Message Font: Serif | Sans-Serif
No. of Recommendations: 2
“Rohm & Haas: History of a Chemical Company,” by Sheldon Hochheiser, University of Pennsylvania Press, Philadelphia, 1986. This 231 page hardback is the story of Rohm & Haas Chemical Company, one of the preeminent specialty chemical companies of the US. The story of Rohm & Haas is indicative of specialty chemical companies. It demonstrates well that such companies must continually reinvent themselves as competitors eat into their markets and reduce profitability. Having hit on a major growing market such companies exploit them while they grow. But the inevitable maturing of markets means that new ventures must continually be undertaken to replace the old. Most are insignificant in the early stages, and many mature at levels too small to compensate for losses. The search for new winners is almost like panning for gold.

The story of Rohm & Haas begins in 1906, when two German friends, Dr. Otto Roehm, a chemist, and Mr. Otto Haas, a veteran of the German textile dye business, formed a partnership to market an improved leather tanning chemical, which had been invented by Dr. Roehm. The product was named Oroh, later Oropon, from the inventors names. It was based on the realization that leather tanning was an enzymatic process. They were able to provide a more reliable product than the traditional dog manure using enzymes extracted from the pituitary glands of butchered animals. From the beginning, their sales approach was to work closely with leather tanners to demonstrate that their product was superior to the alternative. The business prospered. They began manufacturing first near Stuttgart, and later at Darmstadt.

In 1909, Otto Haas returned to the US to set up an American branch of Rohm & Haas in Philadelphia. The business prospered and was profitable by 1911. Gradually additional tanneries accepted the product, resulting in a regional office in Chicago that served tanneries in Milwaukee. Next business was extended into South America, in particular to Argentina and Chile.

The outbreak of World War I in 1914, interrupted the supply of chemicals that had been imported from Germany. Based on his knowledge of the tanning industry, Haas began the resale of sodium sulfide, used as a dehairing agent. By 1917 other tannery chemicals had been added including a chrome tan, leather finishes, fat liquors, and Titanene, a mordant for dyeing. The Bristol, PA production site was purchased in November, 1916.

During the war anti-German feelings ran high. American subsidiaries of two German chemical companies, Heyden Chemical Works and Bayer Chemical, were accused of cornering the market in coal tar derived phenol and converting it into aspirin to prevent its being used in the manufacture of military explosives. The Office of the Alien Property Custodian, the APC, monitored “alien businesses.” Rohm & Haas was carefully monitored, and was forced to sell the Roehm portion of the business, which was replaced by the Tanners Council. Rohm & Haas became the first American producer of sodium hydrosulfite, a reducing agent used in dying textiles, under the name Lykopon in 1919.

Research was carried on at Rohm & Haas almost from the beginning. Initially, Ph.D. chemists at the early plants had small research staffs. Their research was mostly in support of existing products and resulted in several publications. The first full-time researcher was a leather chemist named Harold Turley hired in October, 1924. An organic chemist was hired to investigate insecticides in 1926. The first successful product was Lethane, a replacement for pyrethrum in household fly sprays. Studies of high pressure catalysis resulted in two additional products iso-octane and dimethylamine. Both were manufactured at Bristol, beginning in 1932. Isooctane was the standard used for gasoline octane ratings; dimethylamine was a dehairing agent used in leather tanning.

Acrylic acid, its esters and polymers, continued to be of interest at Rohm & Haas. Dr. Roehm in Germany had done his Ph.D. thesis on acrylates. In the 1920s, research was resumed. By 1926 he had a practical synthesis for acrylic acid. In 1928, Luglas polymethyl acrylate safety glass interlayer was introduced in the German market. Rohm & Haas followed up with Plexigum in the US in 1931. Both products were initially successful, but they were soon displaced by technically superior, less costly polyvinyl butyral. In 1929 hydrosulfites were the dominant line supplying 40% of Rohm & Haas revenues.

Haas took great pride in being able to avoid layoffs during the Great Depression. Workers were kept busy painting, and otherwise improving the property during slow production times.

