This Congress report was made in collaboration with the members of FECCIA's Executive Committee and company representatives who have kindly replied to the questionnaire sent to them, in particular:

For Germany

President Klaus Alberti (VAA)

and the joint General Secretary, Goetz Von Bredow (VAA)

For Great Britain

Vice-President Tony Casey (AMPS)

David J. Jones of ICI (AMPS)

For Italy

Constantino Grignaffini (FNDAI)

and Patrizia Forcina (CIDA)

INTRODUCTION

Since the end of the 1980's, the world economy has evolved at an accelerating rate: world trade is developing and the new countries become more competitive than the G7 powers. The rate of growth in the OECD countries is limited and the unemployment rate has become unacceptable.

Companies are seeking to profit from new opportunities and at the same time to escape from the constraints of the European social systems.

Generally, commercial rights are becoming globalised with new liberties for the entrepreneurs. The world trade organisation(WTO) is replacing GATT, customs barriers are non-existent and to crown it all, the Internet permits one to have information in one's domicile, for the whole planet.

The consequences for professional life are inevitable. Companies are being re-organised and management must become more adaptable to the various professional situations.

A company will assume a new profile for the 21st century:

Its market is world-wide.

Its manufacturing units will be scattered over all the world.

Its hierarchical structure will be flattened.

Its structure will be sectorised, with subsidiaries.

It will develop alliances with competing partners.

Adaptation of the management and managers is an essential condition for company success.

FECCIA has attempted to respond by analysing the difficulties being encountered and the managers' wishes, so that companies may be at the same time human and efficient, for "the only riches are those of mankind" as Jean Bodin noted in the 16th century.

Europe is both the premier production market in the world zone and the largest for chemical products.

Europe is both the premier zone of production and the largest market in the world for chemical product. Its turnover in 1994 was of the order the world chemical industry's turnover. Equally Europe is the first of 350,000 million ECUs (416,000 million dollars), almost a third of exporter of chemical products in the world, achieving trade surpluses over each of its partners, notably in the USA and Asia, in particular over Japan

The European chemical industry is in the secondrank, after food and agriculture.

These performances in world markets widely benefit the whole of the European economy. Chemical industry, which supplies all industrial sectors, is a major actor in European industry. In terms of turnover and added value, chemical industry is in the second position, after the agro-food industries; it is also No.2 for its contribution to the trade balance with a surplus of more than 25,000 million ECU's.

World leader.

Strong growth of Asian economies.

Today the European chemical industry occupies undeniably the position of world leader. However, certain factors are threatening this situation:

The strong growth of the Asian economies attracts more and more investment for new production capacity. The Asian countries, including Japan, form today the second zone of production for chemical industry, in front of the USA and just behind Europe. Because of its economic dynamism, it is probable that at the dawn of the 21st century, Asia will take the premier place.

GDP growth is insufficient

In parallel, the European economy has had difficulty with renewing growth. Thus between 1989 and 1995, the mean European growth rate was only 15% per annum. Most economists today estimate that the potential for growth of GDP will not exceed 2% ann. in Europe between now and the end of this century.

European chemical production has increased on average by 2.8%/ann against 2.6%/ann for GDP and 1.9% for industry as a whole.

Over a long period, chemical industry has benefited by average annual growth rates superior to those of industry as a whole and of GDP. This premium, however, is tending to diminish. In Europe, for the period 1980-1989, the mean rate of growth of chemical production was 3.3%/ann. whilst it was only 2.2% for GDP and 1.1% for industry as a whole.

For the 1985-1995 period, chemical production in Europe increased, on average by 2.8%/ann, as against 2.6% for GDP and 1.9% for industry as a whole.

Increasing those of industry new technologies and new products.

The capacity of the chemical industry to obtain growth rates over long development of periods superior to those of industry generally is due to its aptitude to develop unceasingly new technologies and new products to create and sustain new markets.

Europe appears less well placed than its main competitors

In its recent Green Book on innovation (2), the European Commission estimates that as far as innovation is concerned, Europe appears to be less well placed than its principal competitors. The Commission emphasises the paradox of a Europe blessed by a scientific base judged to be excellent, but which manages less well than others in transforming these abilities into new products and markets. Thus in 1987, the European Union accounted for 50% of all the European patents, whilst this figure was only 45.5% in 1993. This decline affects all the major industrial sectors, clients of chemical industry, but the chemical industry is not excluded from this.

The proliferation of rules weakens the competitivity of European industry

The inflation in national and European rules, particularly regarding the environment, affects all the activities of the chemical industry: development and marketing of a new product, industrial production, use a customer and the end of a product's life. This proliferation of regulations undoubtedly weakens the competitivity of European industry compared with that of its main competitors.

Risk of and of innovation

Thus, the introduction in Europe of new chemical products is a long delocalisation process, costly very uncertain due to rigid, maladjusted regulations. The European brakes on marketing new products risks causing a certain delocalisation of innovation towards zones which are more favourable to it.

A failure of growth

In conclusion, in relation to other global economies, Europe today appears to be chilly: it is affected by brakes on its future, its growth rate has broken down

Reinforcing its leadership in Europe

To reinforce its leadership in Europe and to pursue an active development in the big international markets. For 18 years, Europe has been the major centre of global investments. Today, it receives 43% of the stock of global investments and occupies the premier place for direct foreign investment, i.e. investment from outside its zone of economic origin.

The majority of the large chemical companies are represented in 3 continents

Historically, the major chemical markets were essentially continental ones: European, North American and Asian. More and more, the markets are becoming globalised, particularly for specialities and fine chemical high added-value products. Most of the large chemical companies are present in 3 continents. This permits them equilibrate their sensitivity to regional conjunctures and to changing contingencies. Equally, they are able to take into account the specifities of regional markets which are powerful and which remain for a long time.

Permanent adaptation

The aims of the European chemical industry are then first conditioned by its aptitude to provide, over a period, the financial resources necessary for its continuous effort of adaptation and preparation for the future. Competitive pressure and evolution of the markets necessitates permanent adaptation. It is necessary to invest continually to adapt the industrial tools to technological changes and to quantitative and qualitative changes in demand. This adaptive effort is a necessary condition but not sufficient to assure the future.

Novel products

To be better prepared for the future parallel investment is needed in research, development, marketing and production of new speciality products which form the essential constituent for growth potential of the markets in the OECD regions.

Remain vigilant

Chemical industry is characterised both by a strong capitalistic intensity and by a high level of research and development. This high level of industrial investment and R and D in progress over a long term indicates a clear, coherent and stable vision of objectives and priorities.

It is necessary to remain vigilant so as not to sacrifice the future to short term financial profits.

Chemical industry is beneficial to mankind and society

Another essential condition for achieving the objects of European chemical industry is for the authorities to arrive at a better recognition of its beneficial role for mankind and society. The environment is oftenassociated with the word "risk" and researchers have to evaluate risks: not to make decisions but to help politicians make the best decision. Unfortunately, the scientists are not always consulted and when they are, these are not those which are competent in the domain concerned. One must insist on the necessity for the researcher to say what he knows but also what he does not know, both for risk assessment and the cost/benefit/ efficiency of the policies proposed. It is the scientific community which should be the ambassador of the industry to whose development they are contributing.

The importance of innovation for Europe's future is insufficiently understood.

A third condition, also highly determining for the future of our industry, is to develop a climate favourable to innovation. The importance of innovation for the future of Europe is not sufficiently recognised. It is necessary to correct this situation, as has long been the conviction of the chemical industry. Innovation must primarily benefit the customers and partners in all economic sectors.

People is an incomparable source of risk riches and has a formidable potential for creativity and innovation

Ideas of old Europe gives rise to a climate scarcely favourable to innovation. A suspicion against novelties and an aversion to taking has developed, little by little. The history, culturaldiversities, strong identities, divergences of opinion, interests and approach sometimes seem to divide Europe better than help to construct it. However, this diversity is an incomparable source of riches and has a formidable potential for creativity and innovation. It is a European feature which must be resolutely changed into an advantage rather than a handicap. By its international presence in all the major markets, its entry into all industrial sectors and its links with the scientific community, the European chemical industry benefits, in this respect, from a privileged position.

Brussels counts on "aiding the chemical industry to take up its challenges"

A recent Community report entitled "a competitive industrial policy for the European chemical industry" shows that Brussels reckons on "aiding the chemical industry to take up its challenges." CEFIC and the European Commission have decided to meet every six months to cement the actions envisaged in this report.

To induce studies of the cost/ benefit type before each new regulation is projected.

First stage: involvement of the legislative framework: European chemists consider they are too often faced with a multiplication of texts. The Commission has decided to introduce cost/benefit type studies for each new regulation which is projected. A pilot project has the object of studying the possibilities of "simplification" of the legislation in the light of the internal market," (in summary, SLIM)

Large electricity consumers may buy from the producer of their choice

Other anticipated actions: those which permit maintenance or improvement of the competivity of the European chemical industry. The trade ministers of the EU have agreed, on 20 June 1996, on a project of liberalising the electricity market. Small consumers will continue to be supplied by their national producer but the big ones - above 40 gwh/ann may choose theirs. This must result in a reduction of energy costs for the chemical industry relative to US producers benefiting from cheaper energy.

Anti-cartel legislation is considered as a brake on competitivity by business

Amongst other European initiatives "welcomed with enthusiasm" by Simon de Brec, figures the eventual softening of the anti-cartel legislation. Last year it has caused the failure of the projected association between Rhone-Poulenc and DuPont on adipic acid and has constrained Montell (Shell/Montedison) to abandon the Spheripol technology for the time being. A "softening" will then lead in the best direction, according to CEFIC, even if business eventually prefers self-regulation.

Biennial reunions. Avoidance of the infernal restructuring- investment- over-capacity cycle in a regulated framework.

CEFIC would like to profit from biennial reunions with the Commission to bring up the problem of new capacity, so as to avoid the infernal restructuring-investment-overcapacity cycle and to find a legal framework to resolve this problem. But obstacles arise as much on the side of the Commission who see in proposals for agreement a hindrance to competition, as on the side of the producers. In 1993, the European Petrochemical Association (AEPP) had not succeeded in allocating aid funds for restructuring capacities. The profitable producers were not prepared to help their competitors to close down units.

The best infrastructure for chemical product transport

In the end, these future bilateral reunions must be the occasion for CEFIC to demand better infrastructures for product delivery (railway network, multi-product pipelines). The AEPP must, before the end of the year, publish a study on the necessary investments in this domain. But these will be high: about 1 million Euros/km. Hence the importance of European aid.

