Pechiney Business Information, Profile, and History

History of Pechiney

Pechiney, a holding company with numerous subsidiaries in France and abroad, is the descendant of a single chemical plant at Salindres, established in 1855 in the southern French region of Provence by Henri Merle. It has become synonymous with the French aluminum industry, which first began in 1860. The company has remained faithful to its origins, and is now tne third largest aluminum producer in the world, although diversifying towards canning and packaging--in which it is world leader--and industrial components and systems, and holding prominent positions in related fields such as nuclear fuel, ferroalloys, heavy carbon products, and international trade in minerals and raw materials. Nationalized in 1982, Pechiney, formerly the first French industrial group, under the name of Pechiney Ugine Kuhlmann, has undergone heavy restructuring and returned to its original activities. It has begun a new era of expansion, with the acquisition of American National Can in 1988 and the ensuing restructuring of the holding company in 1989.

In 1855, a young chemical engineer named Henri Merle founded his plant in Salindres, near Alais in the Gard region, with the permission of the French emperor, Napoleon III, in order to produce caustic soda from tne coal, salt, pyrites, and limestone that were all available in the area. The company was known as the Compagnie des Produits Chimiques d'Alais et de la Camargue, run by Henri Merle and presided over by Jean-Baptiste Guimet. The year 1860 saw the first industrial production of aluminum metal, using the chemical process discovered six years earlier by Henri Sainte-Claire Deville, which allowed the company to cast 505 kilograms of metal the first year and retain a monopoly for it for about 30 years. Aluminum was then extremely expensive, and considered a luxury product. The French emperor Napoleon III was actually offered aluminum cutlery as a wedding gift. The man who was to give the company its name, Alfred Rangod, known as A.R. Pechiney, the name of his step-father, entered the company in 1874, under the presidency--1871 to 1879 of Pierre Piaton to manage it from 1877 until 1906. He was the leading man in the firm, which was already referred to in financial and trading circles by his name as early as 1877. Henri Roux was appointed president in 1879, to be replaced by Emile Guimet, founder of the famous Asian arts museum in Paris, in 1887.

In 1886 a new, much more efficient electrolytical process to cast aluminum was discovered by the French scientist, Paul Héroult. Héroult offered to sell the process to A.R. Pechiney, but the latter did not believe in the future of aluminum and declined to buy it. Héroult subsequently sold his patent to another company, the Sociét&eacute Électrométallurgique Fran&ccedilse, which built its first aluminum factory in Froges. In 1889, faced with competition from Froges, A.R. Pechiney closed down his firm's aluminum department. In 1897, however, Pechiney bought a competing firm and entered the field of electrolysis. Up to World War I, the firm continued to construct new plants in the Alps and Pyrenees, becoming the second aluminum producer in France and the leading firm for sales through the establishment of L'Aluminium Franz&ccedils, a sales company uniting all the French aluminum producers. The company also had a Norwegian subsidiary, which produced aluminum, but the most ambitious project of the period was the establishment in 1912 of a U.S. aluminum factory in Soutn Carolina. The plant, one of the largest in the world at the time, was to develop into a town, Badinville. The town was named after Adrien Badin, who succeeded A.R. Pechiney at the head of the company as managing director, from 1914 to 1917, when he died. Badin was succeeded by a team comprised of Emile Boyoud and Louis Marlio. In 1918 Emile Guimet died, and Gabriel Cordier was appointed president.

Due to its southern location, the firm was not affected by World War I, apart from the fact that it had to sell its American plant to Aluminum Company of America. On the contrary, it worked hard to comply with the orders of the French war ministry. However, the firm faced new difficulties at the end of the war. The economic crisis of 1920 and 1921 led to an era of industrial concentration in France. In 1921, Alais et Camargue--referred to in financial circles as Pechiney--merged with the leading aluminum producer, Froges, to form the Compagnie des Produits Chimiques et Électrom&eacute:tallurgiques d'Alais, Froges et Camargue known as AFC. The company was managed by Gabriel Cordier, president of Pechiney. The production of the new company continued to grow steadily until World War II under the leadership of Gabriel Cordier and, after the latter's death in 1934, Jacques Level, from Froges, who died in 1939.

