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|Subject: Labor of a Modern Hercules: Evolution of a Chemi||Date: 1/1/2009 1:32 PM|
|Author: pauleckler||Number: 517 of 744|
“Labor of a Modern Hercules: Evolution of a Chemical Company,” by Davis Dyer and David B. Sicilia, Harvard Business School Press, Boston, 1990. This 528 page hardback tells the story of the Hercules Powder Co. from its beginning in 1912 as a spin off from the Dupont antitrust case. (Atlas Powder was created at the same time as the third, smallest company.) In the beginning Hercules was exclusively an explosives company making blasting powder and dynamite, black powder and smokeless powder.
Hercules came of age in World War I, supplying large quantities of explosives and propellants. During to war, chemicals previously supplied from Europe were in short supply due to wartime blockades. Much of the US chemical industry expanded to supply products no longer available from Germany or needed for production of munitions. Dupont, Dow, Allied Chemical, American Cyanamid, Monsanto, Union Carbide, Koppers, and Atlas are usually mentioned as companies who grew to meet the needs of the Allies.
Nitrates came from mines in Chili, but in limited amounts. Synthesis of ammonia by the Haber process had been developed, but the technology was primitive. Potash used later in fertilizer was needed to make potassium nitrate. Hercules became a major supplier of smokeless powder at its facilities at Kenvil, NJ. Hercules made TNT at Kenvil, and at Hercules, CA, and operated a new government plant built at Nitro, WV near Charleston, intended to make smokeless powder, but only partially completed by Armistice Day.
The story of acetone is told in detail. The British needed cordite as propellant for naval guns, but highly nitrated nitrocellulose required processing with acetone rather than the alcohol usually used. Acetone was a by-product of charcoal manufacture made by pyrolysis of calcium acetate. It should have been possible to convert vinegar, but Hercules’ attempt at vinegar production at Kenvil and a related attempt by US Industrial Alcohol near Baltimore both failed. Hercules also set up to process kelp near San Diego, CA at Chula Vista. Chopped seaweed was fermented to produce calcium acetate (for conversion to acetone) and potassium chloride. Hercules supplied 857K lb of acetone to the British with this process, but the operation was unprofitable and was discontinued after the war. Ultimately Chaim Weizmann’s fermentation process successfully met the need for acetone, but operations at Commercial Solvents Corp. did not begin until after the war. Weizmann was knighted for his contributions to the British war effort, and became an advocate for the creation of Israel. Later he became her first president. Meanwhile, the British revised their requirement to cordite RDB, which used ether alcohol, presumably Cellosolv, instead of acetone.
After the war, all three companies set out to build chemical businesses using nitrocellulose plants acquired from the government as surplus. Hercules differentiated itself from Dupont and Atlas by avoiding forward integration. They were the merchant supplier of nitrocellulose. They did not compete with their customers, a strategy that served them well.
In the 1920s, nitrocellulose grew as an ingredient of fast drying enamels for autos and furniture and of coatings for artificial leather (then used on cloth-top automobiles). Scrap nitrocellulose partially hydrolyzed with sodium acetate resulted in a low viscosity product used in Dupont’s Duco auto paint. Hercules developed a direct process that gave better quality nitrocellulose. Major customers were Glidden, Sherwin Williams, Egyptian Lacquer and Dupont.
After the war, Hercules used profits to diversify. Yarin Rosin and Turpentine was purchased with plants in Brunswick, GA and Gulfport, MS, in the belief that harvesting the necessary pine stumps was a potential market for dynamite. Naval stores is a traditional agricultural business from colonial days. Pine tar was used to chink the bottoms of wooden ships. Turpentine was an inexpensive lamp fuel in the 1830s (until eventually displaced by kerosene from oil). By 1900, rosin became the major product for use as paper size, yellow soap, in varnish, and medicine. The major competitors were Yaryan and Newport (in Bay Minette, AL and Pensacola, FL.). The book includes a detailed summary of the naval stores business.
