs Company, was formed much later than its three fellow companies. The BDC was formed as a response to the embargo of German dyes during World War I, which had seriously depressed some segments of British industry. In comparison with their American and German peers, British dye-makers were not technologically advanced. This was in part due to the large English textile industry which used its political and economic resources to keep dye prices low and thereby discourage research into more sophisticated production methods.

At the beginning of World War I the dynamite company founded by Nobel was a major supplier of ammunition. As the war progressed, however, there was less open warfare than predicted. Instead, the war developed into an extended seige and, as a result, high explosives rather than bullets were needed. These high explosives were very different in composition from Nobels gunpowder. The TNT and lyddite that were required for English troops to blast their way through German defenses were coal tar derivatives, and these, of course, came from the dye industry. So the British Dye Company, to its surprise, found itself a manufacturer of armaments. Since TNT could be used more economically when mixed with ammonium nitrate, the Brunner, Mond Company, which by then was a major supplier of ammonia, was also pressed into service, along with the United Alkali Company.

In 1926 Nobel Industries Limited and the Brunner, Mond Company were the two largest companies in the otherwise enervated British chemical industry. Both companies had been shaken by the 1925 merger of many German chemical firms into the IG Farbenthe largest cartel the world had ever seen. Since the IG Farben was in direct competition with British companies for exports, it was feared more than the Du Pont cartel which operated primarily in the United States.

Both Nobel and Brunner, Mond Company initially considered joining the IG Farben, but were unable to reach a satisfactory agreement with the Germans. After months of negotiations it was decided that a British cartel would be formed. The architects of this British cartel were Sir Harry McGowen of Nobel Industries and Sir Alfred Mond. British Dyestuffs and the United Alkali Company, weakened by a world-wide depression, were in no position to withstand pressure from their more powerful competitors and also agreed to the merger. The newly formed British cartel was soon in contact with Du Pont, Allied Chemical and the IG Farben. According to Sir Harry McGowen, the formation of the Imperial Chemical Industries was the first step in a comprehensive scheme... to rationalize the chemical manufacture of the world.

The newly formed Imperial Chemical Industries was divided into nine groups: alkalis, cellulose products, dyestuffs, explosives, fertilizers, general chemicals, leathercloth (rubberized fabric), lime and metals. Early in the ICFs history, fertilizers were chosen as the companys main growth area, and 10% of its capital was concentrated in a fertilizer plant in Billingham, England. By 1929 the onset of the Depression in the U.S. caused the demand for fertilizer to fall and the native demand was not large enough to support the huge Billingham works. In order to partially protect its investment the ICI signed an agreement with the IG Farben which established production quotas for nitrogen, the main ingredient in fertilizer. In 1935 it was agreed that the IG Farben would sell nitrogen in all of Europe, except for Spain and Portugal, and also South and Central America, while the ICI would control the markets in the United Kingdom, Spain, Portugal, Indonesia and the Canary Islands. It was agreed by both groups that the Asian market would be shared.

Despite the agreement with the IG Farben, nitrogen sales for the ICI decreased and the Billingham works were eventually closed. The ICIs return on equity dropped to 4% in the early 1930s. The company then tried to produce oil from coal, but despite government subsidies the oil produced by the ICI could not compete with regular oil. In the mid-1930s, with two failed plans behind it, the ICI finally began to give more attention to its neglected dyestuffs division.

Unlike American and German dyemakers, British dyemakers had never used their knowledge of chemistry to diversify into plastics, specialty chemicals or pharmaceuticals. The dyestuffs division, with only a small research budget, was able to begin production of agricultural and rubber chemicals around 1929. It was the alkali division and not the dyestuffs division which discovered polyethylene, one of the ICIs few contributions to the industry.

Polyethylene is a versatile plastic produced when ethylene is subjected to extreme pressure. Previous polyethylene experiments had exploded; therefore, in 1933 the ICI forbade its scientists to pressurize ethylene. However, in 1935 ICI researchers Perrin and Manning defied the ban and produced 8 grams of the polymer. Despite infighting over whether polyethylene would be developed by the alkali or plastics division, it was patented and sold as an insulating material.