The eco-tax is a subject for disaccord between CEFIC and the European Commission

CEFIC, in addition, estimates that environmental questions must be regulated by cooperation and not by adding new taxes or regulations. European chemists believe more surely in their VEEP/programme (Voluntary Energy Efficiency Programme) which foresees a 20% reduction in energy consumption between 1990 and 2005 (15% between 1990 a 2000 and 5% more between 2000 and 2005). European chemical industry thus will have the means to stabilise Co2 emissions and to "reach the objective" fixed by Brussels, without the ecotax.

Starting from a base of 100 in 1990 profits achieved an index of 160.05, turnover 110.3 and staff nos fell to 88.4

Investments on German sites reached 12.1 MM DM in 1996. Production tended to shrink in inorganics and plastics and increased in phyto-sanitory and pharmaceutical products. Production costs dropped 3.3% and the staffs of 1700 members of the VCI shrank by 3% in one year, to 521,000 at the end of June 1996. From 1991 to 1995, the number of employees in theGerman chemical industry (new (East) regions excepted) shrank from 716,000 to 538,000. The most striking phenomenon is the explosion in profits (BASF + 14.7%, BAYER + 13.2%, HOECHST + 103%) compared with the change in turnover. Thus starting from a base of 100 in 1990, profits achieved an index of 106.5, turnover 110.3 and employees, 88.4.

More specialities

The rise in share values is a sufficient proof that the large chemical groups in Germany are amongst the most profitable companies of the nation. However, they are experiencing the pressure of global competition and are facing the need to expand in the Asian countries. This combination of offensive and defensive attitudes has also considerably changed the appearance of companies like BASF, Bayer and Hoechst over recent years. Acquisitions, sales, joint-ventures and other forms of cooperation all have a commonaspect. Companies are evaluating their strengths and are more concerned with specialities than commodities. Nevertheless, the strategies of each company contain a number of distinct differences as a revue of their 1996 activities shows.

Concentrates on its core business

In 1996, BASF continued to concentrate on its core business even more rigorously than in the previous year and became increasingly oriented towards the Far East. The declared objective of the company is to maintain its market leadership in the sectors considered essential i.e. to be among the three leading companies on the global scale. For this, production limits must conform to international standards.

Two major agreements forpolyole fin cooperation

BASF is the second largest chemicals producer in Germany and wants toimprove its position in the market by 2 major agreements for polyolefincooperation with Shell and with its compatriot Hoechst. With an investment of 850 million DM, BASF and Shell will construct a large unit to produce propylene oxide and styrene in Holland.

BASF has confirmed the splitting of its European business in inks and paints into 3 separate companies.

The German BASF group has confirmed the splitting of its European activities in inks and paints into 3 separate companies. Besides the traditional objectives of increased flexibility and improvement of profitability, this decision, predicted almost a year ago and which is part of a new European strategy, it is equally destined to facilitate eventual alliances and acquisitions. All the BASF subsidiaries, Lacke and Farben have been or will be adapted to the new structure.

Leadership in international costs

The BASF objective is to be first in the world. The group hopes to be able to profit from its experience when it achieves its projected wish forcoproduction of fibres in Asia with DuPont. The large scale project in China and Malaysia is estimated at about 1000 million DM and aims atproviding the Asian textile market with nylon precursors. Companies withperipheral business have been sold, whilst acquisitions are strengthening the core business. According to this philosophy, for colouring matters andpesticides, BASF has bought the colourant business of Zeneca and the maize herbicide business of Sandoz for the high price of 1000 million DM

Globalisation

In the scheme for group re-organisation, the board, headed by Juergen Strube, continued to give its main attention to strengthening activities which are the least dependant on conjunctional factors.Excepted from this are the gas business with the Russian partner, Gazprom, and life sciences which are essentially pharmacy. It this branch,globalisation has made enormous progress with the acquisition of most of the capital of the Japanese pharmaceutical company Hokuriku Seiyaku, thus giving BASF access to an important market. Slowly, but constantly,BASF Pharma is developing its activity in generic medicines by acquisition. The founding of BASF Lynx Bioscience AG at Heidelberg, jointly with BASF and the genetic engineering company Lynx TherapeuticsInc. has a special importance. With this joint venture, an American genetic engineering producer for the first time, has established itself in Germany.

Main emphasis on S.E. Asia and onChina

In geographical terms, in 1996, the main emphasis has been on S.E. Asia and on China. In future, not only the nylon precursors, but the main primary materials as well, for the chemical industry, will be produced by BASF in this region. The large scale project for a factory in Nanjing in Eastern China, is still in the negotiation stage, for an investment of6000 million DM. It is far from being the largest investment project of BASF. The company considers its technical knowledge for constructionof chemical factories, in which all production units are inter-connected,to be one of its strengths which it will use in Asia where 3 factories ofdiffering size are planned.

Intentions to sell BASF Magnetics to Targraks have proved strong resistance among  company personnel.

In all the other countries where BASF operates, the company has fewerproduction lines, but they have an important size. In past years, the grouphas been reorganised in N.America. In 1996, the company's business in magnetic tapes as well as in potash and salt, were separated. Whilst the sale of 51% of the Potash and Salt Beteiligungs AG to the leader, theCanadian Potash Corporation of Saskatchewan passed quietly, the intention to sell BASF Magnetics to Turc Raks provoked strong resistance amongst the company personnel and led finally to a re-examination ofthe project. In the end, the Korean Kohap won the race as a buyer acceptable to the personnel. BASF has found the South African PersetelGerman company's desire to maintain a high level of investment in Europe,of about 2000, million DM/annum (of which one third will be outside Germany), in parallel to powerful investments in Asia.

Bayer is striving to be at the head of the big chemical companies with integrated pharmaceuticals, in the world

Manfred Schneider, President of the board of the chemical group, has coined the slogan that Bayer is striving to be the first in the world of the big chemical and integrated pharmaceutical companies. His anxiety adheres to the concept of wide diversification but will be concentrated on and reinforce the strategies for main businesses in the health,agriculture, polymers and speciality chemicals sectors. Apart from internal growth, in this context, more cooperative ventures and acquisitions are planned. The year of 1996 has also been marked by reorganisations and adjustments in the portfolio of participations and products by taking account of regional markets.

Quiet growth

By disregarding fashion, Bayer has continued its peaceful growth. This German company expects to exceed 50,000 million DM of turnover in 1997 and hopes for a further improvement in profits, already excellent. In 1996, the giant at Leverkusen registered a 9% increase in sales at 48,600 million marks: a development half due to the acquisition of the ABS business of Monsanto and the printing plate business of Hoechst, as well as the consolidation of the Florasynth perfumes. A quarter of the increase in sales is due to the fall of the mark against other currencies, the volume increases being responsible for the remainder.

Nett profit has attained a new record of 2700 million DM

In spite of restructuring charges of 300 million marks, the group's surplus has risen by 10%, to 4,500 million marks whilst the nett profit reached a new record of 2,700 million DM, a 13% increase. The group has posted a yield of 9.3% of turnover, making many companies pale with envy.

Projected reorganisations

Two major classes of products in consumer goods may have a better future than with other firms. These are Natreen and personal hygiene products (Delial, Quenty and Satina) which have been sold to a US producer of consumer products, Sarah Lee, as well as the anti-flu agent Larilyn, bought by Merck.

Bayer is above all seeking to restructure its chemical business

Bayer is trying to restructure its chemical activities, dulled by a fine of 150 million marks, imposed by the anti-cartel authorities of the USA. Representing 20% of sales, chemicals only furnished 2% of the surplus. The group has negotiated a partnership in titanium oxide where it has not  a critical size, and is seeking to have other chemical companies on its German sites to share in fixed costs.

Bayer expects to lose 2000 jobs in Europe and to create 1700 in the USA

"In future, we cannot avoid the closure of non-profitable units for which rescue is impossible", according to Manfred Scheider, in recalling the fall in profitability of the chemicals sector in 1996. With the anticipated (including Germany) rise in global posts of 2000 persons in 1997, i.e. 144,200 by the years' end, Bayer expects 1200 job losses in Germany and 2200 for the whole ofEurope (including Germany). On the other hand, 1700 posts will be created in the USA, notably in health products.

Bayer will rely on its strengths to develop in pharmacy

Concerning Agfa whose results were far below group standards in recent years, the future is good: the film business will be in balance this year and the firm will post a yield of 6% on turnover next year. A decision on its future will be taken at the end of 1988. Strong, with a health business which represents 42% of its surplus, for 24% of its sales, Bayer is counting on its strengths to grow in pharmacy. Bayer has a pipeline full of medicines in preparation. From now till 1999, Bayer will introduce medicinals which bring it 5000 million DM in additional turnover each year. Amongst them there are currently Miglitol (diabetus, 800 million DM of expected sales) and Upobay (cholesterol, 700 million DM). In1988, Metrifonat (Alzheimer, 900 millions) and in 1999 a medicine for allergic rhinitus (250 millions), another for AIDS (300 millions) and an anti-infection medicine (1.5 million). All these will give a strong arm to the i nexhaustible Bayer which will celebrate its 100 years since foundation.

Policy of acquisition in small steps

To strengthen its base, Bayer intends to continue what it considers to be a policy of acquisitions in small steps; i.e. less than 1000 million DM for each. "We must achieve between 1 and 5 million dollars of acquisitions this year" explained Manfred Schneider. He intends to strengthen in generic products but will exclude those put on sale by Hoechst.

Bayer's ninth joint-venture in China

Above all, associations in the research area are classed as the most important cooperations of the year. The main emphasis of Bayer in joint ventures set up this year is once more clearly in Asia. The newest has been signed in Peking. It will produce a range of polycarbonate products the Chinese construction and building industry, representing the ninth joint-venture of Bayer in China. More than 160 million dollars have been invested by the group in this growing market.

Liberating hidden energies by splitting up the group is based on the concept of reorganisationof traditional factories, using.

In comparison with the two other chemical companies, Hoechst is reorganising in the most radical manner. The chairman, Juergen Dormann is trying to free hidden energies by dividing the group into numerous profit centres managed by a "holding". In this way he hopes to facilitate mergers with partners; thus he is applying a radical solution. The board of directors themselves are divided into separate enterprises. This strategy their industrial activities as a model. Thus it is intended to complete the operational divisions of Hoechst AG by creating new cojoint enterprises and if possible to include new outside firms within the perimeter. In a different context, this procedure would be called "active management of industrial activities".

