PITTSBURGH (March 27, 11:35 a.m. EST) — Bayer AG scientists have tackled some tough equations in the company's century-plus history. Now they're working on addition by subtraction.
Essentially, Bayer wants to grow its markets and broaden its customer base through a sweeping reorganization, while at the same time cutting 15,000 jobs by the end of next year. Ian Paterson, head of the America's region for Bayer's newly formed polymers unit, said the firm is up to the challenge.
“We have to plan on how we're going to look at the end of 2004,” Paterson said March 13 at a pre-NPE media event at Bayer's U.S. headquarters in Pittsburgh. “We have to think in smart ways about what we do. In some areas like business development, we were replicating efforts over and over again. I'm absolutely convinced we were offering services that our customers didn't want or weren't willing to pay for.
“This reorganization is the most far-reaching in Bayer's 140-year history and the changes in polymers are the most profound,” added Paterson, a 25-year Bayer veteran who was named president and chief executive officer of Bayer Polymers LLC in November. “We've seen our margins erode and we're facing more global competition, so this is something we absolutely have to do.”
By reducing its five operating units to four, Leverkeusen, Germany-based Bayer has created a polymers unit that includes plastics like polycarbonate and ABS, as well as polyurethane, rubber and coatings raw materials. The new polymers unit had 2002 sales of 10.8 billion euros ($11.6 billion) and employs 22,000 at 120 sites worldwide.
Polymers now is the largest of Bayer's four operating units, accounting for more than 36 percent of total sales. Tough business conditions resulted in a loss of $132 million in 2002, as sales fell more than 2 percent.
Bayer already has cut 1,000 polymers jobs in Belgium, Brazil and Canada. The 5,000 total polymer job cuts that are expected equal 22 percent of the total polymers work force at the start of 2002.
“The new organization has far more transparency, more dialogue and a more open culture,” Paterson added. “Each unit can act as an individual organization and can do more individual resource allocation.”
A key change is the altering of Bayer's marketing structure from one run by product lines to one run by industries.
“Before, customers would have three different [Bayer] people from three different units calling on them and it got to be very confusing,” Paterson explained. “Now, there's one key contact for each customer — one rep who can take care of all their needs.”
Bayer's polymers unit also has set an aggressive goal of doing 25 percent of its sales in Asia by 2005. Currently, Bayer's Asian polymer sales are “well under” that level, according to Paterson.
Bayer is in the midst of expansions that will add significant PC capacity in China and Thailand by 2006. The firm also is seeking approval for a new PU plant in China.
“We have a lot of investments in the Shanghai region,” Paterson said. “It's important to have access to the Chinese market.”
At NPE, Bayer plans to focus on new grades of its Bayblend-brand PC/ABS and Apec-brand PC-based copolymer. The new Bayblend grades were commercialized late last year, while the new Apec products aren't commercial yet.
The new Bayblend offerings are halogen-free extrusion grades that can replace PVC in bus and railway panels and in mass-transit seating, according to Mark Witman, director of Bayer's plastic injection molding technology center in Pittsburgh. In Apec, the new grades will be used in lighting and high-heat consumer applications.
Bayer also is working on a developmental PC copolymer with better transparency and chemical resistance than competing resins, Witman added.
Two new grades of Leda-brand color effects used in Bayer's pre-colored PC and PC/ABS compounds also recently hit the market. Deja Blue — a bright blue with a glowing edge — and Atlantis — which color shifts between purple and green — are finding uses in a variety of electronic and consumer areas. Leda is part of Fantasia, Bayer's color and special effects program launched last year.
Bayer's plans for finding new frontiers for its products hinge on “ideation” sessions where Bayer brainstorms with customers to develop new ideas. Bayer involves industrial designers in the process to find new ways of looking at the form and function of its materials, according to Bob Kumpf, vice president of Bayer's Industry Innovation and Creative Center in Pittsburgh.
New areas for Bayer to explore include water infrastructure and mass-consumer customization, Kumpf said.
“Some studies say it's going to take a trillion dollars to fix U.S. water infrastructure in the next 10 years,” Kumpf said. “And Generation Y consumers are used to having products customized to their own individual tastes and preferences.”
Beyond those uses, Bayer resins could end up in small engines, flexible displays and nonautomotive fuel cells.
“Some of these ideas sound far-out,” Kumpf said. “But that's necessary in the modern world to understand what's happening with our markets.”