Chemical Change

In 1854, William Russell Grace a refugee from the Irish potato famine and a partner in a small ship chandler's store seven miles from Lima, Peru, changed trades. He decided that he could make more money selling guano fertilizer (bird droppings) than from ship supplies He was right. By the time he died in 1904. his W. R. Grace & Co. was a multimillion-dollar empire whose ship lines, sales agencies, railroads and import-export business touched almost every town and hamlet along South America's west coast.

Last week the company started on a change that was almost as important as the one Bill Grace made some 98 years ago: it began in earnest to turn itself into a chemical company. As a starter borrowed $35 million from four big insurance companies to build, as one part of a wide-sweeping expansion program a $20 million plant in Memphis, Tenn.' to produce fertilizers by petrochemical processes. Said Grace's 39-year-old president, Joseph Peter Grace Jr.: "In 20 years, W. R. Grace may well be predominantly a chemical company."

Necessity's Child. Grace & Co. has been heading toward the big change for the past two years. In 1951, Grace bought 16% (later upped to 20%) of Baltimore's Davison Chemical Co., and this year got its fingers in the Dewey & Almy Chemical Co. of Cambridge, Mass, with a $2,000,000 loan. Grace has also started two new big chemical plants in San Francisco, the Naco Fertilizer Co. of California and the Grace Agricultural Chemical Division, to process and sell bug and weed killers.

The chemical change was mothered by necessity. Caught by such pressures as growing competition in Latin America from other U.S. firms (especially small free-wheeling operators with little overhead) and a worldwide textile slump, Grace's profits skidded from $18.2 million in 1947 to $9,480,000 last year, although the gross climbed from about $175 million to $269 million.

Hardest hit is the Grace Line, which once accounted for almost half of the company's total profits. Nipped by competition from shipping lines owned by the South American countries themselves, Grace carries almost 40% less cargo than it did in its peak year, 1947. Furthermore Grace is currently facing dollar shortages all along the line; South American currencies have been steadily depreciating in terms of the dollar, and the once low South American tax rates have been on the increase.

Big Overhaul. Peter Grace has been overhauling his company to meet the new conditions ever since he took over from his father in 1946. Peter Grace found it short of top executive talent. He brought in executives from other firms and, although a graduate of Yale himself ('36), he put a stop to Grace's habit of hiring what he calls "rich men's sons from swanky colleges." Says Grace: "What we want are hungry, brainy young men who are eager to knock themselves out."

Grace knocks himself out. He works as much as 80 hours a week, shuttles back & forth between New York and Latin America about five times a year, has developed ulcers and a prodigious memory for even the smallest details about the Grace empire. He had his staff investigate some 500 different U.S. corporations before he decided to plunge into petrochemicals. Said Grace: "We think it's going to be the fastest-growing industry in the U.S. during the next ten years."

Grace may sink as much as $75 to $100 million in petrochemicals, may some day have as much as half of the company's assets in the industry. But Grace has no intention of stopping all expansion in South America. Last week he was putting the finishing touches on another one of his pet projects: a $5,000,000 DDT plant which the company will soon build, probably in Brazil.

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