Nalco Chemical Corporation History

Company History:

With nearly one-fifth of the global market for water treatment chemicals, Nalco Chemical Company dominates that $3 billion industry. By making good on its corporate pledge to "find the customer need and fill it," Nalco expanded from a base in water treatment into the production and sale of specialty chemicals and devices used in pollution control, oil production and refining, steel making, energy conservation, paper-making, food production, and mining. In the increasingly regulated and efficiency-oriented 1990s, Nalco worked to provide its diverse industrial customers with the means to solve their problems. By the mid-1990s, water treatment products only constituted about one-third of annual sales, and the company ranked as one of the largest specialty chemical suppliers in the United States.

The merger that formed the National Aluminate Corporation came as the result of a natural synergy between the Chicago Chemical Company and the Aluminum Sales Corporation. The former company, organized in 1920 by Herbert A. Kern, had sold sodium aluminate to industrial plants for boiler feed-water treatment, while the latter, founded in 1922 by P. Wilson Evans, sold sodium aluminate to railroads for the treatment of water used in steam locomotives.

At its inception, Kern's Chicago Chemical Company marketed a water treatment product called Colline to industrial plants in the Chicago area. Unfortunately for the company, the chemical, while very effective on Chicago water, was not quite so effective on other water supplies. Kern found that water was not the same everywhere, and that treatments would therefore vary. He did, however, discover that the chemical compound sodium aluminate was more effective and more universally marketable than Colline. By 1922 Chicago Chemical Company began marketing Kern's Water Softener, KWS Sodium Aluminate. Kern contracted Evans' Aluminate Sales Corporation to supply the chemical for Chicago Chemical's water treatment business. Soon afterwards, however, the Chicago Chemical Company constructed a new plant in the Clearing Industrial District for the manufacture of sodium aluminate for both companies.

Nalco was formed in 1928 as the National Aluminate Corporation, the result of a merger between Chicago Chemical Company and Aluminate Sales Corporation, both of which manufactured and sold sodium aluminate, and some of the interests of the Aluminum Company of America (Alcoa), which held several patents on the manufacture of dry sodium aluminate. By 1929 the National Aluminate Corporation founded Visco Products Company to manufacture chemicals used in drilling oil wells. This company established National Aluminate within the oil industry. National's sales for the year 1929 totaled more than one million dollars.

In 1933 Emmett J. Culligan, then a chemist at National, persuaded Herbert Kern to allow the company to produce a water softening, gel-type chemical zeolite. Culligan was appointed manager of the new zeolite department at the Clearing Facility. The plant was ultimately forced to expand because of the large amount of space needed to manufacture the zeolite. Drying the material required several blocks of streets, leased from the Village of La Grange Park, Illinois. In 1935, after Emmett Culligan left National on friendly terms to start his own water softening company (now known as Culligan International), the company replaced the zeolites with more efficient synthetic ion exchange resins.

In 1937 the company constructed one of the first windowless, air-conditioned plants in the country, across the street from the old factory. National's sales for the year 1939, near the end of the Depression, had grown to more than $3.8 million. From the years 1940 through 1944 the company's sales grew rapidly. During World War II National Aluminate, which provided water treatment for steam locomotives, was classified as part of an essential war industry, thus keeping production at peak levels. Immediately after the war, when steam locomotives were replaced by diesel, National was forced to change its products and its market. The company developed combustion catalysts, coding system treatments, and fuel oil additives for diesel engines. In 1949 National Aluminate introduced a new diesel cooling system treatment in pellet form.

In the 1950s the company experienced a rapid expansion in both the domestic and international markets. In 1951 National incorporated its first foreign subsidiary, Nalco Italiana S.p.A., in Italy. By 1959 National had acquired several other foreign subsidiaries: Deutsche-Nalco-Chemie G.m.b.H. in Germany (1954); Nalco Espanola S.A. in Spain (1955); and Nalco Venezuela C.A. (1959).

Also in the 1950s, National added two new plants for catalyst production and oil field chemicals. To mark expansion into several new markets, National changed its railroad division's name to the transportation division. The company also penetrated the nuclear power field as a consultant on the land-based prototypes of the first atomic submarines, the first nuclear aircraft carrier, and the nation's first nuclear power plant at Shippingport, Pennsylvania.

In April of 1959, National Aluminate Corporation changed its name to Nalco Chemical Company. The name change signaled the company's expansion into new areas. By this time, Nalco manufactured a wide range of specialized chemicals in addition to sodium aluminate, the company's first product. By the end of the 1950s, its sales were approaching $50 million.

During the 1960s the company again expanded in size and scope. With its new polymer technology, Nalco maintained a solid position in the water treatment industry, and set standards in the areas of waste management and pollution control. In 1964 Nalco opened a new factory at Freeport, Texas, for the production of lead antiknock compounds for gasoline. The company employed a new electrolytic process recognized as a major achievement in chemical engineering technology. In October of that same year, Nalco's shares changed hands on the New York Stock Exchange.