The company's expansion continued between the wars. Aluminum production, which amounted to 11,000 tons in 1918, reached 50,000 tons in 1939. The firm developed its chemical production and, above all, concentrated during the 1920s and 1930s on the exploitation of hydroelectricity in the French Alps and Pyrenees. In 1946, when the energy sector was nationalized by the De Gaulle government, along with the transport sector and strategic industries, including arms and electricity, AFC-Pechiney alone supplied 15% of French electricity. In addition, the company took part--together with the only other French aluminum producer, Ugine--in the reformed international aluminum combine--which was established in 1901. International alliances regrouping the aluminum producers followed one another, up to World War II. In addition, French aluminum producers formed a sales consortium in 1912, which favored an efficient double-edged policy aiming at the development of the final uses of aluminum and at moderate pricing. This situation allowed the company to go through the 1930s Depression without major problems, unlike the copper combine which experienced a major crash during the same period. Once again, the company plants were spared from destruction in World War II because of their geographical location in the south of France. The firm survived the war without major problems. During the first few months it was under the tenure of Louis Marlio, who had succeeded Jacques Level in 1939 after assisting him for 20 years in the company, and from then onwards under president René Piaton, who was to preside over the company, with Raoul de Vitry as managing director from 1940 to 1958. Although the firm saw aluminum production in 1945 fall to half the level of 1938 because of the energy shortage, it had completely recovered by 1947.

The year 1950 marked the beginning of a new era in the company's history, with its change of name from AFC to Pechiney, under which it was already well-known in financial and commercial circles. In 1948 the firm had already been completely reorganized, with the creation of four major divisions: aluminum, electrothermics, chemicals, and mining products. During the 1950s and 1960s, during the tenures of René Piaton, then Raoul de Vitry, from 1958 to 1968, and finally Pierre Jouven, from 1968 to 1971, Pechiney's policy aimed at two major goals: finding new sources of energy and raw materials abroad, and better integration of the nonferrous metals transformation activities. The firm took stakes in aluminum fabrication companies in Argentina and Brazil as early as 1947 and 1948. In 1954, an aluminum plant was launched in Cameroon, and in 1960 another alumina factory opened in Guinea, and an aluminum smelter at Nogu&egave;nes in France in 1960. In 1962, Pechiney acquired an important U.S. aluminum producer and transformer, Howe Sound Inc., which was eventually to split in 1975 into Howmet Aluminum Corporation and Howmet Turbine Components Corporation. Also in 1962, the firm took a stake in the Australian alumina factory of Gladstone. In 1964, the Spanish subsidiaries founded in the 1930s were reorganized with the creation of Aluminio de Galicia. In 1966 an alumina-aluminum integrated plant was opened in Greece and in 1971 another aluminum factory was launched in the Netherlands. Pechiney took total control of a French firm, Cegedur, in 1964. Cegedur was another transformer founded by Pechiney itself in association with Compagnie Générale d'Électricité in 1943. The firm then created Cebal, a 100% subsidiary specialized in packaging, in 1966. In 1967, Pechiney merged with Tréfimétaux, another French firm in the sector specialized in copper. As a transformation result of this policy of integration and concentration, Pechiney adopted a holding structure in 1969. In the same year it sold its chemical activities to Rhône-Poulenc.

In 1971, a new period began with the merger of Pechiney and Ugine-Kuhlmann. Ugine had merged with the chemical producer Kuhlmann in 1965. The Pechiney Ugine Kuhlmann (PUK) share was introduced on the stock market immediately to replace the separate Pechiney and Ugine-Kuhlmann shares. After the short tenure of Pierre Grezel, Pierre Jouven, former president of Pechiney, took over the presidency of the new group in 1972 for three years. He was succeeded by Philippe Thomas, whose tenure lasted from 1975 to 1982. The industrial policy of the period was based on the belief that conglomerates with various complementary activities were the correct answer to U.S. competition and the European common market. Pechiney and Ugine had indeed shared common interests for years. The new entity, Pechiney Ugine Kuhlmann, became the first French industrial group. A holding company coordinated various activities: the aluminum division, the only one in France, was fully integrated, while the electro-metallurgic activities were gathered into a new subsidiary called Sofrem. The new group was also present in the nuclear sector, from the mining stage to the production of combustible elements, with the creation of specialized subsidiaries, FBFC in 1973 and Zircotube in 1976. Finally, PUK produced special steels, copper, rare metals, basic chemicals, and coloring and pharmaceutical products. During the 1970s the company concentrated on its marketing policy. The holding company emphasized the development of technical assistance contracts with the USSR and third world countries such as Yugoslavia and India. It created an international sales network called MIA (Multibranch Integrated Agencies), with its first agency in Japan. This network has been expanding constantly covering more than 60 countries with 30 agencies all over the world. Eventually, PUK acquired Brandeis, an international raw materials trading company, in 1981.

