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1361 Alps Road
Wayne, New Jersey 07470
(201) 628-3000

Public Company
Incorporated: April 26, 1929 as American I.G. Chemical Corporation
Employees: 4,300
Sales: $754 million
Market Value: $1.469 billion
Stock Index: New York

GAP Corporation is a chemicals and building materials producer that is currently achieving successes previously unequaled in its 60-year history. During that period, control of the company has been transferred from the hands of the founding German corporation, to the U.S. government, to the American public. After decades of unclear direction of its management and its industry concentration, the company has shed the characteristics that had contributed to its historical reputation of an underachiever; in the 1980s GAP finally stands on solid ground as a leader in specialty chemicals and roofing products.

GAP had auspicious beginnings, founded in April, 1929, as an American arm of the enormous German chemicals trust, I.G. Farben-industrie. Known throughout the world as I.G. Dyes, the German corporation was involved in most areas of the worldwide chemicals industry, pressing forward with massive investments in research, and in 1929 it was classed as the largest industrial corporation in Europe. Six executives from I.G. Dyes joined with a handful of prominent American businessmenamong them Edsel Ford, president of the Ford Motor Company; Walter Teagle, president of the Standard Oil Company of New Jersey; Charles Mitchell, chairman of the National City Bank; and Paul Warburg, chairman of the Industrial Acceptance Bankto form the board of directors of the American I.G. Chemical Corporation.

For its plant facilities, the new corporation acquired substantial interests in Agfa-Ansco Corporation of upstate New York and General Aniline Works, Inc., which operated in New York and New Jersey. Agfa-Ansco, whose roots dated to a photographic supply shop set up in New York City in 1842, ranked second to Kodak in the U.S. in the production of photographic materials and film, and General Aniline Works, formerly the Grasselli Dyestuffs Corporation, had established itself as a major manufacturer of synthetic organic chemicals and dyestuffs since its founding in Rensselaer, New York, in 1882.

The plans for American I.G. were to provide competition to other American chemicals firms and to exploit the patents of I.G. Dyes in the new American market, which it did over the next decade. Initially, the companys trump card was its process for the hydrogenation of coal, which produced gasoline as a by-product; this largely accounted for the initial interest that the presidents of Ford and Standard Oil had in the new corporation. Other products that were developed and distributed by American I.G. include dyestuffs, pharmaceuticals, solvents, lacquers, photographic products and films, synthetic silk and other fabrics, a range of nitrogen products including chemical fertilizers, and an array of other organic and inorganic chemicals.

In 1939 the company changed its name to the General Aniline and Film Corporation, after having acquired all of General Aniline Works and merged with Agfa-Ansco, of whose stock it owned 81%. By that time it had earned approximately 3900 patents for its vast stock of chemical formulations.

From the beginning, General Aniline was designed to be largely controlled by and dependent upon German direction and research. Almost all its research took place in Germany, then chemical intermediates were manufactured there and sent to the U.S. plants for final preparation. The companys consistent successes were earned through a steady performance in the fields of dyes, chemicals, and photographical products. In fact, it was the leading U.S. manufacturer of dyestuffs until du Pont caught up in the late 1930s. An acquisition which had impact on the companys future was that of the Ozalid Corporation, a producer of copying equipment, in 1940.

General Aniline and Film survived some early criticisms of its very existence by Americans who questioned the prudence of such a large German concern operating in the United States. The companys record was legitimate, but the direct participation in its management by German citizens had raised some cautious eyebrows on Wall Street and in Washington; soon after it became apparent that the United States would be an active participant in World War II, General Aniline was seized by the U.S. government in February, 1942, under the Trading with the Enemy Act. It was the largest asset taken over by the U.S. in World War II.