Hoechst is re-centralising

Hoechst is recentralising particularly in pharmaceuticals and crop protection together with high quality research. This strategy rests on the objective of becoming among the leaders in these 2 sectors.

Results in pharmacy

The results for pharmacy explain that not even a partial withdrawal from  HMR is intended. The turnover has increased by 20% to 13,000 million DM. The operational surplus has risen from 709 million DM in 1995 to 2249 DM in 1996. The operational activities of HMR have contributed to this improvement by about 500 million DM. The remainder is due to various relinquishments, rights on products and reducing restructuring compared with 1995. After having bought, for 5400 million DM, the whole of Roussel Uclaf, HMR's objective is to market at least two active products per year starting in 1999, each with a potential turnover of more than 600 million DM. R & D will depend enormously on biotechnology, in which the firm is becoming stronger. Thus 3 projects are in course of realisation: the joint construction with Ariad Pharmaceuticals of a development centre at Bridgewater (New Jersey), that of a biotechnology centre at Cambridge (Massachusetts) and of a biotechnology centre at Martinsried (Germany). Of the total R & D budget of 4,000 million DM, 50% is destined for pharmacy.

Behring Diagnostics

Behring Diagnostics has registered a turnover of 930 million DM, a rise of 16% and an operational profit of 88 million DM (in 1995, it had a loss of 8 million DM).

Agrochemical branch

For the agro-branch, Agrevo achieved a turnover of 3600 million DM, a 20% increase, an operational surplus which jumped 47% to 232 million DM. With a turnover increasing by 10% to 785 million DM, Hoechst Roussel Vet has augmented its operational surplus by 20% to 73 million DM.

Basic chemicals

Basic chemicals, which will become an international subsidiary under the Celanese flag, has suffered from the price "law". Thus the turnover has fallen 5% to 6,500 million DM and the operational surplus by 51% to 728 million DM.

Chemical specialities

Chemical specialities which will be absorbed into the Swiss  Clariant group on 1/7/97 has registered 7000 million DM of turnover, a fall of 14%. The operational surplus has risen 52% to 691 million DM.

Polyester activities

Trevira (polyester) for 1996 had a turnover of 5,700 million DM, i.e. 11% less than in 1995. The operational surplus tumbled by 84% to 84 million DM.

Plastic materials

The plastic materials division achieved a turnover of 2800 million DM, a 5% fall and an exploitation surplus of 212 million DM, down by 29%.The margins being smaller and smaller for polyolefins (PE and PP), the group had to consider partnerships with other large actors in this sector. Thus for PP, Hoechst became associated with BASF, because of their technological, geographical and commercial complementarities. As for PE, negotiations are in course, notably with BP. From now on, PVC will be part of Vinnolit, created with Wacker in 1993, and discussions have begun between the 2 partners to transfer chlorine and vinyl chloride production to this subsidiary.

Industrial polymers

The industrial polymers have been reorganised under the flag of Ticona. The year 1996 was good as this division posted an operational surplus of 195 million DM against 56 million DM in 1995. The turnover fell 6% to 1300 million DM. Finally, the Messer and Xerberts subsidiaries had better results.

The big rationalisations in the chemical industry in France took place in 1983-1985.

Above all, overseas exports have furnished a major part of the growth of the French chemical industry. This has been responsible for half the turnover in exports (intra-group sales included). Thanks to a 3.4% rise in export values, chemical more rapid than for imports (+0.6%), the trade surplus has reached 46,600 products million francs, of which 80% was for pharmacy and cosmetics. As the third exporter in the world of chemical products, after Germany and the USA, France has experienced its highest growth rates in India (+60%), the East (+42%), Mexico (+32%) and in China (+24%).However, 70% of its exports are to Western Europe

The production of plastic materials has been globalised, which has resulted in considerable volumes being exported in 1996 (exports rose to 27,800 million francs, 4,157,000 tonnes and imports rose to 21,800 million francs i.e. 2,885,000 tonnes in volume. Thus for the second year running, the plastics trade balance has beaten its record with a 6000, million franc surplus, an increase of 5.8% over 1995.

This globalisation causes especially concentration and restructuring, as much as significant economic fluctuations and heavy technological investments push the producers to specialise and concentrate. This development did not just occur. Elf Atochem has long been associated with BP Chemicals and following this, with Union Carbide (who has equally concluded an agreement investments have with Enichem) and with Rohm and Haas. BP, on the other hand, is a partner of pushed Dow and anticipates a PE agreement with Hoechst. BASF has a joint venture producers intowith Hoechst for PP and with Shell for PE, the latter in the Montell company. Specialisation and concentration.

1.4.1. ELF ATOCHEM

1996 has been marked by strengthening of Elf Atochem's position in chemical specialities with:

Creation of a world axis for adhesives which puts ELF Atochem in the fourth rank worldwide, following acquisitions from Findley whose activities are located essentially in the USA and from Laporte who has a strong position in the UK.

The growth of Atotech, in galvano-plastics with the creation of a research at Rock Hill (S.Carolina, USA) and the start of construction of 2 new units, in Canton(China) and Neuruppin (Germany).

Internal developments to strengthen Elf Atochem's international position in several product ranges, comprising:-

Acrylics with construction of a butyl acrylate plant in the USA and an acrylic acid plant in association with Nippon Shokubai.

Fluoro-substitutes where Elf Atochem is a world leader, with the start-up of a plant at Calvert City (Kentucky, USA).

Molecular sieves, with an investment programme in Europe and in the USA.

The objective of Elf Atochem is to increase its profits regularly by pursuing a strategy based on three components:

Withdraw from those having different cycles.

To increase the specialities sector by internal developments and acquisitions.

To enlarge its globar presence development of activities in China, with 3 axes in chemical specialities Shanghai (hydrogen peroxide, hydrazine hydrate and hot melt textiles). Changshu (fluorocarbons and organic peroxides). Guangzou (opacifiants for ceramics and electroplating).

1.4.2. RHONE-POULENC

The group intends to re-centre on pharmacy, convert into a holding company and has begun an OPA for Rhone-Poulenc Rorer shares. The programme of closures of 10,000 million francs announced at the end of 1995 by Rhone-Poulenc for 1996 and 1997 may finally go to 12,000 million. After having sold 7,000 million francs of operations in 1997, the French chemical group reckons it will give up in 1997, about 5000 rather than 3000, million francs' worth. This movement will affact chemicals and fibres, highly capital intensive and more cyclic than specialities or pharmacy.

The reduction in nos.of employees, from 81,600 to 75,250 may fall still further. To restructure its chemicals production, Rhone-Poulenc has decided to transfer chlorine to a joint company with Laroche which has a presence in the USA.

The losses of Centeon. a joint-venture with Hoechst in plasmatic derivatives have reduced company profit. The need for rolling funds was still negative in 1996 and was close to balance. The annual level of investments was 2000 million francs in 1996 and will grow to 1.5 billion francs in 1997. The operational surplus was 1 billion francs in 1996.

R-PR has, in parallel, announced a programme of re-purchase of 5 million of its own shares. The profitability of the capital involved is only 4.2% whilst the objective is 13% at the 2000 horizon!!

1.4.3. L'OREAL IN PURSUIT OF GLOBALISATION

In less than 12 years, the turnover of L'Oreal has more than tripled, from 20,000 million francs in 1987 to 60,350 million francs in 1996. Twelve years of double figure growth in sales and profits, L'Oreal expects to reach a turnover of 100,000 million francs in 2001. The year of 1996 finished finished with a large rise (+ 13.1%), the internal growth accounting for 8% and acquisitions for 4.8%. A notable fact is that the proportion of the dollar in the turnover rose from 1.5 to 19.5% in 4 years. On the other hand, the franc was no more than 27.6% of it, as against 42.4% in 1992 and the share of other European currencies fell similarly from 44.2 to 36.3%. The major element in the group's expansion in 1996 has been the globalisation of its activities and the integration of Maybelline. Today, 40% of the turnover is achieved outside Europe. The object is to realise a 50% rate between now and the year 2000.

North America which represents 23.4% of world sales has achieved aturnover of 11,500 million francs, a jump of 31.3%. Asia whose share of the total turnover is 6.9%, has reached 3,300 million francs turnover, an increase of 17.4%.

The growing globalisation of L'Oreal, from now on, is notable for its entry into Asia (6.9% of sales), in Latin America and the eastern countries. The developing countries are, in fact, a huge source of growth for L'Oreal. The 1000 million franc cap has been crossed in Eastern Europe and the Group well expects to double this between now and 1999. Sales in Russia although still marginal (61600 million francs) have jumped by 86%. Those in Thailand have increased 46% in a year and in Brazil by 32% (1250,000 francs). Sales in Japan are unchanged at 1380 million francs but this is a rise of 12% in local currency. In China, "growth is booming" glows L. Owen Jones. The hardest market to penetrate is India where the distribution system is inappropriate or the living standards remain low.

"Our growth outside Europe will necessitate construction of numerous factories and an increase in investments" says the Group's Chairman. A factory has been opened last year in Poland. Another is being built in China and a third has been acquired in America. These do not exclude new acquisitions.

The Group is specially watching the developing countries like Latin America, particularly Brazil which posted a turnover of 1250 million francs in 1996, Eastern Europe (616 million francs in Russia, South East Asia and India. The approach adopted in recent years bears witness to the growing popularity of different product ranges.

1.5 GREAT BRITAIN

1.5.1. A complete metamorphosis of Imperial Chemical Industries (ICI).

ICI, tenth world chemical group, commenced its metamorphosis 4 years ago with the separation of its pharmaceutical branch, which became Zeneca. Created seventy years ago from basic chemical production (chlorine, soda, with the splitting ammonia) it became one of the chemical speciality heavy weights. The tronger added value domain into which the Group has turned itself, pharmaceuticals nevertheless only represented in 1966 half of its 10,500 million pounds turnover.

ICI has been very much affected by the cyclic character of its chemical products which caused its net profit to fall by 48% in 1996. Shares values reflected this and made a poorer progress than those of Zeneca.

Whilst recovering from the costs of the Unilever acquisitions, a turnover of 4600 million dollars, with an operational profit better than its own (12% of sales, against 6%), ICI has changed its profile. The market value is "excellent". 800 million dollars i.e. 1.7 times the turnover and 23 times the net profit of its activities - factors more frequent in pharmacy than in chemicals. Having decided to retain all its acquired businesses, ICI has definiely put a cap on speciality chemicals, where it will realise sales of about 8000 million pounds (paint and acrylics included). In order to pay unilever, the group has borrowed 8500 million dollars from Goldman Sachs and an Asian bank.

