European chemicals and plastics makers are cutting in-house research and instead trying to persuade customers to work together to develop running shoes, cars or electronics.
Collaborating can cut millions of euros from research and development (R&D) budgets and translate into exclusive supplier contracts as chemical and plastics profits come under pressure from cheaper emerging market competition and rising fuel bills.
German chemicals group BASF has started working with sportswear maker Adidas to make running shoe soles more bouncy. Solvay is developing polymer linings for corroded pipelines with an oil major while Lanxess is helping VW unit Skoda make car parts.
“These days cooperations are much more common. It’s much more beneficial than doing it all by yourself,” said Werner Breuers, executive board member at German speciality chemicals group Lanxess.
Europe’s €650 billion chemicals industry relies on innovation after selling most of its bulk chemicals businesses over the past 20 years to focus on high-tech materials for industrial customers.
But they need to make sure they stay innovative because emerging market companies are becoming more sophisticated at copying established products, while US rivals are getting a boost from shale gas as a cheap source of energy.
Weakening the European position further, many businesses in the region’s largest chemicals-producing nation Germany are facing painful surcharges on their electricity bill to fund the country’s shift to renewable energy.
Chemical industry R&D spending in the region – measured as a fraction of sales – slid to 1.6 per cent in 2012, down from 1.8 per cent the year earlier and 2.8 per cent in 1991, the latest data available from lobby Cefic shows.
Industry advisors say this is not a sign of waning commitment, rather one of companies managing to get more innovation out of a euro spent on R&D, a result of linking up with and seeking input from their clients.
“At Lanxess, somebody might have an idea, and the customer will tell us immediately whether for one reason or another it is not going to work,” said Breuers.
Lanxess worked with Volkswagen’s Skoda unit and French auto parts maker Faurecia to develop a component from glass-fibre reinforced plastic that holds a car’s bodywork together at the front of Skoda’s Octavia.
Martin Gruhlke, a project manager at business consultancy Stratley AG, said efforts to boost R&D productivity are high on boardroom agendas. He has recently helped reposition a global chemical group’s research department to filter out ventures that do not serve immediate client needs. (Reuters)