The 1970s economic crisis nevertheless hit PUK hard. The company accumulated financial losses of up to FFr1O billion (about US$2 billion) owing to difficulties in the steel and chemical sectors. In 1979, PUK had to sell its cable activities to Pirelli. Then, in 1982, like many of the major French industrial groups, PUK was nationalized by the socialist government of Pierre Mauroy.

Nationalized companies were originally meant to be used as tools of economic policy by the state. Quite rapidly, however, the government had to set up restructuring plans for most of the companies it nationalized, including PUK. A series of transfers took place during the early 1980s, under the presidency of Georges Besse, who remained at the head of the firm from 1982 to 1984, and then under Bernard Pache, whose tenure lasted until 1986. The coloring activities were sold to ICI and the special steels department to Sacilor in 1982. The chemical activities were transferred to Rhône-Poulenc, Elf Aquitaine, CdF-Chimie, and EMC in 1983. The considerably thinned company took back its original name, Pechiney, in 1983. In 1987, Tréfimetaux was sold to Europa Metalli, with Pechiney taking a 20% stake in the firm. Pechiney thus returned to its basic activities as an aluminum producer, with half of its sales coming from aluminum metal and semi-finished products in 1986. In 1983, a new aluminum plant was opened in Australia; another one was launched in Quebec, Canada, in 1986, while the French factories were extended and renovated. In 1985, Sofrem absorbed Bozel Électrométal-lurgie to become Pechiney $Eacute;lectrométallurgie. In order to finance a part of its investments, privileged investment certificates--shares without voting rights--were introduced on the Paris stock market in 1985 and 1986.

In 1988, during the tenure of President Jean Gandois, appointed in 1986, the firm embarked upon a new policy of external growth by taking control of American National Can (ANC), the world's leading packaging company, with 21,600 employees, 100 factories, and sales of about US$5 billion in 1988. Pechiney itself achieved sales of US$10 billion at the time of the acquisition. In taking over ANC, Pechiney first of all grew by 50%, then reached a new equilibrium between aluminum (30% of manufacturing sales), packaging (45%), and other divisional activities. The aim was for the company to become less dependent on the volatile world aluminum market. The state-owned firm, heavily indebted by the acquisition of ANC, needed to finance its development projects in a convenient way. In 1989, the firm created Pechiney International, its international interests being brought together into the 75% subsidiary. The remaining 25% of the subsidiary's shares are on the stock market.

Pechiney intends to continue developing its packaging division, which is now the world leader, and its aluminum division, which is the world's third largest, and the most advanced exploiter of the electrolysis process. New aluminum factories throughout the world use the Pechiney technique. The company's other major fields are industrial components and systems, particularly for jet engines; related industrial activities, such as nuclear fuel, ferroalloys, and heavy carbonated products; and international raw materials and metals trading.

Principal Subsidiaries: American National Can (U.S.A.); Cebal; Techpack International (39%); Aluminerie de Becancour (Canada, 25%); Aluminium Pechiney; Aluminium de Grèce (Greece, 60%); Alucam (Cameroon, 46%); Tomago Aluminium (Australia, 35%); Pechiney Nederland (Holland); Oueensland Alumina Limited (Australia, 20%); Affimet; Electrification Charpente, Levage; Pechiney Rhénalu; Almet (France, Germany); Pechiney Aluminium Presswerk (Germany); Softal; Pechiney Batiment; Howmet Corporation (U.S.A.); Microfusion; Howmet Cercast (Canada); Sintertech (34%); Le Carbone-Lorraine (56%); Aimants Ugimag; Pechiney Electrometallurgie; Metaux Speciaux; Hidro Nitro (Spain, 70%); Sers; Cegram (Belgium, 92%); Genosa (Spain, 56%); Comurhex (51%); FBFC (50%); Eircotube (51%); Cerca (50%); Cezus; Pechiney World Trade S.A.; Brandeis Instel (U.K.); Pechiney Trading Co. (Switzerland).