In July 1997, ICI achieved its transformation by selling its heavy sector to DuPont for 1780 million pounds. The British firm has parted with its Melinex polyester film (profitably), its polyester polymer subsidiary (PTA and bottle grade PET) and its titanium dioxide, a pigment for paint and paper, for which ICI is the European leader (both the latter being loss-makers). Moreover, it is going to sell its 62.4% share in its Australian subsidiary, worth 2300 million Australian dollars.

1.5.2. ZENECA

A stock market value increase of 3 times in 4 years to 18000 million pounds, a profits growth of 23% per annum for the last 5 years and for the first time last year more than 1000 million pounds profit before taxes. When he assesses the balance for the split from ICI, after 5 years, the chairman Sir David Barnes, has no complaints

The new products have been well received by the market, those in development are promising and disposals, acquisitions and partnerships have been judicious. In spite of the increase in physical investments of 33%, to 373 million pounds and the rise in R and D costs (16% on its pharmaceutical sales), this pharmaceutical company, numbered 21st in the world, couldn't spend all its surplus last year.Even after completely amortising its debts, it had £234 million at the end of 1996.

Zeneca's primary business, pharmacy, has seen its turnover increase by 13% to £14,350,000. More than 40% of the growth has been achieved by medicines put on the market in the last 2 years. In spite of 2 figure growth in four our of the five therapeutic classes covered by Zeneca, the exploitation profit in pharmaceutical business has progressed less rapidly than the turnover; +10%, £757 million.

Agrochemicals, Zeneca's second activity has helped to offset this performance: its operational profit has progressed by 18% to £227 million on a £1684 million turnover, a 12.5% rise, mainly thanks to volume sold, as the prices increased by only 2% on average. Here also, David Barnes acknowledges internal growth due to introducing new products ahead of competitors and puts it in second place in the world after Novartis. In agrochemicals, the Group is placing its hopes on the fungicide Amistar, approved in the USA.

Finally, after drastic restructuring, speciality chemicals are back in favour, especially since the sale to BASF of textile dyes.Sales have fallen by 1% to £1025 million in spite of a volume increase of 9%. However above all, Zeneca has improved its operating margin which reached 6.8% last year and even 10% if one excludes the business ceded to BASF and the £7 million spent in modernising a U.S. site. The margin approaches that achieved by the best in this field and is close to 15%

Is it then the right moment for acquisitions? Even if they are not completely excluded, Sir David Barnes is going to be a gourmet. "Every operation for external growth must be a quality one" he insisted yesterday, meaning that it must have a positive and immediate effect on profile. Quite properly, he has instanced the option which may be used this year for the 50% of the American Salick company, so far remaining. Half the capital of this company for cancer treatments had cost him 150 million dollars in 1995. Sir David Barnes is not lacking in ambition. "Our objective is to achieve a 15%/ann profits growth for the next 5 years" he has stated.

To achieve this end, the Group is vigorously introducing new products. Medicines marketed less than 2 years ago represent already 40% of its pharmaceutical sales. The group is recruiting strongly in the USA to commercialise its new anti-asthmatic, Accolate, launched in November. Although without any other product in this market, Zeneca prefers to

augment its own selling force, which will increase from 1200 to 2000 persons between now and the end of this year, rather than share future profits with an eventual partner. The laboratory also hopes to obtain before the end of 1997, the homologation of Seroquel, a schizophrenia treatment, of which the sales may attain £120-200 million pounds in the end, according to Goldman Sachs. The firm has just received the first homologation of its anti-migraine medicine, Zomig, in the UK. The competing Glaxo Wellcome product is already generating sales of more than £500 million. As well as these products, Zeneca has a profile of 18 new chemical entities in development. These will widen its scope outside cancer and cardiovascular medicines, at present its 2 strong axes.

1.5.3. GLAXO WELLCOME

At 54 years of age, Sir Richard Sykes may feel satisfied. Nothing indicated that this research biochemist by training would become chairman of the first pharmaceutical group in the world. However, it was he who at the head of Glaxo, launched into a shares battle to acquire Wellcome. A somewhat forced marriage gave birth to a group with 61,000 million francs turnover with a margin of exploitation of 36%.

The synthesis of the 2 companies is today "virtually completed". Sir Richard Glaxo holds only estimates: but the proof is still to come. Although number one, Glaxo Wellcome only holds 5% of the world's pharmaceutical market, and the wave of mega-fusions may yet overtake the British company. Thus their cross-channel colleagues, the Swiss Ciba and Sandoz may marry, taking 4.7% of the market. Moreover, the group has to face the ageing of its major mendicaments which are losing their patent protection. The shock of generic products may be rough, starting next year.

Certainly the firm has numerous others to follow in the market, but nothing says they will be able to maintain their ranking. A single medicine, however, can make the fortune of the laboratory, just as on1 April 1981, when Glaxo launched the anti-ulcerant, Zantac, which became the most sold treatment in the world.

1.6. ITALY

The principal Italian chemical groups are reorganising themselves and continuing in this path, are concentrating on their own "core business", or on that of the group to which they belong. Up to a point, the tendency to intensify their global presence (market and production) in an autonomous manner has not been ascertained: joint-venture creation (always with non-Italian partners) by virtue of previous disengagement in given sectors is sometimes sought.

Since 1995, Italian chemical industry has had multiple site closures, disinvestments (Enichem fertilisers, PVC, EVC, Enichem Augusta detergents) and above all, major alliances like that of Enichem with Union Carbide (European PE co-leader), of Montedison with Shell, making Montell the incontestable world no.1 in PP, of Snia fibres with Rhone-Poulenc in nylon, of Caflaro with Rhone-Poulenc in industrial polyamides.

The capital structure for this has already widely evolved as much by joint ventures than by direct sales of companies or branches, otherwise than by placement of major shares on the Stock Exchange. For the most part, the new owners are not Italian.

As far as the two main Italian groups are concerned:-

1.6.1. ENICHEM

The typical example of concentrating on "core business" petrochemistry is provided by Enichem which has almost entirely Given up its non-downstream petroleum and natural gas activities. The chemicals, agrochemicals and fibres have been abandoned.

The policy of exits has been accompanied by a search for international alliances with the object of strengthening the positions acquired in basic chemicals.

Enichem and Union Carbide have in effect set up a joint venture, the "Polimeri Europa", to consolidate their position in the European polyethylene market, thanks also to the use of the Unipol technology.

Due to numerous exits and closures of working plants, Enichem sees its objective as concentrating in the area which integrates with the petroleum cycle where this company may count on its competitive market position. Enichem will specialise in production of ethylene and polyethylene, polystyrene, polyurethanes and elastomers. After closing most of its

fertiliser plants and putting the rest up for sale, Enichem has, in fact, elastomers and gradually given up its fine chemical activities (in Enichem Synthese) and in agreement with ICI, has sold most of it shares in their joint venture EVC for polyvinyl manufacture. The sale of Enichem Augusta (detergents) to Multinational Rwe Dea has been decided and they also wish to leave the fibre sector.

1.6.2 MONTEDISON

The Montedison group has ceded certain activities in order to pursue a policy of rationalisation, leading to closure of non-productive plants and abandoning non-strategic activities.

Restructuring by Montecatini, the main part of the Montedison chemical division has produced 2 important operations.

Ceding the Erbamont pharmaceutical activities to the Swedish Procordia group. Signature of an agreement with Shell to combine, worldwide, their polyolefin activities with the subsequent creation of the Montell polyolefin company.

As far as the activities in Ausimont are concerned, Montecatini has made an agreement with Nippon Zeon in the fluorinated elastomer sector as well as investing in hydrogen peroxide production at Bitterfeld so that Ausimont can pursue its internationalisation policy.

1.7. OTHER COUNTRIES

1.7.1. NOVARTIS

The amalgamation of the Swiss Ciba Geigy and Sandoz is like a marriage of 2 giants . Since the end of 1996, Ciba and Sandoz have disappeared to Sandoz, Novartis give rise to Novartis, no.2 in the world of pharmaceuticals and no.1 in agrochemicals. In the space of a few months, the new teams have been no.2 in pharmacy set up and at the same time, 10,000 -12,000 redundancies were announced. Splitting-off the speciality chemicals of Ciba has taken place agrochemicals' and the new CSC company launched on the Stock Exchange on 13 March. no.1.

The optimisim of Alex Krauer and Daniel Vassela brings in more of the Coue method than any other thing. In the short term, a merger costs more than it returns, Novartis has decided to allow in its accounts a provision of 4690 million Swiss francs as the cost of the merger.

Synergies will cost 2000 million Swiss francs during the next 3 years, 60% anticipated this year. The bill has been lightened by the 1,700 million Swiss francs of added value realised by ceding many activities (Mettler Toledo, MBT speciality chemicals and certain maize herbicides of Sandoz). The changes then yield the 1996 surplus of 2900 million Swiss francs (S.Fr.) before taxes and 1900 million after them. The fall in nett surplus was 45% to 2300 million S.Fr. for a fall of 8% in turnover to 2760 million S.Fr. It should be noted that the S.Fr. has a positive impact on sales developments. The company remains very healthy with a nett liquidity raised by 70% to 6200 million S.Fr. and an exploitation profit from life sciences raised by 4% to 5620 million S.Fr.

"We have succeeded in preserving the business by the merger" Daniel Vasella thinks. In fact the divisions have all had increases in turnover have succeeded in local currency (+ 7% for health, + 6% for agrochemicals, and + 3% for nutrition). The immunosupressor Cidosporine has become the Group's first estimates Daniel medicament, in front of the anti-inflammatory Voltarene which withstands its generic competitors very well. However, the operational margins of these divisions have all been eroded. By irony, only the chemical specialities which have been hived off have seen increased profits last year.

Novartis must still show that it can overcome the expiry of the patents on the medicaments and the competition from cheaper copies. "Novartis is in a unique position amongst the pharmacy majors with 6 of its 9 premier products which are not protected by patents "emphasises the Daiwa bank. The Swiss group, of which 70% of the capital is always in Swiss hands, is almost a paradox . Number one in the world for generics, it is equally among the highest for R & D costs (3140 million S.Fr. total). "The future of the group lies totally in innovation", -D. Vasella doesn't hide it. Novartis will spend in the next years a little more than the average for the pharmaceutical industry in R & D. The laboratory is ready to launch 28 new substances in the next 3 years and has 85 projects in clinical development.