Haas continued his interactions with German chemical companies looking for products he could introduce in the US market. One was a rosin modified phenol formaldehyde hard resin used in varnish manufacture. It had been developed by Chemische Fabrik Dr. Kurt Albert, under the name Albertol. This product was more consistent than the natural resins and was easier to use. A new company Resinous Products and Chemical Company was set up with the Albert company as an equity partner to manufacture the products which were renamed Amberol for the US market in 1926. Success of these products, specifically for fast drying varnish, was rapid and growth rates were high. A series of the plant expansions followed through 1932. As a result Rohm & Haas undertook research in the coatings area.

Depressed prices resulted in the acquisition of 11,000 acres of Florida pine forests in 1931, organized under the name Southern Resin and Chemical Company as a source of rosin for Amberol. Several competitors evolved, but Rohm & Haas was the industry leader in hard resins for varnish. Paraplex plasticizer for nitrocellulose lacquers was developed in 1930. Duraplex alkyd resins (based on formulas purchased from IG Farben) soon followed. Oilsolate dryers for varnish and Uformite urea-formaldehyde resins were also introduced in the 1930s. Tego paper impregnated adhesives for plywood were added in 1934, replacing natural glues based on blood albumin or casein. Tego had been originated by Theodore Goldschmidt AG of Essen, Germany. Tego plywood was used in construction of Howard Hughes large plywood airplane, the Spruce Goose, during World War II. Liquid urea-formaldehyde adhesives for plywood were introduced in 1938.

Research on acrylics continued both in the US and in Germany. In 1931, a first sample of polymethyl methacrylate was prepared. Its high hardness made it easily worked with standard tools. In Germany, Roehm licensed its acrylate technology to IG Farben so it could focus its limited resources on methacrylates. With improvements in processing and manufacturing, Plexiglas soon followed. Production of methyl methacrylate monomer began in Darmstadt in 1933 using a primitive acetone cyanohydrin/P2O5 process (referred to as the A process). (A similar process had earlier been used to make acrylic acid from ethylene chlorohydrin, for which IG Farben had developed a process in World War I as an intermediate for mustard gas.)

In 1935, ICI in Britain was found to have developed an improved process (the B process, acetone cyanohydrin with acid cracking), which was licensed in return for cast sheet technology. In spite of restrictions imposed by the Nazi government, Haas learned sheet casting from Roehm, but was unable to license the ICI process for monomer manufacture until the mid-1940s. The first market for Plexiglas was canopies for military aircraft. Contrary to popular belief, bullets did not bounce off. They produced a clean hole, but the glass was light weight, easily shaped by warming, and did not shatter. Eventually methods for both blow molding and vacuum forming were developed. In March, 1943, an abandoned furniture factory in Knoxville, TN was converted to Plexiglas production. Butyl lactate was adopted as a plasticizer for Plexiglas to improve formability.

Dr. Herman Bruson was a highly inventive chemist at Rohm & Haas. He invented Oilsolate driers, Paraplex plasticizers, and Triton surfactants. His experiments with polymers of long chain alcohol methacrylates resulted in the discovery of the Acryloid viscosity index improvers used to improve the low temperature properties of motor oils and hydraulic fluids. The Acryloids were the second most important products produced by R&H to aid the war effort. They made possible high altitude, low temperature flying. Bruson claimed that Acryloids in the Russian tanks and artillery were responsible for their ability to function in low temperatures in the Battle of Stalingrad, an advantage the Germans lacked. He also discovered Hyamine 1622, a quat bactericide, in 1939. In 1940, R&H was first to commercialize acrylonitrile, an important component of synthetic rubber in World War II (probably from ethylene chlorohydrin).

In 1942, Rohm & Haas, Dupont, ICI, IG Farben and Rohm and Haas AG were charged under US law with price fixing of acrylic products. Rohm & Haas and Rohm and Haas AG shared technologies and had agreed not to sell in each others markets. Dupont and ICI had agreements to automatically license each others patents in their home countries. Rohm & Haas and Dupont ended up with patent conflicts. A cross licensing agreement was reached on Plexiglas and later dentures. In 1945, all defendants were acquitted by jury trial. In a damages trial that followed, R&H decided to settle. Patent licenses with IG Farben and Darmstadt were cancelled, but non-exclusive licenses were retained. The firm also agreed to give non-exclusive, royalty free licenses under its acrylic patents to any applicant.