This move developed into a long-standing legal dispute between the U.S. government and I.G. Chemie, a Swiss holding company that was the majority stockholder of General Aniline. Prior to 1940, I.G. Chemie had been a branch of I.G. Dyes, but it contended that it broke all relations with Germany during that year, becoming an independent corporation called Interhandel; the U.S. view was that I.G. Chemie remained a front for I.G. Dyes, despite its claims to the contrary. An out-of-court settlement between the Justice Department and Interhandel was finally reached over twenty years laterGeneral Aniline would be sold to the public, with proceeds from the sale being split 60%-40%, the U.S. receiving the majority.

Between 1942 and 1965, General Aniline was managed by government-appointed directors, and it was a turbulent, minimally profitable time for the company. All told, during this period the company had seven different chief executives and over 80 directors. In several regards, the governments hands were tied, preventing it from acting as freely and spontaneously as most managers could and did at the time. The rapid turnover of directors in itself created a barrier to long-term planning. The directors were excessively cautious, in most cases focusing on immediate rather than long-term results, never knowing when the company would be sold to the public. The pending lawsuit with Interhandel created an atmosphere laden with modest risk-taking, as each potential move by General Aniline was accompanied by threats of further legal action by Interhandel. For instance, one injunction obtained by Interhandel in 1957 (to prevent dilution of its equity) prohibited General Aniline from issuing its shares for acquisitions or from entering the equity and capital markets for money on which to expand. As the Board President Jack Frye stated in 1953, One of the problems of this company is that, due to its ownership situation, the management, the boards of directors, and all concerned are extremely cautious about making expenditures. In trying to avoid mistakes, they actually move more slowly than do their competitors.

Consequently, General Aniline was growing in terms that were stagnant compared to its competitors in each of its fields of interest. In film and photographic equipment, it competed chiefly with Kodak, in chemicals, with du Pont, and in copying equipment with Xerox. All these firms, indeed each of the industries in question, experienced unprecedented growth and diversification that lasted through the postwar period and into the 1970s.

Regardless of its cautious management and modest overall growth, General Aniline did achieve some significant successes in the 20 years after the government takeover. One bright spot was the work of the brilliant chemical engineer Dr. Jesse Werner, who led the surge in replicating the formulas of all the important compounds that were formerly produced at the parent company in Germany. A central research laboratory for the dyes and chemicals divisions was set up in Easton, Pennsylvania, in 1942, employing 400 chemists; the management was more venturesome in this area than in others, and spent a good deal of money on product and market research and development on chemicals. These divisions produced an array of substances; among the successful were a chlorinecaustic plant set up in New Jersey in 1956, and the companys pioneering efforts in the field of synthetic detergents. The most important technical triumph was the companys success with acetylene derivatives, a fledgling branch of chemistry at which the company far surpassed any competitors progress.

In the 1920s an I.G. Dyes chemist named Julius Walter Reppe found a way of handling acetylene under pressure without explosion, something that was previously thought by classical chemists to be impossible. Reppes patented processes were found in General Anilines American vaults in 1940, and were used as a basis for research by the chemists in Easton. Some of the earliest marketable uses of acetylene-based chemicals were the PVP (polyvinylpyrrolidone) family of products, which use a white powder that is the product of the pressurized combination of acetylene and formaldehyde; some of its uses are as a blood volume expander, suspending agent, tablet binder, and a fungicide, and also include a component in cosmetics, photographic chemicals and ink, paints, adhesives, detergents, and glass.

As of 1962, General Aniline remained the sole producer of acetylene derivatives in the United States, even though they were immensely profitable. The commercial successes of acetylene products can be largely attributed to Dr. Jesse Werner, who had risen through the technical ranks of the company in the 1940s and who was named director of commercial development in 1952, charged with the responsibility of exploitation of the chemists discoveries. He implemented large-scale plans for the growing industrial uses of acetylene compounds, and eventually became company president in 1962; he was the first chief executive of General Aniline to have worked his way up from the laboratory.