The naval stores business provided a series of challenges. The plants acquired were run down and poorly designed. Engineering, investment, marketing, and product refinements were helpful. Hercules branded turpentine was offered in hardware stores to overcome adulteration, and substitution problems. Refined pine oil was developed as a sweet smelling disinfectant. Better quality resulted in improved ore floatation reagents. Pine oil proved useful in textile dying to remove contaminants replacing less effective mineral and vegetable oils. Fractionation of pine oil and processing rosin to remove color–especially with furfural–followed. Pinene separated from turpentine became a major product used to make synthetic camphor. Paper size had been the largest consumer of rosin (followed by linoleum with Armstrong Cork the largest customer). Hercules acquired Paper Makers Chemical Corporation, the leading supplier of paper size, in 1931.
With the success of the commercial nitrocellulose business, in 1926, Hercules acquired Virginia Cellulose of Hopewell, VA, its supplier of cotton linters. The business expanded and became the leading supplier of cellulose for the chemical industry. As the industry began to shift to rayon and cellulose acetate, Hercules followed with a plant for cellulose acetate at Parlin, using licensed IG Farben technology. Production began in 1936, but the process was improved in stages through 1940.
Staybelite hydrogenated rosin (with improved resistance to aging, discoloration, and embrittlement) was introduced in 1938. A process change to benzene extraction resulted in recovery of a hard, insoluble resin, Vinsol, eventually sold as sealant for electrical connections. These emphasized the classical co-product problem of the chemical industry, i.e., the need to sell the various co-products from naval stores processing. Of the dozens of products offered, only a handful contributed over a few thousand dollars in sales.
In 1936, a Synthetics Department was created to market even more sophisticated rosin derivatives including Abalyn rosin methyl ester, Hercolyn hydrogenated rosin ester, and Petrex synthetic resins. The products were used in plastics, protective coatings, inks and adhesives. Distillation of crude tall oil to produce tall oil fatty acids and tall oil rosin was begun at Savannah and at Franklin, VA, in 1955.
Hercules undertook production of synthetic ammonia from natural gas at Hercules Works in California using the L’Air Liquide process in 1939. The ammonia was needed for nitric acid and ammonium nitrate in explosives but could also be sold as fertilizer.
As World War II approached, Hercules took on contracts to supply Allies with powder. Tragedy struck on Sep 12, 1940, with a major explosion at Kenvil killing 55. Residual flammable solvent was being recovered from processed smokeless powder when a flash fire ignited. The book tells the story of the explosion in detail but disputes the possibility of German sabotage. According to “Hitler's Undercover War: The Nazi Espionage Invasion of the USA,” (by William Breuer St. Martins Press, NY, 1989), one week after elections, on Nov 12, 1940, three US munitions plants exploded mysteriously at 10 min. intervals beginning at 8 am. (They were Trojan Powder in Allentown, PA, killing 16; United Railway and Signals, manufacturer of torpedoes, in Woodbridge, NJ; and Burton Powder Works in Edinburg, PA.)
In 1940, the government authorized 60 Government Owned, Contractor Operated (GOCO) plants. Hercules operated one at Radford, VA. The plant made its own acids, nitrocellulose and finished smokeless powder on three lines operating around the clock. Operations began by April, 1941. Later Hercules contracted to operate five additional GOCO plants including New River, VA (bag loaded artillery ammunition), Volunteer Ordinance Works, Chattanooga, TN (TNT plant), Missouri Ordinance Plant, Louisiana, MO (ammonia plant), Badger Ordnance Works, Baraboo, WI (smokeless powder), and Sunflower Ordnance Works, KS (smokeless powder). In addition operations at Hopewell, Parlin, Kenvil, and Belvidere continued. In 1942, manufacture of propellants for small rockets (e.g. bazookas) began at Radford and later at Sunflower.
At Radford in 1942, Hercules pioneered the Pentolite shell explosive, a mixture of TNT and pentaerythritol tetranitrate (PETN). The radio proximity fuse was a key development of the war. Hercules developed a potting compound for the electronics and its plastic nose cone.