1.7.2 SOLVAY

Like many plastics producers, the Belgian company Solvay has not repeated its excellent 1995 performance. The nett current profit for 1996 of 8% at 11500 million Belgian francs (B.Fr.) on a turnover of 282,700 million B.Fr. has fallen. However, thanks to the added value of 190 million dollars before taxes gained by selling the animal health business to American Home Products (AHP), the Group, headed by Baron Daniel Janssen posted a nett profit of more than 9%, i.e. 13600 million B.Fr. This exceptional result is nevertheless outweighed by two thirds by the costs of closing an electrolysis unit in Austria as well as by losses in selling its Brazilian industrial sheet works.

The Belgian company has suffered a 50% fall in plastics profits last 50% in plastics year. After the prices bubble burst at the end of 1995, the reform of PVC polyethylene and polypropylene prices in 1996 has been "slower and less vigorous than anticipated" Georges Theys, the new director of Solvay France commented on Friday.Three plastics centres, French subsidiaries of the Group have also seen their turnover fall by 7.5% to 11.500 million francs. This has been accentuated by the rapid drop for bottle grade PVC which represented 10% of the consumption of this material in France "We have had no losses in selling plastics but at today's prices we are not covering the amortisation of the capital" emphasised Georges Theys, who hopes for more consistent margins this year.

In spite of a small price rise for sodium carbonate and the acquisition of flurocarbons from Hoechst, the alkalies branch posted a profit inferior to that of 1995, due to the drop in caustic soda price since mid-1996. On the other hand, hydrogen peroxide (Solvay is no.1 in the world), plastic moulding (tanks for cars, tubing and joints, industrial sheeting, wall paper) and the health sector have seen an increase in their profits. The Group benefitted from a 36% increase for the Luvox (competitor of Prozac) anti-depressant reaching a turnover of 163 million dollars. A request for homologation of this product will be made in Japan this year.

With its wallet refilled after the sale of its animal health business, Solvay expects to make several purchases to strengthen its pharmaceutical branch (ca 15% of present turnover) directed to central nervous system problems, gastroenterology (Duphalac), cardiology and menopause treatments. "These briefs are in preparation in the U.S.A. " explains Georges Theys.

After having increased its investments by 36% in 1996, by taking a major share in the Argentinian plastics producer Indupa and the purchase of 60% of the capital of a Bulgarian soda producer (Sodi), the Group expects to maintain an increased level of investments, around 28,000 million B.Fr. i.e. 84% of the turnover of 1996. In France, however investment will be down by 8%.

2. THE NEW SITUATION OF MANAGERS WITH GLOBALISATION

Chemical industry has been a destroyer of values during recent years and chemicals cycles even if its performance has been improved, remains insufficient. The origin of these disappointments, a sheeplike generation of over-capacity is followed by incontrollable variations in world prices. This is the "Mikado effect" described by Dominique Fournier, chairman of Exxon Chemicals, France. However, due to better tools for management and their conscience, certain chemical groups have begun to change fundamentally.

Whilst the penetration of chemical industry grew at a substantial rhythm, its growth was rapid and assured. Today the facts of the problem have changed and chemical industry is in competition with itself on all markets. The reduction of costs will not permit it to regain a significant growth rate if it does not simultaneously develop new markets by globalosation, innovation and a more direct co-operation with its customers.

The situation for employment is paradoxical. Taking the case of France: during the 1982-1996 period, French chemical industry has lost 38,000 jobs and the total employed is 243,000 persons but this overall figure hides very different realities: a fall in the number of workmen and employees (-71,000 from 116,000), a high increase in the number of foremen and technicians (+19,000 on 82,000) and a large increase in engineers and managers (+15,000 on 45,000). However, the increase has slowed since 1992 since when all catagories have seen their numbers fall.

2.1. True and false globalisation (6)

Even though the internationalisation of the markets is undisputed, the management of the multinationals remains deeply rooted in the original culture. At the beginning of the decade, none of the hundred premier companies were global, without bonds or frontiers. Only forty generated at least half of their turnover abroad and generally this was the case 10 or 15 years earlier. For production, only 18 had the majority of their activities abroad. The same for employment - only 19 employed at least half of their personnel abroad - as for capital, internationalisation was restrained. Most believed their capital was better protected in their home country. Finally, with few exceptions, boards and management styles had a resolutely national character. Governments helped most companies at some time or other.

No planetary mega-culture is then anticipated for the moment. For a simple reason: even if modern technologies bring civilisations geographically together, the latter remain rooted in value systems and world views which reflect ancestral traditions and educational principles.

Bernard Nadoulek, professor of comparative civilisation and international consultant distinguishes seven main world civilisations (Ango-Saxon, Latin, Asiatic, Hindu, Musselman, African, Slavonic) each having its logic for comprehension, communication, negotiation or management. Few things are in common e.g. between the Ango-Saxon principles based on individual liberty and combat, a Latin spirit valuing creativity and free-arbitration and an Asiatic philosophy based on a collective approach.

Thus contrary to the perceived idea, the behaviour of individual companies, even though internationalised, like methods of consumption, remain misled by these cultural logics. "The original culture is the downfall of company strategy" affirms Jean-Louis Levet, expert of the Plan. "There is no more American company than IBM, more German than Daimler-Benz, more Japanese than Toshiba".

Certainly the multinationals use the same principles for managing human resources, the same information technology, the same organisational only the practice principles, but their practice is different. The modes of organisation, for example, remain pyramidal in Japan whilst Western companies function by a matrix mode.

In the end, globalisation does not mean consumption of the same product by all and one finds today an amount of products issuing from all the cultures, whilst previously markets were the prisoners of national specialities. For success in internationalisation, adaptation to local needs remains the master word today, which concerns marketing and human resources.

One of the keys to intercultural management is to be itself and to guard it own identity, whilst making an effort to understand others in competition and co-operation, - a desire for comprehension that is indispensable for putting into practice, first between Western countries, espacially European On the management plan, taking account of local specifics is indispensable. It is sometimes enough to introduce the product differently to succeed, as Robert Salmon, vice-chairman of l'Oreal has said.

Cultural and geographical differences should be preserved to keep innovation and avoid impoverishment. Thus, companies which have enlarged on a world scale have multiplied their R & D centre.s

2.2 Company Mergers

As well as total or partial hiving-off and related to this, companies have a tendency to concentrate on the interior of groups by merging the array of specialist companies created during the 1980's.

Fear of losing its place,syndrome of the vanquished, cultural uprooting, a merger always causes to one degree or another, a trauma among the staff of the absorbed enterprise but also in those of the "conqueror". Nothing is more difficult than to work with another, on different cultural bases, because individual behaviour is cemented by collective values and procedures. The benchmarks, often unconscious, will disappear in future. It is still truer when the merger is between 2 enterprises of different nationality: is is especially difficult to manage. According to the experts, a successful integration presupposes reciprocity exchanges, complementarity, synergy. It must not deny original cultures, unless there is antagonism.

The object is rather to promote a double nationality where each is enriched by the differences - hence the importance of setting up new structures which will rapidly achieve mixing of the teams, and to choose the key people with care. Many studies on mergers demonstrate that directors have too much tendency to focus on economic and financial objectives and to underestimate the organisational and human dimensions of the merger. Once the strategic decision has been taken they should be prepared, but this is not often the case. Constraints of confidentiality for example, do not permit implication at an early stage of the interlocutors. Confidentiality does not cover all. In most cases, even after the merger is official, a certain improvisation reigns, coloured by "angelism" whilst a merger is not a mystery. The most frequent error is in believing that the integration of 2 enterprises will make itself.

In a process of merging, all is not rational and the emotional aspect must not be ignored. Different cultures, fear of losing one's place, the vanquished syndrome, the directors of the "absorbing" enterprise are always confronted by anguished and aggressive reactions by the "vanquished". The fusion poses for each one a problem of "belonging" and originates from an identity crisis: also there is generally a reduction in people, connected with repeat activities. There is also a risk of haemorrage among key people. A climate of suspicion people related to follows i.e. the lack of communication gives free vein to rumours and false news and at the least decision, multiple interviews torment the staff especially the managers.

Certain enterprises even attempt to manage the merger like a project, by relying on a pilot committee charged with resolving problems in "real time", comprising harmonising working time and remuneration, thus seeing that the company obtains the support of the personnel and especially the managers, most usually through direct communication.

The managers' situation is delicate. In effect, they must make their personnel accept the trauma of the merger without having the means to affect the decision: and the power stakes spoil the game. During the phase, the time to obtain the agreement of the authorities, they lose their capacity to master the information and decisions are prepared without their agreement under the seal of confidentiality. Further, if the organisation of the merger is improvised, they will be the first victims, since their efficacity and the work of their personnel will be deeply involved. Also some will be the emissaries in case of power struggles between the new and former directors. Departures will occur without questioning the managers' merits in the form of "amicable" partings.

3. FORMATION OF SUBSIDIARIES

3.1. Joint Ventures

Priority is for the emerging markets. According to an inquiry by Coopers and Lybrand the foremost industries are those which are also faced with "globalisation of markets" which will accelerate industrial installation outside the habitual production zones (Europe, N.America, Japan). The Americans have been the quickest in this "externalisation of production" in the emerging markets. They will favour henceforth 3 types of association to set foot in these territories: joint- ventures with local partners, licence agreements and sub-contracts. On the other hand, the practice of having 100% subsidiaries is slowing down.

Coopers and Lybrand consider that "a joint-venture constituted an efficient means for setting foot in new markets". This adviser affirms that if "European entrepreneurs" persist in choosing a 100% subsidiary, they take 3 types of risk: "loss of market, slowing of growth and absence from the emerging markets".

This analysis concerns all high-tech (information technology, logistics, electronic and aerospatial products and components, defence) industries. In spite of the high added value and low transport costs of these products "technology" producers must adopt a more flexible organisation closer to the customer, when manufacturing in low-cost countries. To compensate for business losses, they must fully dedicate themselves to their core activity when technological know-how confers a strategic advantage.

3.2. Strategic Alliances

The alliance involves incomparable management to respond to mutual hopes. The essence is a formidable mobilisation of human resources, because limited companies, differing in culture, if not by nationality and often excessively competitive, must learn to share strategies and to work together.