ICIs work with polyethylene was interrupted by World War II. When Britains rearmament began in 1935 ICI became a major producer for the British government. This pre-war production raised a problem for ICI in that the new plants built for the war effort would stand idle after hostilities ended and, consequently, could lead to bankruptcy for the company. ICI was reluctant to imitate Du Ponts policy and charge higher prices for their products in order to pay for the new construction. Fortunately an agreement was reached between the ICI and the British government whereby the government paid for the construction of new plants and the ICI managed them for a reasonable fee.

Almost every industry in Britain required ICI chemicals. In addition, munitions, light metals and guns were manufactured in ICI managed plants. During this time the ICI attempted to make an atomic bomb, but did not succeed. A disagreement between the director of the Manhatten project and the ICI resulted in company researchers not being allowed to work with American scientists on atomic research.

The end of the war brought two major changes for ICI. The first was a result of the anti-trust suit brought by the U.S. against the 800 various agreements the ICI had signed with Du Pont to regulate competition. Although the legal decision against the ICI-Du Pont partnership was not rendered until 1952, the exchange of technical information and cooperation on prices and markets ended in 1948. The second important post-war event was the 1952 opening of a huge chemical complex in Wilton, England. The Wilton works included a 4,000 ton nylon polymer unit as well as ammonia and hydrogen plants, and production facilities for phenol and organic chemicals. Despite this new complex, however, most of the ICIs productive capacity was obsolete.

ICI, unlike the largest German and American chemical companies, did not prosper during the 1950s. There were two reasons why this happened. The first reason was that the company had lost its monopoly over the chemical markets of Britain and her colonies. The second reason was its outmoded productive capacity and old-fashioned managerial style. ICI was not in a position to either defend its old territory or take advantage of the opportunities that decartelization offered.

Until the mid-1960s, the ICI continued on their same course. It was a small company in relation to its product line and rather than specializing in a few products that it could have efficiently manufactured in large plants, ICI manufactured hundreds of products inefficiently. Forbes magazine, in describing this stage in ICIs history, said that, Nothing short of a full-scale industrial revolution could have saved ICI.

Increased exports and larger and more efficient plants saved the company from bankruptcy. Beginning in 1965, the ICI initiated an ambitious building plan that included an ethylene cracker in Britain, fiber spinning operations in Germany, and a huge PVC plant in Bayonne, New Jersey. The course pursued by the ICI had some inherent risks, and most important of these was over-capacity. Nonetheless, the expansion permitted ICI to produce chemicals at a more competitive price. After the building plan was underway in 1967, sales in Europe increased an average of 33% a year until the end of the decade.

While ICI expanded externally in the late 1960s, internal changes were also taking place, the most important of which was a change in labor relations. Shop employees began to be paid weekly rather than hourly wages, and most enjoyed substantial raises. In return for the increase in their wages these workers began to assume duties and responsibilities that had previously been the concern of supervisors. By the early 1970s productivity had climbed 11%, although ICI remained behind its competitors in this respect.

The 1970s did not begin well for ICI. Between 1970 and 1972 ICIs profits declined 13% while profits for the largest U.S. chemical manufacturers increased between 18% and 26%. Throughout the decade profits were erratic. For example, the year 1974, when profits climbed to £568.6 million, was followed by a 33% drop in 1975. Despite inexpensive natural gas from the North Sea, plastics and fibers depressed profits in 1975 and subsequent years.

Although Britain had joined the Common Market in 1972, ICI focused its attention not on Europe but on the U.S. In 1971 ICI purchased Atlas Chemical Industries and was almost immediately issued a restraint of trade judgement. As a result, Atlass explosives division had to be sold. Perhaps it was due to this experience that convinced management at ICI to concentrate more on American investments rather than on any further acquisitions. ICIs U.S. investment in 1977 included a paraquat plant in Bayport, Texas and a new laboratory for ICI Stuart Pharmaceuticals division.

