W. German Chemical giants in flux

The year 1980 proved a rough one for West Germany's major chemical companies. Germany's "big three" chemical giants have run ahead of world competition since their birth in the 1860s as ambitious dye concerns. They were first to synthesize rubber and liquefy coal, and also the first to brew chemicals for the battlefield. They survived two world wars, divestiture and economic collapse, and even today, BASF AG, Bayer AG, and Hoechst AG rank as the three biggest chemical companies in the world, with total sales of $45 billion.

Profits are falling, however, and competition is growing and raw material prices are climbing, leaving even the most optimistic German chemical executives doubting how long the lead can last.

By now the chemical companies believe unanimously that the worst is past, but no surge in new orders is yet visible.

The industry usually faces slack demand in summer. But it was specially bad last summer. Bayer had to put 4,100 employees on short time, just two weeks after Hoechst cut its production, and BASF is rapidly changing its product mix to offset fierce cut-rate competition from the United States and gestating OPEC producers armed with Western technology. BASF chairman matthias seefelder, interviewed at his Ludwigshafen office, overlooking the world's largest industrial complex, said, "It is, of course, not a terribly sunny outlook. We need to adjust and learn to live with slower growth rates." In fact, his company recently announced a 48 percent drop in pretax profits for the third quarter of 1980.

BASF -- which became the biggest of the three in a 1979 sales boom -- has already done much. Ten years ago it made its first vitamins, and it now stands second only to Hoffman La Roche in Europe. It is slowly moving away from bulk chemicals to more sophisticated products, hoping to sidestep competition which can easily imitate the more simple chemicals. And as demand shrinks at home, it is diving headlong into foreign markets. BASF last year invested some $170 million in the United States, it is building plants in Brazil for more than $100 million, and it is reorganizing management to emphasize overseas expansion. "We see our chances and we grab them," says Mr. Seefelder, a former chemist, who holds some 100 patents himself.

Bayer is the best known of the three because of its wide line of consumer products, but it is also the smallest in sales. It has traditionally been most profitable, however, and with the purchase of Miles Laboratories and Cutter Laboratories in the US, it has become a leader in the recession-proof drug industry (but it lost trademark rights in the US after World War I, and Bayer aspirin there is made by Sterling Drub). Bayer also hopes to bolster Agfa-Gevaert, the world's second-largest photo concern, in which it holds a 60 percent interest.

Last year, Agfa-Gevaert was more bane than boon, as soaring silver prices caused giant losses, but Bayer is confident that its laboratories can turn out revolutionary new photo-chemicals which could help make the marriage mutually profitable.

Hoechst was the largest of the three for most of the past decade, but its concentration on fibers and plastics -- both highly energy-intensive fields -- has left it open to cut-rate competition. Now, Hoechst is spending some $600 million annually in product-oriented research. Its scientists are searching for breakthroughs, such as producing protein from natural gas and methanol.

But even as profits shrink and competition grows, Germany's big three are plotting a future course they feel will keep them atop the industry. Under the common roof of Adolf Hitler's chemical combine, I. G. Farben, they cooperated as the largest company in the world. Evil tongues now accuse them, even though totally separated after World War II, of neatly splitting up product lines so as to minimize price-damaging competition. Industry executives scoff at this, explaining it is only natural to play to your strengths and away from those of others.

Clearly, all three must rely on one common strength: innovation. They have invented hundreds of new products, including such items as Novocain and magnetic recording tapes, and they know their future health lies in more of the same. All three have more than doubled their research outlays in the past 10 years.

Still, many wonder whether Germany's superchemists will be enough in a future filled with so many challenges. Mr. Seefelder notes, "We have reached such a high level of technology that breakthroughs will come only in small details . . . we are at the beginning of what will be a long-lasting period of change."