Entrepreneurs do not sufficiently attend to these aspects. Enterprises limit themselves indeed to financial and legal questions while passing to the second planning stage. It is not because they have anticipated a balanced heart of alliance structure that they regulate all. They should also consider the cultural shock. The alliance must also be conceived as an enterprise project, Cultural questions like power sharing are at the heart of alliances,, like mergers. It is a question of setting up a coherent organisation and assembling with care the teams which must work together.

In fact, strategic questions, like management must be anticipated far ahead, during the negotiations and through the eye of crisis management. Prevention is better than cure. Enterprises do not realise sufficiently that the alliance is a global process which joins questions of strategy, finance, law and management. It is important to come to the negotiation table with all the elements to hand: knowledge of the partner and his true intentions, direct and indirect impacts of the union, a first draft of the future organisation and its responsibilities, legal and financial set-up, scenarios relevant to conflicting situations. To sum up, there is nothing better than project style management, like on the big industrial installations, leaving the planning of the various stages to those responsible for the combined project.

3.3. Technology transfer

How do you arrange a partnership without giving him the means to become a competitor? This question arises more often, with the globalisation of exchanges and the industrialisation of the developing countries.

Technology transfer is the order of the day, with the investment boom in Asia and the opening of the eastern countries. For certain industries this represents a dangerous loss of know-how, the key being a risk of giving weapons to apotential competitor. For others, is it a component of economic life, accelerating year on year, under the pressure of industrialisation of the developing countries and globalisation. In many cases, companies have no other true choice since many countries insist on know-how transfer as a condition of a manufacturing agreement.

The danger of "involuntary loss of control" starts when the buyer's teams visit the factories, design offices and laboratories of the seller. After signing the contract, there is a very dangerous euphoric phase. At this point, certain information passes from person to person and a pupil-teacher relationship, very valuable for the teacher, is set up.

One thing is sure - alliances between companies are major sources of technology theft, because the partner may co-operate with hidden intentions American companies, although champions of joint-ventures in Asia, are extremely distrustful of these associations. According to a survey by Booz Allen, 17% of American directors find them efficient but 31% consider them to be dangerous. On the other hand, these alliances are profitable: enterprises who have them post an average profitability about 50% higher than that of their competitors.

Risky or not, these know-how transfers are now the norm. Between the class of technologies developed in-house which practically no more exist and those purchased 100%, there is a series of means to access industrial

knowledge: purchase of a company, manufacturers' club, capital-sharing and research contracts. Of all these systems the joint venture is today the most in-vogue, especially in Asia.

4. HIERARCHICAL DEVELOPMENT IN THE MAJOR GROUPS

4.1. The consequences of reorganisations on management structure.

The number of directors is tending to decrease as companies combine whilst

that of other senior managers diminishes with contraction of hierarchical levels. Delegation is less and less imputed to "non-top" levels, with consequent repercussions for the power of representation of company unions, notably in Italy.

The reduction in hierarchical levels is part of a global process of reduction of fixed costs not only aimed at achieving efficiency but also flexibility of the decision making process. In fact, the capacity for rapid reaction requires requires creating projects based on activities, with few intermediate levels: Chairmen,, divisional directors (manufacturing), factory managers(production managers), engineers (foremen) and plant operators.

The levels in brackets may disappear in certain companies (Air Liquide, Pechiney). Bringing in this reduction in responsibility levels is only a facade to concentrate power between a minimum of persons. In reality the functional managers (non-operational) exist in the organisation and are in charge of areas not covered by the direct client - production - provider decisions and which are more and more numerous. The hierarchical pyramid has become horizontal (with a wide span) and there is an increasing authoritarian pressure.

Increased information technology is reducing the presence of administrative officers in the staff function where the highest professional competence is required. One also notices a marked tendency inside companies to split senior managers into 2 types, top-management and others; at this second level, a retiring senior manager is replaced by a manager with high professional qualities but who will never become a senior manager.

The converse is that with the senior managers having more power, delegation of power will be more important in the definition of responsibility since there is little overlapping. The senior manager will be more directly implicated legally if the company commits an accident if he has not delegated his power and responsibility to a lower level. This is the case for foreign subsidiaries which are insufficiently controlled by the mother company.

The classification of posts is being harmonised at the European level using the HAY method, named after the counsellor who devised it. This is a grading of jobs from workmen to senior managers, utilising many criteria developed by socialogists. This will affect remuneration.

4.2 Changing the remuneration system

Managers' pay is generally not covered by collective agreements. In France, there are minimum agreements negotiated annually. In Germany, the starting salaries are followed by the VAA in the course of an annual inquiry as well as the increase, in deciles, with age and seniority. In Italy, the National Labour Collective Agreement for senior managers is less and less oriented towards maintaining their purchasing powers, for which increases are more and more linked to merit (variable portion) and career status(fixed portion). However, each company has its own remuneration system and every restructuring flattens this out, to the displeasure of those concerned. Soglobalisation is the perfect pretext.

More and more frequently, one finds new remuneration forms which are not directly linked to the employee, but to the profit of the company, or even to the profit of the business or to factors in the form of appropriate indicators. In France, this bonus is negotiated in the form of a Company agreement, every 3 years. It comprises financial participation with uncertain elements (not entirely forseeable) such as the company profit or its trading surplus or any other parameter like security or environment. The formula may comprise a portion negotiated at company level and another negotiated at local level. No social contributions are made from these bonuses but they are taxable.

In France, there are other forms of financial participation, not liable to social contributions or taxation except after 5 years. The first is profit-sharing which is either by law and/or negotiated in the company and is calculated on the taxable profits. Following this, there is the company-savings plan which is voluntary with an eventual subscription by the employer consisting of shares and/or other obligations. The management of these PEEs is divided between company and unions.

Stock options are shares which companies let their personnel purchase later at a definite price, usually advantageous (less than market price). In France, this is usually reserved for senior managers and has tax benefits. Getting rich is (too) easy on a rising market. In Great Britain this practice is already an old one, and certain companies are looking for a more suitable form of incentive. In Italy, bonuses in the form of stock-options are not yet taxed. The overall system of remuneration is being overhauled; the manager's bonus is more and more being changed to an annual bonus and towards benefits such that the change in the fixed part is only due to the position, itself directly linked to merit rating.

5. SOCIAL CONSEQUENCES

Any restructuring affects all the personnel from ordinary employee up to senior manager. It is the employment contract linking the personnel to the company which ensures continuity in the change. When the structure changes, the contract remains but suffers modifications outside the managers' control, often to his disadvantage. His career is no more linearly progressive in the company or Group, but horizontal moves i.e. without promotion, are more and more frequent.

5.1. An analysis of the social and legal consequences for senior managers.

In France, participation schemes, based on social contributions, are in doubt due to financial difficulties. Unemployment is less well indemnified, sickness assurance suffers from control of reimbursements, retirement contributions tend to the authorised maximum but pensions are increased less contributions are including the supplementary ones of managers (AGIRC). Capitalised pension funds are now legalised, further on from compulsory schemes.

In Italy, the National Collective Agreement for the "dirigenti" applicable to sickness and professional insurances is forseeing grave problems in the future. With sickness insurance it is a matter of fiscal problems. For retirement the problem is linked to an increase in the companies' contributions and for senior managers a change in modes of contribution which will reduce the value of compulsory pension, hence the need to increase the contributions in future to the complementary pension scheme to make up for the losses from the obligatory one.

Concerning job losses, compensation is to be limited to redundancies, encouraging departures by bonuses which will however be seriously lower. The possibility of leaving with a "full" pension will be more and more reduced (up to extinction) and this may soon arrive.

The possibility for redundant managers to work outside the company will be more and more on part-time in smaller companies which make unreasonable demands on managers.

5.2.Effect of restructuring on the social aspect of Europe.

Has an enterprise or Group in an EU state an obligation to consult the representatives of the personnel concerned before closing down an enterprise situated in another state? The answer is 'yes', according to two Community directives:

Directive No.75/129/EEC of 17 February 1975 (modified by directive No.75/129/EEC, No.92/56/EEC of 24th June 1992 on the harmonising of legislations in member states on mass redundancies is quite explicit on this point. "If an employer anticipates making a collective redundancy it is obliged in good time to consult with personnel representatives, with the aim of ending an agreement".

The directive No.94/95/EEC of 22 September 1994 on the instituting of a European Works Council or the setting up of a procedure for information and consultation of personnel in companies or Community-wide Groups, defines, in its article 7, that the European Works Council has the right to be informed about measures affecting the interests of workers significantly, especially in local shut-downs, closing down of enterprises or establishments or mass redundancies and more particularly, the council has the right to meet, to be informed and consulted on these measures!

The requirements of this article are inapplicable when an agreement was concluded, by anticipation, by virtue of article 13 of the directive but in practice these agreements anticipate a procedure of consultation or dialogue (which happened in an agreement with the European Group, Renault, 5 May 1995, articles 1 and 7).

These directives today have passed into the national laws and regulations.

It is appropriate to define equally that in the 1975 directive relevant to mass redundancies consultation is conceived as a discussion with the aim of ending an agreement, in order to avoid mass redundancies or limiting the number. It is not thus limited to a simple exchange of views on information furnished by the employer.

According to the above directive the consultation must occur in good time. It should be understood that this means before a decision is taken. This rule holds not only for redundancy decisions themselves, but also for decisions which inevitably lead to redundancies (closures, transfers away).

Thus the Community regulation benefits social dialogue and locates it at the heart of restructuring operations and the national laws which have transferred this directive to each member state have confirmed and even reinforced these principles in favour of workers, according to local usages. Consequently, there cannot be any doubt that if a company or group decides to close an establishment or enterprise located in an EU country, preliminary consultation of personnel representatives is obligatory both according to EU principles and national laws. This consultation concerns just as much the representatives of personnel of the establishment which must be closed as those of the enterprise which decides on the closure.

The 1994 directive on the European Works Council adopts, on its side, a conception a little different on consultation. In this case, the consultation with personnel representatives is understood to be an exchange of views and does not require a formalised opinion such as a vote. In the outcome, although the question may be discussed, this directive does not insist that the consultation of the Works Council should precede a decision. On the other hand, the European Works Council is only to be consulted once per year on the development of the business and the future of the enterprise or group and if it so requests, case by case, on measures significantly affecting workers interests.

It is clear that the 1994 directive seeks essentially to institute a structure or dialogue procedure in which there reigns "a spirit of collaboration", a formula which implies reciprocal loyalty and good faith. The national laws which have transposed this directive are very respectful of these principles and they rarely impose rigid consultation rules.

