Randy Dearth has July 1 circled on his calendar. That's when Lanxess Corp. will take its first step outside of Bayer Corp.
Pittsburgh-based Bayer is spinning off its chemical business and part of its polymers business into Lanxess. Bayer is the North American unit of Bayer AG of Leverkeusen, Germany. Lanxess' corporate parent - Lanxess AG - likewise will be based in Leverkeusen.
What's left of Bayer will focus on products for the health-care, nutrition and life-science markets. Bayer will own Lanxess, but plans an initial public offering for the spinoff company in early 2005.
Dearth, a 16-year Bayer veteran, will serve as president and chief executive officer of Lanxess Corp., which will employ 2,100 in the United States and have U.S. sales of more than $1 billion. Lanxess Corp. will be based in Pittsburgh, where it expects to employ 350. Overall, the United States will account for about 16 percent of Lanxess AG's sales and about 11 percent of its workforce.
Plastics will rank second behind rubber in terms of sales and volume for Lanxess. The firm's main plastic products will be ABS; specialty stryenic resins, such as acrylic styrene acrylonitrile and styrene acrylonitrile; polybutylene terephthalate; and nylon.
Thermoplastic polyurethanes may be part of the Lanxess product mix as well.
``Plastics will be a key component of our business,'' Dearth said in a May 10 interview in Pittsburgh. ``We'll be focused on styrenics and are looking at whether we treat ABS as a commodity material or as a specialty. That will drive our decision as to how we use our assets.''
In making that decision, Lanxess will look at other markets for potential areas where ABS can overlap with other Lanxess products such as additives and pigments sold into the plastics market.
``The key issue in styrenics is capacity,'' Dearth said. ``We have to look at optimizing our capacity and deciding what markets and what products we want to be in.''
Lanxess plans to look at existing markets for ABS while also focusing on new niche markets. The new firm has its work cut out, however, since North American ABS sales plunged almost 10 percent in 2003, according to the American Plastics Council in Arlington, Va. High prices for butadiene feedstocks - and for benzene, which is used to make styrene monomer - also have hurt the product's profit margins.
Bayer bought the ABS business from Monsanto Co. for $580 million in 1995. Bayer spent $100 million on technology improvements at an ABS plant in Addyston, Ohio, but cut 200 jobs at the site in 2000. The firm also closed a site in Muscatine, Iowa, in 2000 after closing a plant in Lasalle, Quebec, in 1997.
``The advantage of having a Lanxess strategy vs. a Bayer strategy is that with Lanxess, ABS can be at the forefront,'' Dearth said. ``At Bayer, everything was second to polycarbonate.''
``We feel this approach can only benefit ABS. It didn't really get the attention it deserved at Bayer.''