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With operations in 24 countries around the world, Praxair, Inc. is the Western Hemisphere's top supplier of industrial gases. The company's 10 percent share of the $23 billion global market for industrial gases ranks third behind that of L'Air Liquide (18 percent) and BOC (15 percent). Formerly the Linde Division of chemical giant Union Carbide Corporation, Praxair was spun off to shareholders in 1992 as an independent company. Over half of the new firm's sales are generated outside the United States.
Praxair's business interests are focused in two basic segments: industrial gases and surface coatings. The company's surface coatings business was developed in the 1950s to supply wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders to many industries. Industrial gases by far constitute the greatest portion of Praxair's operations, contributing 91 percent of 1993 sales. Industrial gas products include atmospheric gases like oxygen, nitrogen, and argon, and process gases such as helium, hydrogen, and acetylene. Distribution of industrial gases occurs by one of four methods: pipeline, on-site systems (both cryogenic and non-cryogenic), merchant liquid, and packaged or cylinder gases. Many of Praxair's largest customers, and an increasing number of smaller volume customers, utilize on-site distribution, wherein a dedicated plant is built on or adjacent to the customer's site to supply the product directly. Pipeline and on-site delivery constituted about 24 percent of Praxair's 1993 sales. Merchant liquid delivery involves transportation of medium-sized volumes of gases by tanker truck or railroad tank car to on-site storage containers owned and maintained by Praxair. This segment contributed about 39 percent of the company's 1993 sales. Customers requiring small volumes of industrial gases receive them in metal cylinders or tanks. This "packaged gases" business constituted 28 percent of 1993 sales.
Praxair's origins may be traced back to nineteenth-century Germany, where a professor of mechanical engineering at the College of Technology in Munich started experiments in refrigeration. Karl von Linde's research came to fruition with the 1895 development of a cryogenic air liquefier. von Linde built his first oxygen production plant in 1902. His continuing research led to the establishment of the first plant for the production of pure nitrogen two years later. The entrepreneur/scientist went on to build air separation plants throughout Germany and Europe during the first decade of the twentieth century.
Karl von Linde's 1907 foundation of Linde Air Products Company in Cleveland, Ohio, established the first firm in the country to produce oxygen from air using a cryogenic process. Although oxygen distillation was relatively inexpensive--the raw material is, after all, free--the storage and transportation of gases in heavy containers was very costly. With its foundation in scientific inquiry, the Linde Air Products Company made research and development a priority. As a result, the industrial gas business evolved into a very capital-intensive enterprise; in 1992, Chemical Week estimated that every dollar of annual sales cost over a dollar in assets.
The Linde Company's relationship with Union Carbide started around 1911, when the two competitors undertook joint experiments regarding the production and application of acetylene. Union Carbide had been formed in 1898 to manufacture calcium carbide, a catalyst for the production of metal alloys. The partners had hoped that acetylene--a flammable, gaseous by-product of alloying calcium carbide with aluminum--could be marketed for street and household lighting. While acetylene gas lighting was extensively used especially in rural areas and was also used for auto lights, Thomas Edison's invention and commercialization of electric incandescent light bulbs distracted some emphasis away from acetylene gas lighting. Fortunately, a French researcher's discovery that acetylene could be burned in oxygen to produce a hot, metal-cutting flame launched a whole new market for the gas.
In 1917, Linde pooled its resources with National Carbon Co., Inc., Prest-O-Lite Co., Inc., Electro Metallurgical Co., and Union Carbide Co. to form Union Carbide and Carbon Corporation. The new entity was organized as a holding company, with its five members acting relatively autonomously and cooperating where their businesses converged. As a subsidiary of one of the United States' largest chemical companies, Linde soon became one of the world's largest producer of such industrial gases as acetylene, hydrogen, and nitrogen, which formed the foundation of the petrochemical industry. The companies' combined research efforts coincided with a national push for new technologies to help win World War I, and new applications for industrial gases came in rapid succession. Cooperative research and development among Union Carbide companies used Linde's gases to facilitate production of corrosion and heat-resistant ferroalloys used in skyscrapers, bridges, and automobiles. Linde also earned a reputation as an innovator in the industrial gases industry by developing new applications for industrial gases, especially in conjunction with the growing chemicals operations of its parent. During the 1940s, for example, Linde participated in Union Carbide's contribution to the development of the atomic bomb. Linde scientists perfected a refining process for treating uranium concentrates through gaseous diffusion. In the late 1940s, Union Carbide executives attempted to centralize the traditionally autonomous nature of the corporation through a reorganization. The holding company arrangement was dissolved, and subsidiaries were transformed into divisions. Each division, however, retained the word "company" in its name, suggesting that a decentralized corporate culture still endured at Union Carbide.
The Linde Division benefited from Union Carbide's mid-1950s to mid-1960s globalization and retained its position as America's top producer of industrial gases through continuous innovation. The development of oxygen-fired furnaces for steel manufacture and application of nitrogen as a refrigerant increased Linde's markets during the 1960s. The industrial gas company was even able to benefit from the energy crisis of the 1970s, when the rapidly rising costs of traditional fuels made oxy-fuel an attractive alternative to air-fuel because one received maximum heat from fuel. Applications of industrial gases in the food industry during this period included the use of hydrogen in hydrogenated cooking oils and nitrogen to quick-freeze foods.