It is clear that consultation of personnel representatives in case of closure of an enterprise causing mass redundancies is thus an incontestable obligation, in the first row of Community rules, reinforced by dispositions which have ultimately accompanied the transposition of the directives into national laws.

Its control and sanction lies in the domain of national laws. Besides, the 1975 directive on mass redundancies applies to member states, whom it expects to watch "that worker representatives and/or workers have administrative or judicial procedures to ensure that obligations placed by this directive are respected".

6. NEW MOBILITY CONSTRAINTS ON MANAGERS IN THE CASE OF RESTRUCTURING

6.1. Impact on the mobility of senior managers

In a "Europeanised" market, the senior manager will be obliged, in the course of events, to adapt himself to a new system (mentality, culture, foreign languages and laws) much different from his present one. He must consequently also feel more than the stable and safeguarded resource of his company - a mobile professional at the disposal of European industrial society.

As far as collective agreements are concerned in the case of mobility, secondment is as significant as a mission, the latter dependant on its duration. Generally, "missions" are rather short and do not impose a continual absence.

6.2. Secondment abroad and repatriation

The problem of worker circulation in Europe does not just affect the senior managers, but all workers. There is then a problem of harmonising, at transnational level, all the aspects (social, fiscal and contractual) which are involved to reach a common solution. It would be appropriate, in this case, for the EU to set up a propedeutical observatory, involving a commissioner, in view of this vital sector of the economy.

One may anticipate the production of a European type work contract, adapted to the situation of migrant managers, which would not be imposed on companies, but serve as reference for the employees concerned. Further, it would avoid inequalities which may be present in working contracts or even in collective agreements and which tend to authorise discrimination, particularly in remuneration, payments and professional training.

Measures and expenses linked to the condition of a mobile person are a real brake on mobility as they are constraints, above all for the employee who is expatriated alone and who had no time to make arrangements. If Community legislation has till now been simplified, it would be useful to make it more detailed (expenses and arrangements linked to rights of absence and residence, automatic renewal of these, on request, change of driving licence etc.)

Limiting the right to enter another member state to find work within 3 months, when it should be longer, is an important constraint.

At present, Community programmes mainly concentrate on language training for students. However, the CEC emphasises the importance of professional language training. Member states should encourage language training throughout life in companies and job-finding agencies in order to permit employees or job-seekers to practice, improve and learn European languages and thus encourage professional and personal exchanges.

The CEC approves the EC's reasoning for Community action on unemployment benefits because of a worsening economic situation. The treaty set 3 months as the time for which the unemployed had rights to benefit. This is generally insufficient to find a job in another member state It is necessary, as the EC has proposed, to be more flexible. It is thus necessary to modify the regulation No.1408/71 for unemployment and other social security payments, also the right to other payments (sickness, maternity) must remain in force during the indemnity period.

The CEC believes that Community action is needed to palliate the lack of co-ordination between member states on pre-retirement payments for workers obliged to export payments and social cover to which they and their families are entitled. Generally, managers negotiate conditions and payments for pre-retirement individually and specifically. The CEC proposed then that the origin of the payment is not considered whether conventional (individual, sectorial or company) or legal. All payments must be catered for by the Commission's proposal. The dispositions for payments applied to pre-retired persons contained in the Commissions's proposal must accord with those regulating the situation especially concerning: Working or credited years Totalling the assurance periods Export of payments. The CEC has then proposed the need to widen the field of application of regulations 1408/71 and 574/72 in order to integrate the pre-retirement regimes.

Now, in Italy, for such problems, each company operates its own schemes and all is managed, normally, by pseudo-contractual rules or company practice, by integration of "ad personam" agreements.

The additional pension systems differ enormously from one country to another. Particularly for managers, the transfer of acquired rights, if they decide to work abroad, poses a real problem. The solutions which the EU envisages must attempt to improve the compatibility of the different systems, respecting the subsidiarity principle: Here and now, the CEC has taken part in working parties, initiated by the EC to fund appropriate solutions and has now proposed work, as far as it has the necessary means. On one hand, we must consider the mobile employees (mainly managers) but on the other, we cannot modify national systems which threaten the rights of the majority of workers to supplementary pensions. Consequently, the CEC emphasises that it is primary that any solution considered must respect the different situations and nationalspecifics.

Finally, if Community law stipulates that a worker coming back from another EU state has the same union rights as the national employee (vote, managerial and administrative responsibility, election to works councils) nothing is provided in the case of an employee, unionised in his mother country and momentarily employed abroad. The CEC has worked out a mutual assistance agreement permitting each adherent of a CEC member organisation to benefit from assistance in his host country. Means must be given to national unions to set up aid schemes for mobility cases.

6.3. Reception of foreign managers in France: a complex regulation.

With the exception of nationals of the EEC and the European economic "espace" it is necessary to obtain residence and work permits for every foreigner working in France. This permit request is submitted to the departmental direction for work and employment. An offer of employment must be deposited at the ANPE for 3 weeks and when the candidates appear, the employer must justify any refusal after having studied their canditature.

In order to favour foreign managers in France, councillors of the municipality, labour and the interior, in order to simplify and accelerate the issue of residence and work permits have produced a circular, dated 15 April 1996(7) concerning foreign managers of French companies or subsidiaries of foreign companies established in France. This circular is aimed at foreign managers employed for more than a year in a French or foreign branch of a company group of which the mother company, situated in France or abroad, has at least a 3 million franc capital and has completed a 3 year duration, which wishes to operate in France, under French law and whose nett monthly salary is at least 23,517 francs (today's value).

The major points of this circular are to dispense with the deposition of the employment offer to the ANPE, for the post occupied by the manager, a month's respite in which the details can be processed and the presence of an official to follow these papers through the prefectures. This circular would only be applied to procedures entered into before the arrival in France from abroad and does not affect the regularisation procedure. Once the problem of the work permit has been solved, there is that of the law applicable to the foreign worker in France.

The Council of the EU and the European Parliament, considering that "transnationalisation" of the relation of work raises problems of applicable law, have on 16th December 1996 (8) stopped the 96/71 directive in relation to detachment of workers affected in the framework of service payments. It guarantees the detached employee the application of a certain

number of minimum regulations (rest, paid holidays, salary, hygiene and safety etc). The directive anticipates, as is the case in France, that these regulations apply from the first day of detachment. However, it expects in certain cases of brief detachment, that article L314-5 of the Code of Work will not be applied. Except for some details, the present French regulations seem to conform to the directive and do not need modification.

For social security, the applicable legislation follows, in principle, that of the locality. However, bi - or multilateral agreements may involve detractions and particularly for temporarily detached employees.

Inside the EC, detachments are foreseen in a regulation of 14 June 1971 (9). This expects that the employee sent by his employer to another member state for a temporary stay, remains subject to the law of his own country which is an exception to the rule for subjection to the law of his place of work. Thus an English employee working habitually in the UK. sent by his employer to a French enterprise, remains subject to English law. The social security contributions will not be due seeing that the formalities prescribed by the Community regulation (the E101 form) have been fulfilled. It should be noted that this possibility is very widely used by companies wanting low cost labour, favouring low social costs.

On 31 May 1996 (10) the administrative commission of the EC for social security of migrant workers has defined the field of application of article 14 paragraph 1 (relating to "detached" workers) of the said regulation. Thus a

detachment is only possible if the existence and subsistence of an organic link between the employee and the company which detached him is established. The proof of this comes from a bundle of indices (responsibility for recruitment, work contract etc.). It is convenient to note, however, that the employee does not necessarily have to be paid by the enterprise which detached him - in practice the host enterprise usually pays him. The Commission has also defined the conditions in which the detachment was possible with many companies and that of personnel recruited for purpose of detachment.

7. CONCLUSIONS

In view of the new record closures of establishments and the number of unemployed in Europe and in view of the rapid growth in other regions of the world, and increasing global conjuncture, FECCIA proposes a series of actions:

1. In favour of deregulation and debureaucratisation

To decrease the international retardation suffered by Europe in growth and competitivity whilst improving the structural conditions of production, concerning products, processes, installations and their innovation or modernisation and to reduce the delocalisation of European industry to overseas.

2. In favour of economic growth compatible with the environment (sustainable development).

Add to the June 1992 Rio conference the economic, social and fiscal risks to the ecological ones, for a global view of risks in the Rio concept, for only this global view, leads to a concensus in society.

3. Do not impose supplementary charges on European industry by an "ecotaxe" on energy etc. which increase structural risks for Europe in competivity and employment.

In this context the following factors, amongst others, are indispensable to safeguard Europe's productive capacity:

-allow industries subject to international competition to dispose of international (and national) regulations;

- make a cost/benefit strudy of the constant increase in standards;

- take account of the social, economic and fiscal consequences when evaluating risks;

- do not resolve technico-commercial problems by extreme dirigism (e.g. by prohibitions) but by research and knowledge.

- do not sacrifice promising industries, as is the case now with pharmaceutical research industry, in lateral economic planning.

- be able to exploit economically patents to finance research and future products: meddling in exploitation of patents and patentability decides the future of economic production (not only that of young scientists).

- The main problem of the technico-economic-scientific relationship is that the causes and effects do not follow one another immediately but after a long time, perhaps decades. Companies lack competitivity and unemployment affects thousands of young university students.

The social dialogue in an enterprise must be vigilant, long term and not onlyfor immediate interest. Managers are ready to bring their competence to a constructive dialogue, in particular, when it's a matter of restructuring and long term strategy

ANNEXE

A policy for industrial competivity in the European chemical industry

European Commission

1. THE CHARACTERISTICS AND CHALLENGES OF THE CHEMICAL INDUSTRY OF THE EUROPEAN UNION

The main challenge confronting European chemical industry consists in strengthening its competivity in the long term internationally by giving its customers, both in Europe and abroad, high quality products which respect the environment and at reasonable prices. In line with this challenge, it is possible to pick out several essential characteristics of chemical industry, keeping in mind the need to maintain a sufficient degree of profitability to guarantee continuing investments in Europe.

Chemical products and environmental and health policy: very diverse, the clientel of chemical industry comprises the big industrial sectors (cars and other means of transport, food, pharmacy, textile, construction) the agricultural sector(fertilisers and pesticides) and specialists, the final users of plastic packing, paints, detergents, cosmetics etc. Chemical products are directly linked to everyday life. Thus in Europe there is a strong sensitivity to the impact of these products on health and the environment. This feeling as well as the actual risks and complexity of problems, has engendered a multitude of regulations, often of national origin; these regulations must be funded on a solid scientific basis and potential economic impact including that on international competivity and must be taken into consideration.