In World War II, APC again monitored the company. Its minority interest shares were seized and two directors were placed on the board. After the war, the company was taken public (Jan 17, 1949) and minority interest shares were sold to the public. Proceeds from the stock sale were distributed to Dr. Roehm’s children after his death. R&H was listed on the NYSE in April.

After the war, sales of Plexiglas were slow. Signs and juke boxes were early peacetime successes. Colored Plexiglas made possible back lighted signs, which proved popular. Plexiglas molding powders, used for taillights for the auto industry, followed in 1946. Competitor Dupont abandoned the acrylic sheet business (Lucite) in 1953.

Improved acrylate process research continued. Initially sodium cyanide was purchased for Dupont, a competitor. In 1945, R&H developed a direct process to make HCN by catalytic reaction of ammonia with natural gas. A site was purchased to implement the process on the Houston Ship Channel in 1946. In 1951, an H process plant to make higher alcohols for the Acryloids was built nearby. After the war, knowledge of IG Farben’s Reppe acetylene chemistry became available. He had discovered the production of acrylic acid by the addition of carbon monoxide to acetylene in the presence of nickel carbonyl catalyst. With extensive improvements, this became the F process. Efficient operation needed larger scale than the current acrylate requirements. The company undertook development of acrylic emulsions for paints to expand use of acrylates. The first product was Rhoplex AC-33, sold to paint manufacturers for latex paints.

Early latex paints had been introduced shortly after the war. They were based on synthetic rubber emulsions. Styrene-butadiene and polyvinyl acetate latexes had significant deficiencies, but low odor and easy clean up made them popular with consumers. AC-33 offered major technical advantages, but low gloss and poor adhesion were still weaknesses compared to oil based alkyds. Improved ion exchange resins, used for water treatment, were developed and offered under the Amberlite brand name.

During the war DDT proved highly effective in the hands of the military to combat typhus and malaria. After the war, numerous companies entered production. One was Rohm & Haas, with a small plant at Bristol. But it could not operate profitably and was shut down in 1955.

Dithane, an agricultural fungicide in the thiocarbamate family, was discovered in 1941, and proved effective on a variety of crops. It was marketed in a series of formulations beginning soon after the war. New herbicides were developed. Stam was introduced in 1961; Tok in 1962.
Otto Haas died on Jan 2, 1960. On his deathbed two days before he resigned his position in the company and arranged for his son, F. Otto Haas to succeed him. Mr. Haas had been proud of the way he treated his employees. He built employee club houses at both prewar plants and maintained a beach for employees on the Delaware River at Bristol. From 1949 to 1970, R&H operated the government’s rocket propellant research labs at Redstone Arsenal in Huntsville, AL. Central research laboratories were established at Spring House, PA in 1963.

A government butadiene plant from the wartime synthetic rubber program was purchased in 1961. A B process methacrylates plant was constructed on the site, but was promptly mothballed due to weaker than expected demand. Production of adipic acid, a plasticizer intermediate, was begun there in 1962. In 1968, R&H had four 72 MM lb/yr methacrylates plants: one at Bristol, one at Louisville, and two at Houston. A decision was reached to construct a single 400 MM lb/yr plant using the T process at Houston. The T process produced acrylates by oxidation of propylene. It had been developed in 1970 and piloted in Teaside, England.

Development of acrylic emulsions for latex paint continued. A steady stream of improved emulsions were introduced. Finally, by 1978 acrylics had all but displaced oil base house paints in the domestic market. Products were also developed for use in printing inks, floor polishes, industrial and maintenance paints. Larger kettles were installed for emulsions in Louisville, Bristol, Knoxville, and at a new plant in Croydon, PA. A plant in Hayward, CA opened in 1972. Skane M-8 mildewicide was introduced for paint in 1971. Acrysol soluble acrylic thickeners were added the same year.

In 1970, R&H purchased the world wide rights to the Rohm & Haas name from the Roehm family. The German company became Roehm GmBH. The Haas family sold its interest in the German company at the same time. F. Otto Haas decided to retire for health reasons in 1970. Vincent Gregory, a Harvard MBA, and long term R&H employee replaced him.

