Issue Date: July 29, 2013
In 1995, Hariolf Kottmann, working for then-chemical giant Hoechst, wrote a report recommending that Hoechst’s specialty chemical operations be pulled together into a single unit. The company liked the idea and did so. But it didn’t like the specialty chemical business. So two years later, Hoechst sold the unit to Clariant, a Swiss specialty chemical company, while Kottmann took jobs at other chemical firms.
Today, however, Kottmann is Clariant’s chief executive officer. When Kottmann, now 58, wrote that report, he didn’t imagine he was going to one day lead the business that Hoechst sold. He also couldn’t have imagined that Clariant, a bright new idea in 1997, would later teeter on the brink of failure, calling on him to come in, reorganize it, and get it on the road to becoming a specialty chemical powerhouse.
“Sometimes life is surprising,” Kottmann told C&EN while on a visit to New York City earlier this month to meet investors. “I even spent two years in fine chemicals production at a Hoechst site that later went to Clariant,” he adds. There, he worked for Reinhard Handte, a Hoechst executive who for a time also served as Clariant’s CEO.
Kottmann, who relishes a challenge, says he owes many of his successes to the discipline he learned from his parents. That discipline led him to earn a Ph.D. in organic chemistry from the University of Stuttgart, in Germany, and helped him rise through the ranks at Hoechst. He later held management jobs at the acetyl chemicals maker Celanese and the carbon products firm SGL Group before joining Clariant.
“Discipline is one of the most important attributes to have, from my point of view,” Kottmann says. That discipline is what has allowed him to take what he considers an unbiased view of Clariant’s strengths and weaknesses.
When Kottmann joined Clariant in 2008, just before the Great Recession, he and his team already knew they “needed to start a restructuring with a significant headcount reduction.” The economy wasn’t the main motivation behind the change, Kottmann notes. Rather, a disastrous foray into pharmaceutical chemicals with the 2000 acquisition of BTP left the firm reeling.
“We reduced headcount by 20%, shut down 20 plants, and set up a simpler organizational structure. Today we have an organization in place with dedicated people trained to use lean Six Sigma analytical tools to solve problems,” Kottmann says, referring to a managerial concept designed to reduce waste.
The firm has divested several businesses under Kottmann and recently signed a deal to sell its textile chemicals, paper specialties, and emulsions businesses to private equity firm SK Capital Partners for $550 million. Clariant has also made a number of acquisitions, including the $2.8 billion purchase of catalysts and adsorbents maker Süd-Chemie in 2011. Today Clariant has 21,000 employees, annual sales of $6.4 billion, and earnings of $855 million.
Research at Clariant is also subject to discipline, Kottmann says. The firm spent about $187 million on R&D in 2012. “All the freedom you provide to your employees has to be managed in a disciplined way. Without it, you get chaos,” he says.
One area where chaos reigns, however, is the cost of energy and raw materials in Europe. After Japan’s Fukushima Daiichi nuclear plant disaster in 2011, Germany decided to phase out its nuclear power plants. As a result, industry’s energy costs throughout Europe are skyrocketing.
“Ultimately, Germany may successfully turn to alternate energy sources,” Kottmann says. But for now, popular sentiment against nuclear power in Germany and beyond has put Europe’s chemical industry at a competitive disadvantage to its counterpart in the U.S., where shale oil and gas have made energy relatively cheap.
Although European chemical executives and trade groups have been advocating for hydraulic fracturing, or fracking, of shale in Europe, most politicians there don’t support it at this time. In addition, Kottmann notes that the geology of much of the Continent may make the technique more difficult than in the U.S.
In the U.S., industry and government are for the most part willing to invest in industrial infrastructure such as pipelines, power lines, railroads, and highways. That is not the case by and large in Europe, Kottmann says.
“Societal attitudes are different in the U.S. versus those in Europe,” Kottmann says. “If industry doesn’t fight for its existence in Europe, society will shut it down.” Such attitudes are “one important reason why Europe’s economy won’t recover for another few years,” he adds.
The outlook for the U.S., on the other hand, is bright, Kottmann says. Clariant now derives about 12% of its sales from the U.S., the largest share for any one country. And the company is taking steps to increase that share, he says.
Oil services, for instance, provide a strong opportunity for Clariant in the U.S., where Kottmann notes his company is not as well positioned as it is in other oil-producing countries. To beef up its U.S. presence, the firm bought oil services patents and know-how from Ecolab in April. In May, the firm invested in Ultimate EOR Services, an enhanced oil recovery technology firm.
Before the changes brought about by hydraulic fracturing, most observers thought the U.S. was a declining market for the chemical industry, Kottmann says. “We were surprised a bit at the development here. We have to catch up.” With the right discipline, Kottmann expects Clariant will catch up soon.
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