The European and global dimension of markets - in this context, it is necessary to concentrate on all aspects so that the European chemical industry can play on equal terms with its main competitors. OECD and recently industrialised countries, in terms of market access, environmental status and if possible, competition rules and fiscal and social regulations.

Its dependence with regard to primary materials and imported energy sources. Oil and gas, used in production of petrochemicals and their derivatives, as well as industrial minerals needed to make i norganic chemicals, must generally be imported. As well as energy provided by European companies, like electricity and gas, the total represents up to 60% of production cost. Effective competition can only take place if unit prices of these imports are not distorted which may occur in third world suppliers or in the EU.

Its strong dependance on capital and on Research & Development Nett engagements of above 1 million ECUs per employee for a large part of the sector (especially basic chemicals) and moderate Research & Development expenses take around 6% of the turnover, constraining chemical industry to seek high utilisation of its capacity, in order to reduce fixed charges and maximise receipts. This implies:

. Continual restructuring, using the most efficient plants and closing the least profitable;

. A wide marketing effort, needing the consolidation of an effective interior market in the EU and access to markets abroad under truly competitive conditions;

. An increase in cooperative research, at the same time with competitor companies and users in the most horizontal RDT domains (promoting recycling, better access to information technology);

. Continual development of new products and innovative manufacturing processes in a long term strategy, to counter the growing pressure of the newly industrialised countries (Asia, the Arabian gulf) especially, for low value-added products and that from industrialised countries (e.g. USA, Canada) favoured by certain advantages (cheaper primary materials and energy);

. By their diversity, complexity and interdependance, these characteristics represent a challenge to the effective working of a horizontal policy for industrial competitiveness for European chemical industry. Several action programmes and concrete measures have been identified; these may be an example for similar sectors.

II. BASIC PRINCIPLES AND ACTION FOR STRENGTHENING THE COMPETITIVITY OF THE EUROPEAN CHEMICAL INDUSTRY

In any market economy, each industrial enterprise is responsible for decisions and strategic initiatives which it must take to maintain or strengthen its international competitiveness in the long term. Nevertheless, the authorities have a role to play in creating a legal and economic framework and by adopting, if necessary, measures alongside those coming from industry. The actions to be taken by the EC, industry and/or member states are grouped around the 4 priorities of communication on industrial competivity:

1. Actions seeking to improve the framework of regulations

This improvement, agreeing with the "directing principles for regulating action" recently adopted must concentrate on:

The consolidation, up-dating and/or simplification ofthe present set of regulations for chemical substances. Amongst examples of such action, one may quote the coding of directives concerning fertilisers, detergents and restrictions on marketing certain products, the correction of the directive on preparations, simpification of the directive on health protection and the security of workers exposed to risks from chemical products in the workplace and the simplification of procedures for notifying new chemical products, especially for the PME, all are examples of this type of action:

The application of a coherent approach for all new regulatory initiatives concerning chemical products or installations, implying:

A scientific risk analysis for the product, its preparation, the type of installation, related to health, security and/or the environment and a comparison with the risks associated with eventual products of substitution or alternative procedures;

An analysis appropriate to the costs and benefits of available options at EU level, as well as eventual national measures;

If possible, a comparative analysis of legislative texts of similar force, being prepared in the most competitive third world countries;

If the results of these 3 types of analysis justify a new initiative whether at international or EU level, the simplest and least costly instrument guaranteeing an increased level of health and environmental protection should be chosen. There is a wide range of possibilities, unilateral industrial initiatives, agreements negotiated at EU or national level (for which the Commission will prepare a general framework), economic implications and regulatory initiatives at EU level, or if possible and necessary, at international level.

This approach is equally applicable as far as possible to present situations or in spite of harmonisation measures already taken, the internal market for chemical products remains fragmented: staged directives (asbestos) national requests for application of article 100A, paragraph 4 (pentachlorophenol, cadmium, creosote....). All actions must be analysed and elaborated in cooperation with representatives of industry and/or the member states concerned.

2. Actions seeking effective competitivity

The Commission will take account of the global dimension of the chemical industry and of the need to adapt permanently its structures, if it has to apply competitivity rules inside and outside the EU, especially on the following aspects:

- the analysis of eventual solutions proposed by the industry to resolve overcapacity, experienced by certain basic chemical firms, by means of actions carried our by the firms concerned, provided that the structural overcapacity is proved and the proposed actions are compatible with competition regulations.

- The pursuit of efforts to liberalise the electricity and gas market in the EU, lowering chemical industries' energy costs for these large consumers.

- The pursuit of efforts for efficient use of commercial instruments and especially the elimination, between the members and certain OMC candidates (Arabian gulf countries, China) of non-tariff barriers (double price systems for primary materials, import registers, etc).

- Bilateral research, with the main commercial (e.g. the USA, through a commercial transatlantic dialogue, the Transatlantic Business Dialogue and the Joint Action Plan) and multilateral partners of new agreements on international competition and commerce, especially relating to elimination of hindrances to international investments.

3. Actions seeking to strengthen non-material investments

-The need to innovate in high quality chemical products, diversify outlets and introduce more efficient manufacture, leads industry, the Commission and the national authorities to concentrate their efforts of Research & Development, aducation and scientific training in particular:

- The pursuit of cooperative research programmes on the European level, not only between industrial sectors with similar characteristics (the case of the SUSTECH and PRIMA initiatives for industries such as food, steel and paper) but also with downstream industries (transport, construction) and with logistics;

- An integration of chemical industry into the existing or future multisectoral initiatives (task forces, activity bundles) which will allow better access to various Community programmes and optimisation of the results thanks to better co-ordination;

- a greater flexibility in the development of specific Community Research & Development programmes;

- improvement in patent protection e.g. for pesticides and biotechnological products;

- the present industrial activities seeking to improve chemistry teaching of the young and scientific training of workers which together with the SOCRATES and Leonardo da Vinci Community programmes, certain sub-programmes of the fourth programme set and actions eligible under the structural funds and with the indispensible co-operation of member states educational programmes, will reinforce the educational and scientific base, essential to assure the future of an innovating chemical industry, which must include safety and health training of workers.

4. Actions seeking to develop industrial cooperation

The structure of this industry, comprising not only multinational companies but also numerous PME, as well as the risks and possibilities offered by certain internationl markets, requires intensive industrial cooperation.

- The importance of the PMEs in several branches of the chemical industry and their fundamental role in job creation and sub-contracting, compels the pursuit and/or the development, by industry and the Commission of actions such as:improving the access of the PMEs to technical economic and non-confidential legal information, thanks to a more up to date information system set up by the European Council for the chemical industry (CEFIC) and due to the DGIII netweork, the RISC (Information network of the chemical sector, the Bilbao agency for health and safety of work will form also a source of viable and impartial information.

- the promotion, amongst the PME of the chemical industry of several Community programmes developed by the EC to assist partnerships and sub-contracting, to improve management techniques etc.

- Cooperation projects which may be started by the industry, with EC support, may help to reduce the risks and increase the openings in third world markets.

- as far as countries adjacent to the European market are concerned (the PEO, certain NEI and countries of the Mediterranean basin), projects for information and technical assistance applied to the administrations and managers of the chemical industry, destined to promote the progressive establishment of a regulatory system (including public and work-place health, the environment, competition rules etc.) similar to that of the EU, will help countries hoping to join but also permitting the widening of the EU internal market, by ensuring more stable and homogeneous conditions for competition.

- Concerning the third world countries of which the markets are experiencing rapid growth, (certain PECOs, China S.E. Asia and Latin America) projects for training and technical assistance, combined with other actions more centred on technology transfer and investment promotion, will ensure a better access to the markets.

- Concerning the countries rich in primary materials and enery resources (Russia, the Gulf countries) investments in infrastructure or in industrial minerals will allow a better access to these resources and perhaps a greater control of price fluctuations.

III - CONCLUSION

The Commission estimates that the chemical industry of the EU, although among the most modern and competitive of the world, is faced with a number of challenges which it must take up to maintain and if possible, strengthen its international competitivity.

To do this, a series of actions to be elaborated and pursued by the industry, have been picked out and are presented in the present report. The Commission will set up a programme to be followed, in cooperation with representatives of the chemical industry and will oversee closely the evolution of international competitivity by the chemical industry and the adoption of the measures proposed.

REFERENCES

(1) The aims of the European chemical industry by Jacques PUECHAL, Chairman of Elf-Atochem, colloquium on the chemical centenary, Paris 26 November 1996.

(2) Green Book on innovation, published by the EC, on the initiative of Mme Edith Cresson and M. Martin Bangemann.

(3) F.A.Z. FRANKFURT, 20 December 1996.

(4) Chimie Actualities 24 June 1996.

(5) EC report "An industrial competition policy for the European chemical industry 1996,Bangemann and Cresson.

(6) Expansion Management Review, study of the premier world class companies, Fortune, 1993, a review of sales, production, personnel and finance.

(7) Circular DPM/DM2-3/96/256 of 15 April 1996.

(8) "JOCE" L18/1 of 21 January 1997.

(9) EEC regulation 1408/71, 14 June 1971.

(10) CASSTM decision No.162, 31 May 1996, "JOCE" L241/28, 21/09/1996.

(11) The European Round Table (ERT) consists of 46 directors of Europe's largest companies, representing the industry of 17 European countries and occupying more than 3 million people across the world. Their object : to be a force for strengthening European economy and increasing its global competivity.

(12) The point of view of Jerome MONOD, Chairman of Lyonnaise des Eaux, (Les Echos of 6/01/97).

(13) Informations - Chimie.

(14) Report of Int.Lab. Office, Chemical Industries Commission, 11th session, Geneva 1995.

Report I: Recent evolution in chemical industry.

Report II: Repercussions of structural changes in the chemical industry on employment and training.

Chimie-Actualities (Chemistry News).

Les Echos

CHEMICAL MARKETING REPORTER

EMPLOYMENT IN CHEMICAL INDUSTRY (14)

Class 351 of the CITI: Chemical Industry

Class 351 of the CITI: Manufacture of other chemical products.

Employment fell in the developed countries, grew slightly in central and eastern Europe above all, grew rapidly in the developing countries and especially in China. As a percentage, the developed countries passed from 50% of the total world jobs in 1970 to 30% in 1990 whilst their percentage in world production has hardly changed (71-72%).

Note: class 351 represents almost 60% of the total.