Acetic anhydride was needed for the production of cellulose acetate. Initially supplies were purchased from Union Carbide, which added acetic acid to ketene made from propylene. In 1942, a plant was constructed at Parlin using Tennessee Eastman’s acetic acid cracking process. Cellulose acetate production was expanded, but a shift to wood pulp threatened the cotton linter business. Meanwhile, use of rayon in tire cords grew to consume 40% of production by the end of the war.
War time research had additional results. The initial success of pine oil in insecticides resulted in a series of innovations based on chlorinated materials, eventually leading to Toxaphene, a selectively chlorinated camphene. In the government’s synthetic rubber program disproportionated rosin proved an effective surfactant for emulsion polymerization producing a latex that retained tack without interfering with peroxide initiators.
After the war, production at the GOCO plants stopped, but in 1946, three of the plants, Radford, Sunflower, and Missouri Ordinance, were reopened to make ammonium nitrate for fertilizer for western Europe. That work ended in 1948, but production of Naval rockets continued at Radford. Management of the Navy’s Allegany Ballistics Lab near Cumberland, MD was undertaken in 1946. Solid rocket propellants were developed for Nike, Honest John, Sparrow, Matador, Terrier, Talos and JATO booster rockets. Minuteman and Polaris followed. Radford and Sunflower were both reactivated during the Korean conflict, then mothballed in 1953.
The explosives business changed dramatically with the development of ammonium nitrate explosives. Their utility became apparent after the Texas City disaster on April 16, 1947, when a ship loaded with 2500 tons of ammonium nitrate fertilizer exploded in the Texas City harbor killing over 500 and destroying 3400 residences. The industry had been gradually reducing the nitroglycerine content of its ammonia dynamites and eventually concluded that no NG was needed. Ammonium nitrate/fuel oil blends could do the work of dynamites costing 20 times more.
Hercules' two early plastics products were cellulose acetate and ethyl cellulose, but they soon began to lose market to petrochemical plastics like polystyrene and polyvinyl chloride. Production of CMC (carboxymethyl cellulose), a thickener, suspending agent, began in 1945, and grew rapidly. Hercules' product proved superior to that of competitors, but shortages developed in 1948 as demand exceeded Hercules' ability to expand. CMC became a major profit contributor.
Hercules management took a conservative approach to petrochemical projects. They decided not to buy surplus government plants after World War II that could produce monomers for plastics. However, the Naval Stores research department discovered the cumene hydroperoxide process for phenol and acetone in 1949. Production began at Gibbstown, NJ in 1955. The process was licensed to others. Paracresol and di-t-butyl p-cresol, an antigumming agent for gasoline and antioxidant for animal feeds, soon followed.
Dimethyl terephthalate (DMT) became a major product. Polyesters had been invented in the 1930s by Calico Printers Association in UK, who pursued a line of research rejected by Wallace Carothers at Dupont in the development of Nylon. Polyethylene glycol terephthalate was recognized and production began by Dupont in 1950 and by ICI in UK in 1951. Initially DMT was made from para-xylene by nitric acid oxidation and then extensive purification. Hercules entered the business in 1952 making DMT by Imhausen's air oxidation process at Burlington, NJ in a small semiworks facility. The process was licensed to Dupont. A plant was built at Burlington to a long term supply contract with ICI. The work with Imhausen grew out of interest in fatty acids for conversion to esters of pentaerythritol for use as plasticizers and synthetic lubricants. Imhausen had access to German wartime technology for the air oxidation of linear paraffins to suitable fatty acids.
Polypropylene was a second major petrochemical plastic venture. After working with Dr. Karl Zeigler for several years in the 1950s, Hercules obtained the right to manufacture and sell aluminum alkyl catalysts and, in 1954, low pressure, polyethylene. Aluminum alkyls were developed in partnership with Hoechst. Aluminum trialkyl catalysts were produced by Texas Alkyls, a partnership with Stauffer Chemical beginning in 1958.