In Britain the companys fertílizer division proved to be a consolation. After the discovery of natural gas in the North Sea during the previous decade, ICI had signed a long-term contract for inexpensive gas. ICIs feedstock for its ammonium nitrate fertilizer was so inexpensive that it would sell fertilizer for £60 a ton when the market price was £80. By 1975 ICI controlled over one half of the British market for ammonium nitrate. Prices fell so low that other fertilizer producers requested the British government to raise ICIs prices. The government, mindful of ICIs price-cutting escapades during the 1920s, threatened to introduce a pool-price system unless ICI increased its prices and refrained from keeping competitors out of the market.

All in all, the chemical company did not perform substantially better in the 1970s than it had in the previous two decades. It was still a large but often inefficient company committed to many products which were not profitable. The future began to look more promising in 1982, however, when Sir John Harvey-Jones took over the reins of ICI.

One of Harvey-Jones major accomplishments was to end ICIs dependence on bulk chemicals which had accounted for 40% of profits in 1979. After three years of his stewardship, this figure was reduced to 16%. Harvey Jones also deemphasized polyethylene and concentrated on higher margin products like drugs and specialty chemicals instead. The results were impressive. By 1983 profits had climbed to $939 million, which was more than double the year before.

As part of ICIs revitalization program, Harvey-Jones began to look for additions to the companys product line. One of the more interesting products was polyester produced by genetically engineered bacteria fed on starch and water. This bacteria produced polyester has yet to make its way into clothes manufacturing, but has had success as a surgical stitching.

In 1984 ICI launched a major acquisition campaign that has yet to end. ICIs first step was to buy Beatrices chemical division for $750 million. This purchase was followed by many smaller purchases and then the 1986 purchase of Glidden Paint. Since the acquisition of Glidden ICIs paint shipments have been increasing at a healthy rate of 7%, twice the industry average.

An ICI executive was quoted in 1986 as saying that ICI has enough cash to acquire two more companies the size of Glidden. Indeed, the company seems poised for such acquisitions since it has asked to extend its borrowing limit from $7.5 to $10 billion. However, the company still confronts many problems. During 1985 profits slipped 12%. ICI blamed the decline on the strength of the pound, but The Economist magazine cited a continuing problem with bulk chemicals and also a decrease in fertilizer sales. Additionally, the plastics market was plagued by overcapacity, as usual. ICI has reduced its dependence on lowmargin products like fertilizers and bulk chemicals, but it also must become less dependent on its former staples.

In 1964 Forbes reported that ICIs problems were inveterate in that ICI had been designed to dominate the British Empire, leaving the U.S. to Du Pont and Europe to the IG Farben. However, as the British Empire dissolved the ICI found itself laden with slow moving products and, as a result, unable to compete with the other international companies. This theory has been corroborated by the ICIs post-war performance. Under HarveyJones ICI has finally started to re-orient itself towards more profitable goods, but this program will take time.

Harvey-Jones retired in 1987, and the future of ICI may depend on the shrewdness of his successor, Denys Henderson. Most western chemical companies have reached the same conclusion as ICI, namely, that drugs and specialty chemicals are the wave of the future and that bulk chemicals are no longer profitable. As ICI continues to diversify into more value-added products it is going to confront increasingly intense competition. Only time will tell if ICIs upward trend can sustain itself.

Principal Subsidiaries

ICI Petroleum Ltd.; ICI Finance Ltd.; Nobels Explosives Co., Ltd.; Scottish Agricultural Industries plc (62%). The company also lists subsidiaries in the following countries: Argentina, Australia, Canada, China, France, India, Japan, Malaysia, The Netherlands, New Zealand, Pakistan, South Africa, West Germany, and the United States.

Further Reading

Imperial Chemical Industries: A History by W.J. Reader, London, Oxford University Press, 1970; Chemical Foundations: The Alkali Industry in Britain to 1926 by Kenneth Warren, London, Oxford University Press, 1980; The Spatial Organization of Multinational Corporations by Ian M. Clarke, London, Croom Helm, 1985.

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