Equal to the money poured into chemicals and dyestuffs research was the glaring lack of funds directed to the photography and copying equipment divisions. Two discoveries by researchers in the Agfa-Ansco labs would have had heavy impact on the industry, had they only received attention and funds for marketing. In the mid-1940s, a chemist named Vsevolod Tulagin invented a new dye system for color photography. His scientific peers believed it was better than what was on the market, but the business managers had little confidence that they could have a product that was of higher quality than Kodaks offerings. Then in 1951-52, Ansco developed a color movie film that was far more realistic than the super-real colors being viewed on movie screens at the time. In addition, the Ansco film could be developed within ten hours, on location, which was unheard of in the industry. Again, the circumspect General Aniline board refused to allocate the funds for an Anscofilm plant which would make production feasible.

The Ozalid division of copying equipment received a similar lack of support. Its development of small office copiers and all-purpose copiers was sluggish in a booming industry, and its marketing organization was underequipped with money and personnel. In addition, Ozalids management was even more erratic than that of parent General Aniline; between 1957 and 1963 Ozalid had eight chief executives.

Despite all the shortcomings in Ansco and Ozalid, each maintained steady profit levels through the 1960s; the industries were expanding rapidly, so even the decreased percentage-market shares of Ozalid and Ansco amounted to steady profits. Anscos concentration during this period shifted from the amateur photographic market to the commercial market, and it handled substantial government contracts as well. As a point of interest, the camera used by the astronaut John Glenn was a modified Ansco Autoset. Ozalids chief market share was in the engineering field; its process involving the use of diazo-sensitized paper to produce an image upon exposure to ammonia was one of the best and cheapest at the time, and achieved great success in the reproduction of engineering drawings.

A benchmark in the companys history came on March 9,1965, when the 23-year control by the U.S. government was ended in the biggest sale of stock at competitive bidding in Wall Street history. Dr. Werner, who had been appointed president and chief executive officer of General Aniline in 1962, and was voted chairman of the board on October 5, 1964, stood at the reins of the company as it entered its second debut. He consolidated the company into two divisions: dyestuffs and chemicals, and photography and reproduction. In the 23 years since the U.S. seizure of General Aniline, its research program had earned almost 2000 patents of its own, and optimism for the companys future ran high.

Unfortunately, General Aniline was actually entering a new 20-year era of questionable management, during which Werner ran through a diverse roster of managers, products, and industries that never quite panned out as his plans predicted. As of 1981, the firms shares were selling for less than one-third their 1965 offering price, and the company placed 1004th out of 1023 in the profitability rankings in Forbes magazine that year. Werner stated his original plans to be growth in the companys four existing fields, because, as he said in 1966, We have too many product lines, too much diversity for our size. The only significant acquisition during his tenure was the merging in 1967 of Ruberoid Corporation, which added roofing, flooring, and related products to the companys lines.

The general trend between 1962 and 1982 was that research, development, and marketing outlays consistently fell short of what would have been necessary to forge market leaders out of GAFs divisions (the acronym GAP was adopted as the official company name in April 1968). The photographic and copying business serves as a case study. It offered a product line which was much narrower than its competitors, including no color film for its offset printers; its annual research and development expenditures averaged 1% of revenue from the division; a GAP customer observed in 1979 that GAFs salesmen are very good, but there are just not enough of them.

Obviously, GAP must have experienced some positive feedback for its efforts or it wouldnt exist today; likewise, Werners record showed enough merit to withstand the pressures of a proxy fight in 1971, which was led by a family of stockholders who claimed he had grossly mismanaged the company during his career. Much of the profitable experience occurred in the chemicals division, where there was consistent progress in production and sales of acetylene drivatives, surfactants (detergents), engineering thermoplastics, and mineral granules used for roofing shingles. Surfactants and acetylene products are sold worldwide to the Pharmaceuticals, cosmetics, plastics, automotive, agricultural, textiles, oil and gas, paints, and paper production industries. GAP is one of only two worldwide producers of butanediol, itself an acetylene derivative, which is in turn used in the formulation of thermoplastic polyester compounds which have an enormous range of uses in the automotive, electrical/electronics, appliances, and other industries. The company also produces iron powders for the aerospace and electronics industries, products which were developed during the Werner years.