However, Linde's steady performance throughout the 1970s and 1980s was largely obscured by the succession of financial, environmental, and human disasters endured by Union Carbide. In the 1970s, "stagflation" and overcapacity hammered the company's commodities markets and decimated its profits. The parent was also targeted as an air polluter by consumer crusader Ralph Nader. A succession of company leaders lowered overhead, increased efficiency, and kept the global corporation afloat, but the infamous disaster at Union Carbide's pesticide plant in Bhopal, India, in December 1984, struck the corporation just as it was starting to earn steady profits. Newsweek magazine called the incident, which killed over 2,300 and injured another 10,000, "the worst industrial accident in history." Union Carbide's market value plummeted 75 percent to less than $3 billion in the aftermath, and the chemical giant was compelled to take on massive debt to repulse a takeover threat. Divestments scaled the parent company back to its three primary businesses (industrial gases, chemicals and plastics, and carbon products) in the late 1980s, but its debt load curbed research and development, diversification, and international expansion.
By the early 1980s, Linde was a $1 billion contributor to Union Carbide's $9 billion annual sales. However, over the course of the decade, Linde began to lose U.S. market share, particularly to American rival Air Products and Chemicals, Inc. By the late 1980s, Linde was ranked second in nitrogen and hydrogen production and distribution. Nevertheless, Linde maintained its reputation for innovation, including a small, profitable business segment with the development of such coatings processes as acetylene detonation, which metallurgically bonded protective coatings to metal surfaces. High-tech acetylene detonation and diffusion processes were used in aircraft engines and rolled steel, while also having applications in the automotive industry, most notably in Rolls Royce production. In 1989, the industrial gas company introduced a technological breakthrough in its primary market, air separation. Robert Reitzes, then an analyst with New York's C. J. Lawrence, predicted that the economical, non-cryogenic, vacuum pressure swing adsorption (VPSA) technology would consume 20 to 25 percent of the merchant market by the turn of the twentieth century. The company now estimates that more than 40 percent of the merchant liquid market will be served by non-cryogenic systems, both VSPA and Membrane.
In 1988, the Linde division was renamed Union Carbide Industrial Gases, and in June 1992 its shares were distributed to Union Carbide shareholders on the basis of one share of the new Praxair, Inc. for each share of the parent. The new company maintained some ties to its former parent; Union Carbide was still one of its largest customers, and the two continued to share a common headquarters.
Praxair emerged with over $2.5 billion in annual sales, more employees (18,600) than its former parent (16,000) and a debt-to-capital ratio of over 60 percent. Debt reduction was a high priority for CEO H. William Lichtenberger, who devised several corporate goals in the early 1990s: reducing overhead, doubling profitability, effecting 15 percent annual net income growth, and expanding Praxair's global presence, especially in Asia and South Africa. Expense reduction commenced immediately under a "work process improvement initiative," and the company's work force was reduced by ten percent in Praxair's first year of independence. The establishment of joint ventures in Indonesia and China was expected to help Praxair catch up quickly with its competitors in the region. Two joint ventures in Beijing and Shanghai were expected to "give Praxair the largest representation in China among industrial-gases companies."
In 1994, Praxair, Inc. earned one of the most comprehensive quality system certifications issued by the International Organization for Standardiation (ISO). Covered by the ISO 9002 certificate are all 54 bulk-gas operating sites, 12 customer service centers, distribution facilities including the company's North American Logistics Center, plant operations center and two pipeline control centers, and more than 250 on-site air separation plants in the U.S., Canada, and Puerto Rico.
Twenty-five additional ISO certifications have been earned by Praxair sites and businesses in Europe, Brazil, Mexico, Canada, and the U.S. since the company launched its certification effort four years ago.
Principal Subsidiaries: Altair Gases and Equipment; Amko Service Company; Gas Tech, Incorporated; Genex, Ltd.; Innovative Membrane Systems, Inc.; Jacksonville Welding Supply, Inc.; Linde de Mexico, S.A. de C.V.; Praxair Canada, Inc.; Praxair Puerto Rico, Inc.; Praxair Surface Technologies, Inc.; UCISCO Inc.; Praxair Argentina S.A.; S.A. White Martins (Brazil); Argon S.A. (Spain); Companhia Nacional de Oxigenio S.A. (Portugal); Indugas N.V. (Belgium); IGI-Italiana Gas Industriali S.p.A.; Praxair B.V. (The Netherlands); Praxair GmbH (Germany); Praxair Iberica S.A.; (Spain); Praxair N.V. (Belgium); Praxair S.A. (France); SIAD S.p.A. (Italy); Beijing Praxair Inc. (People's Republic of China); Praxair Asia, Inc. (Hong Kong); Praxair K.K. (Japan); Praxair Indonesia; Union Gas Company Limited (Korea); Oxigeno de Colombia; SAID Vertrieb Technischer Gase (Austria); Montkemijeka (Croatia); SAID Technicke Plyny spol. (Czech Republic); Rivoira S.p.A. (Italy).
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