Imperial Chemical Industries of the United Kingdom, or ICI, an important part of Nalco's development since the 1930s, was particularly instrumental in the company's growth in the second half of the 1960s. ICI and Nalco shared joint ventures in Katalco in the United States (1966), Nalfloc in Britain (1967), and Anikem in South Africa (1968). Katalco (which was subsequently sold) produced catalysts for the manufacture of synthetic natural gas, ammonia, and hydrogen. Anikem was the product of a merger between the operations of the Alexander Martin Company of Johannesburg, South Africa (acquired by Nalco in 1967) and part of the operations of another South African company. Nalco's sales for 1966 rose to $100 million, and increased to almost $160 million in 1969.

Because of increased business and growth opportunities, Nalco expanded and consolidated several of its domestic operations during the 1970s. The company established a separate Water Treatment Chemicals Group and a Pulp and Paper Chemicals Group within its Industrial division. The Transportation Chemicals Group's name was changed to Specialty Chemicals and became part of the Industrial division.

Nalco also sold or closed several of its operations during this period. The company sold its vegetation control business in 1974, and its Environmental Sciences Group in 1978. Industrial Bio-Test Laboratories, which was purchased in 1965 to conduct toxicological studies for governmental and industrial clients, discontinued operations in 1978 because of its inability to recover from a poor image following litigation and questions raised by two federal agencies regarding operation procedures.

Nalco's philosophy of consolidation and expansion continued into the 1980s. Worley H. Clark, elected president in 1982, emphasized acquisitions and new product development. To capture more of the world's markets, Nalco reorganized its International Division into three regions, including Nalco Europe, Nalco Pacific, and Nalco Latin America. Nalco also formed wholly-owned subsidiaries in Argentina, Ecuador, Japan, and Hong Kong, and established a new affiliate, P.I. Nalco Perkasa, in Indonesia. The company also expanded its operations in Singapore and South Africa.

In 1984 the federal Environmental Protection Agency's restrictions on the use of lead antiknock compounds in gasoline (first announced in the late 1970s), in addition to the shrinking market for leaded gasoline, forced Nalco to discontinue its antiknock compound business. Production at the antiknock manufacturing plant in Texas was discontinued in 1985, and demolition and decontamination of the plant completed in 1988.

Nalco made several important acquisitions during the first half of the 1980s which allowed the company to penetrate new fields. In 1982 the company purchased Crescent Chemical, and in 1983 Nalco formed an Automotives Chemicals Group, both of which established the company in the automotive industry market. In June of 1985 Nalco also purchased the remaining 80 percent interest in Adco Products, a specialty chemicals manufacturer for the automotive, industrial, and construction industries, for $18 million in cash. In early 1986 the firm acquired Penray, a group of three companies which marketed a line of automotive chemicals to service professionals and automobile owners, for $15.6 million in cash.

Nalco's successes in the 1980s attracted much journalistic attention. In 1984 Fortune magazine named Nalco one of the thirteen "Corporate Stars of the Decade," based on the 21.5 percent return on shareholder's equity over the period of a decade. In 1985 Forbes magazine also commended Nalco's stock performance, with a five year return on shareholder's equity of 22.8 percent. A 1990 Financial World article attributed part of this success to the company's over 700 patents and its anti-licensing proclivity. This strategy helped Nalco cross the $1 billion annual sales mark in 1990 virtually debt-free.

In the aftermath of the accident at the Union Carbide plant in Bhopal, India, where a toxic gas leak killed 2,000 people and injured 15,000 in December of 1984, Nalco paid special attention to safety procedures. In August of 1985, for the first time in its history, Nalco opened its oldest and largest factory, the Clearing plant, for public inspection. Later in the decade, the company launched an internal safety program dubbed "PORT," for Plant Operations Review Teams. These groups were comprised of engineers and managers from various Nalco locations worldwide who made detailed inspections of physical plant, operations, and safety training and procedures, then made recommendations for improvements.

Nalco started the 1990s with a new president, 20-year company veteran E. J. Mooney. Although W. H. Clark relinquished Nalco's chief executive office as well in 1991, his status at the company and in the chemical industry did not diminish. He remained the industry's lead trade advisor to the American government, and made important contributions to the consideration of the North American Free Trade Agreement (NAFTA) and the inter-hemispheric General Agreement on Trade and Tariffs (GATT). The chemical industry acknowledged Clark's many contributions with the 1993 Chemical Industry Medal, and he retired in 1994.

Around this time, Nalco began to divest some of the divergent businesses acquired in the early 1980s, most notably the Penray Companies and Day-Glo Color Corp. The proceeds of this asset sale were used to buttress international expansion in core businesses. In 1991, for example, the company bought the 50 percent interests of joint venture partner Imperial Chemical Industries plc in five overseas cooperatives.