The roofing and flooring businesses achieved growth as well, more in the residential than in the commercial market. Indeed, during the 1970s GAP became the market leader in roofing products, partially led by its pioneering work in the production of fiberglass-based shingles.

In 1978 Dr. Werner sold the consumer photo and processing operations and the dyes and pigments interests because of continued poor showings. This was the beginning of a massive five-year divestment program which by the end of 1982 left GAP with only its two strongest lines, the chemicals and building materials, and the New York City classical radio station WNCN, which it had purchased in June 1976; all in all, over half of GAFs assets were shed during this period. Werner had seemingly played all his cards, and just when the trimmed-down companys future again began to shine, another proxy fight hit GAP, this one much more bitter and hard-fought than the one in 1971. After a two-year battle, Werner lost out to an aggressive stockholder named Samuel Heyman, a real estate brokerage owner who had no previous corporate management experience.

Heyman entered his GAP directorship on December 14, 1983, with promises to trim all but the most profitable operations, including plans to liquidate all of the chemicals division. However, after thoroughly examining all the companys records, he saw great potential for growth in building supplies and chemicals. He first eliminated some management positions, slashed operating expenses by 23% in his first nine months, and moved the companys headquarters from Manhattan to quiet Wayne, New Jersey. And to instill a better sense of teamwork at the company, he decentralized management; Werner had called virtually all the shots himself, but Heyman wanted to spread decision-making responsibilities among regional and divisional managers.

The first 20 months of Heymans leadership brought remarkable success to GAP, based on cost-cutting and effective management more than on expansion of lines of business. Still, under Heyman capital expenditures were far greater, as were research and development outlays, than they had been in the Werner years.

In September, 1985, Heyman stated We have no plans to take over other companies, but we are looking at the possible acquisition of businesses that would complement our existing chemical lines. Yet over the following 18 months, GAP attempted hostile takeovers of engineering plastics and specialty chemicals concerns, Union-Carbide Corporation and Borg-Warner; both takeovers were ultimately thwarted, but each netted huge amounts of cash for GAP through the companys sale of its stock shares in the other firms. GAFs shares in Union-Carbide brought close to $250 million to its coffers, and the stock in BorgWarner, purchased by eventual Borg-Warner-buyer Merrill Lynch, earned over $190 million for GAP. For the future, Heyman doesnt rule out the possibility of another takeover attempt, especially if he finds an appropriate opportunity for expansion.

Typical of Heyman, he has steered much of these cash surpluses back into research for the building supplies and chemicals divisions. GAP sold its engineering plastics business in 1986, but is still one of only two producers of butanediol, which has achieved steady increases in demand throughout the last decade.

The building materials division has retained its status of market leader in residential roofing since the 1970s, and has made big steps in the commercial roofing market over the last several years. Even during the new home-building lag in the early 1980s, GAP was earning steady profits; since then, business has boomed in new home roofing, and even more so in premium re-roofing products designed to upgrade the appearance and value of homes. GAP has led the trend toward fiberglass as well as simulated woodshake roofing products.

The chemicals division has continued its progress in research, selling its products to industrial users across the United States and through 18 subsidiaries and branches throughout the world. Two of the most important recent chemical breakthroughs for GAF are its fixative polymers, used as a primary ingredient in hair mousses and sprays, and its Gantrez resin, used as an active ingredient in tartar-control toothpastes. GAFs acetylene chemicals business has held the company steadfast as one of the two world leaders in the industry.

Principal Subsidiaries

GAF Broadcasting Co., Inc.; GAF Export Corp.; GAF International Corp.; GAF Realty Corp.; General Aniline & Film Corp.; GAF Chemicals Corp.; Jay & Co., Inc.; Mayfair Investments, Inc. The company also lists subsidiaries in the following countries: Australia, Austria, Belgium, Bermuda, Brazil, Canada, France, Italy, Japan, Korea, Singapore, Sweden, Switzerland, South Africa, United Kingdom, and West Germany.

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