Acrylic technologies succeeded very well. They were growth products for decades, but in time growth began to slow. Efforts were made to develop new business lines to continue overall growth. Fibers were selected as an attractive area. Several small acquisitions gave entree to the business, but the goal was an elastomeric acrylic fiber with potential in applications like Spandex or Lycra. Nylon 6 technology was purchased from Lurgi in Germany and a plant was constructed in Fayetteville, NC. Every possible mishap befell this business. Phillips Petroleum and Dow-Badische entered the market at the same time. The new acrylic fiber, Fiber XFE or Anim/8 failed to meet expectations. In addition to technical problems, principally corrosion to weaving looms, it arrived just as women gave up their girdles. A switch to textured polyester failed to rescue the venture. Then came the OPEC oil embargo causing raw material costs to skyrocket. Finally large losses necessitated an exit. The write down of $40MM wiped out profits for the year and R&H reported its first annual loss ever.

A series of veterinary acquisitions followed. Poultry diseases and hog cholera were the main targets. These business were sold in 1977 after the company concluded that the research effort needed to develop new products would over extend resources.

The new regulatory environment also caused difficulty. As early as 1954, a cluster of lung cancer was noted in employees working in the manufacture of strong base ion exchange resins. Studies eventually identified chloromethylether, one of the intermediates, as a human carcinogen. This discovery necessitated extensive engineering controls to minimize worker exposure to continue manufacture of these resins.

After Rachel Carson published her book Silent Spring in 1962, DDT became a controversial product. Eventually it was banned from the US in 1972. R&H had long since discontinued production of DDT, but several related pesticides also banned, were still in production, though none were major products. Passage of new federal regulations in 1972 required reassessment of the R&H pesticides products. The active ingredient in Tok was a suspected carcinogen and a suspected teratogen. Efforts to save this product continued until 1980, when a decision was made to remove it from the US market. In 1977, EPA attempted to cancel the registration of the active ingredient in Dithane. After additional testing, EPA agreed the product was safe but requested additional labeling. However, worker groups continued efforts to have Dithane banned. Those efforts were continuing in 1984.

In 1975, Vacor, a new rat poison was introduced that was much faster than traditional warfarin. Initial tests indicated it was safe to humans, but additional data indicated toxicity to humans. It was withdrawn in 1979. Blazer a herbicide for soybeans was introduced in 1979, initially in South America, and under an emergency EPA approval in six states. It promptly became Agricultural Chemicals’ largest domestic product. Kathon biocide was first introduced in Europe in 1976 for protection of metal working fluids. Acrylic emulsions were also introduced for coil coatings, roof mastics, and marine applications. Higher gloss emulsions were developed for house paints. Acryloids were also developed as impact modifiers for PVC plastics.

In 1978, the company undertook a review of its product portfolio based on Return on Net Assets (RONA). Several product lines were sold including Paraplex plasticizers, specialty enzymes, Hyamine biocides, and a diagnostic laboratory business. Acquisitions supplemented targeted businesses. They included purchase of a polycarbonate sheet plant in 1975, a line of PVC modifiers in 1981, water treatment by reverse osmosis in 1984, and Duolite ion exchange resins in 1984. Target areas included adhesives, electronic chemicals, engineering plastics, and biocides. Shipley Company, a supplier of electronics chemicals, was acquired in stages beginning in 1979. Rohm & Haas Seeds was formed in 1983 to exploit seed technology. The story ends before the acquisition of Morton Salt in 1991.

One is surprised to find no mention of acrylic automotive topcoats. These high durability coatings were adopted by the auto industry in about 1960, and they were a major user of acrylic monomers. One presumes that others were major participants but perhaps R&H played a role as a low cost supplier of the monomers. Also there is no mention of the “super slurpers,” highly water absorbent acrylic polymers that are responsible for super absorbent diapers, etc. It is surprising that R&H seems to have missed this major acrylic technology.

The book is not excessively technical. Chemical formulas are included in the appendix section. The section includes a list of R&H trademarks together with their date of registration, and the performance history of R&H stock from 1949 to 1984. References appear in each chapter, but most are to oral interviews or internal documents. A note on sources describes others. Index.

The book is nicely done, highly readable and provides a great overview of the specialty chemicals business. It should be required reading for those in that business. This is clearly a technology driven company who has refined the art to a high degree. Even so, R&H too has encountered reversals. Long term growth in such businesses is not a given.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.