Like many of its competitors in the recession-racked chemical markets of the early 1990s, Nalco utilized a variety of strategies to boost sales. The company's global team of about 2,200 sales representatives grew evermore attuned to increasing their customers' efficiency and helping them comply with stringent regulatory standards. In 1992, for example, Nalco developed a proprietary process to clean Mobil Oil Corp.'s crude oil tanks so that oil sludge previously categorized as hazardous waste could be recovered for other uses. The project thereby provided two benefits to Mobil at once: it eliminated the need to dispose of a hazardous waste and created a potential profit center.

Nalco further bolstered its sales through the use of new technology. In 1991, the company equipped 250 of its sales personnel with laptop computers on an experimental basis. The technology allowed its users to write contracts, close transactions, and place orders on-the-spot, with significantly fewer errors. Within six months, the leading-edge sales reps had chalked up $14 million in sales that could be directly credited to the hardware.

In 1994, Nalco formed a joint venture with Exxon Chemical Company that combined the partners' global chemicals businesses. Although some analysts doubted the short-term benefits of the enterprise, it did boost the company to the top position in the petrochemical industry segment, passing Petrolite, a longtime rival in that segment.

By the mid-1990s, Nalco had grown from a manufacturer of water treatment chemicals into one of the largest specialty chemicals companies in the United States. While the company had its share of disappointment in several markets, its plans for the remainder of the twentieth century included acquisitions and partnerships within its core competencies. By restructuring and bolstering its international holdings, Nalco Chemical Company planned to maintain and enhance its leading status.

Principal Subsidiaries: Aluminate Sales Corporation; Chicago Chemical Company; Board Chemistry, Inc.; East End Properties Corporation; Nalco Delaware; Nalco Foreign Sales Corporation (U.S. Virgin Islands); Nalco FT, Inc.; Visco Products Co.; Nalco International Sales Company; Nalco Leasing Corporation; Nalco Neighborhood Development Corporation; Nalco Resources Investment Company; Nalgreen Inc.; Oil Products & Chemical Company, Inc.; The Flox Company; Deutsche Nalco-Chemie, G.m.b.H. (Germany); Nalco Anadolu A.S. (Turkey); Nalco Applied Services of Europe B.V. (Netherlands); Nalco Argentina, S.A.; Nalco Australia Pty. Limited; Nalco Belgium N.V.; Nalco Canada, Inc.; Nalco Chemical A.B. (Sweden); Nalco Chemical B.V. (Holland); Nalco Chemical Company (Philippines) Inc.; Nalco Chemical Company (Thailand) Limited; Nalco Chemical Gesellschaft m.b.H. (Austria); Nalco Chemical (H.K.) Limited (Hong Kong); Nalco Chemii (Czechoslovakia); Nalco de Venezuela, C.A.; Nalco Espanola, S.A. (Spain); Nalco Europe B.V. (Netherlands); Nalco France; Nalco Italiana, S.p.A.; Nalco Limited (United Kingdom); Nalco Productos Quimicos de Chile S.A. (80 percent); Nalco Productos Quimicos de Chile Limitada (Brazil); Nalco Ecuador, S.A.; Nalco Egypt; Nalco GIAP-CHEM (Russia); Nalco Gulf Limited (Dubai); Nalco Hellas S.A. (Greece); Nalco Holdings Australia Pty. Limited; Nalco Investments Canada, Inc.; Nalco Investments Australia, Pty. Limited; Nalco Investments U.K. Limited; Nalco Japan Company, Ltd.; Nalco Kemiai Kft. (Hungary); Nalco Korea Co., Ltd. (South Korea); Nalco New Zealand, ltd.; Nalco Norge A⁄S (United Kingdom); Nalco Poland; Nalco Portuguesa (Q.I) Ltda.; Nalco South East Asia Pte. Limited (Singapore); Nalfleet, Inc. (United Kingdom); P.T. Nalco Perkasa (Indonesia); Taiwan Nalco Chemical Co., Ltd.; NCC Chemicals (Malaysia) SDN BHD; Quimica Nalco de Columbia S.A.; Suomen Nalco Oy (Finland); Nalco Saudi Company Ltd. (Saudi Arabia) (60 percent).

Further Reading:

• Anderson, Earl, "Chemical Industry Medalist W. H. Clark Speaks Out on Global Trade Issues," Chemical & Engineering News, October 11, 1993, pp. 11-14.
• Baldo, Anthony, "The Man Who Loves Patents," Financial World, May 29, 1990, pp. 58-59.
• Davis, Gregory B., et. al., "Crude Oil Tank-Cleaning Process Recovers Oil, Reduces Hazardous Wastes," Oil-& Gas Journal, December 13, 1993, pp. 35-39.
  "Finding the Customer Need and Filling It:" A History of Nalco Chemical Company, Napierville, Ill.: Nalco Chemical Company, 1990.
• Gibson, W. David, "Nalco Goes Back to Basics," Chemical Business, November 1992, pp. 11-14.
• Hiatt, John T., "Empowering the Global Sales Force," International Business, September 1994, pp. 16-20.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.