Hercules soon commercialized polyethylene and polypropylene, but numerous competitors entered the field, and prices fell. The result was a constant battle to develop new improved products and reduce costs. Similarly, the DMT business was challenged by lower cost, purified terephthalic acid (PTA) when Amoco, a vertically integrated competitor, entered the business in 1956. Eventually, PTA began to dominate and Hercules began production of it, too.
Missouri Ordinance Works was acquired and renamed Missouri Chemical Works. It was conceived as a centrally located facility to manufacture chemicals from natural gas. Methanol, formaldehyde, and pentaerythritol plants were constructed in 1956. Production of PE at Mansfield, MA (acquired in 1941) was discontinued.
In the 60s, Hercules pursued the growth of polypropylene and terephthalates for polyesters. Plants were expanded, new plants were built, and international ventures were undertaken. Polypropylene was extended into films and fibers. Carpet fiber became a major application. The businesses grew, but margins were low due to intense competition.
Hercules set out to reinvent itself with the creation of the New Enterprise Department in 1968. New businesses included modular housing, waste treatment, credit card readers, and photopolymer relief printing plates. In 1970, rosin, cellulose, phenol, and methanol were identified as cash cow businesses; petrochemicals were stars. Efforts to diversify included the purchase of Polaks Frutal Works, a flavors and fragrances company, in 1973. It was the most successful of the new ventures and was related to several naval stores derivatives. There was also discussion of jvs with oil companies to secure supplies of raw materials, but none was completed.
In 1975, the DMT business changed dramatically as the energy crisis increased the cost of raw materials dramatically. Meanwhile, Dupont cancelled a major purchase agreement. The following summer, Hercules put DMT, TPA, para-xylene, and methanol into a joint venture with Petrofina with Hercules owning 75% of the venture; the remainder of Hercofina was sold to Petrofina in 1985. In 1982, polypropylene was determined to be not profitable enough. It was put into a global jv with Montedison under the name, Himont. In 1987, 22.6% of Himont stock was offered to the public in an IPO; later Hercules sold its remaining shares to Montedison. The last of the commercial explosives business was divested in 1985.
For years CMC was a highly profitable business. In addition its food uses fit nicely with the flavors and fragrances business. However, the big volume was industrial, specifically drilling fluids for oil production. Profits deteriorated when the energy picture changed in the early 1980s. CMC was put into Aqualon, a jv with Henkel, in 1986; in 1989, Henkel sold its interest in Aqualon to Hercules.
As the book ends, Hercules is essentially Aqualon, the flavors and fragrances business (later put into a jv with Mallinckrodt's flavors business), graphite composites, and solid propellants. In the 1990s Hercules' bid for Unilever's National Starch unit and lost out to ICI. Later, it went heavily into debt to acquire Betz-Trevose, but the debt load nearly bankrupted the company. Betz was then sold to General Electric to become the basis of their water treatment business. Finally, in '08, Hercules was acquired byAshland Chemicals, the former oil company, now a specialty chemicals company. In its final 10K report, Hercules lists only paper chemicals and Aqualon as properties owned.
Hercules' history can be considered typical of a US chemical company. Most became sizeable operations in World War I, survived the Great Depression, and again prospered in World War II. After the war, plastics related technologies had high growth potential and for a while were highly profitable, but competition gradually became intense while raw materials costs skyrocketed especially after the energy crisis. Chemical products usually have a finite life cycle. Changes in technology and styles can limit the useful life of investments. As patents expire, competitive advantage goes to the strong who have positioned themselves best. To survive long term requires constantly reinventing the company, but many have trouble finding viable replacement businesses of suitable size and profitability. Those that fail, decline. Those that successfully navigate the changes are the industry giants.
The current volume is a detailed report of a chemical business. Students of the industry will find it informative. Appendix with list of interviews and directors. Glossary. References. Index.
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