Bayer's Lanxess to put HQ in Pittsburgh, move Texas plant to China

Bayer and spinoff Lanxess Corp. win $3.76 million incentive package to keep U.S. headquarters in Pennsylvania and agree to invest over $100 million in state economy. Meanwhile, a joint venture with Chinese company means Baytown, TX, plant will be dismantled in December and moved to China's Shandong province by May. Move driven by rapid growth in demand for chemical used in water treatment, pharmaceutical, plastics and agriculture industries...

Sep 29th, 2004

PITTSBURGH, Sept. 29, 2004 (BUSINESS WIRE) -- Bayer Corp. and its spinoff Lanxess Corp. reached an agreement with Pennsylvania to help bolster the state economy through local capital investment and job retention in exchange for $3.76 million in incentives, including grants, tax credits and job training funds.

Under terms of the agreement, Bayer pledges to maintain its U.S. headquarters in Allegheny County, make substantial investments in its Pennsylvania locations and retain at least 1,750 jobs over a three-year period. In return, the state has offered the corporation a development assistance package worth up to $1.7 million.

The agreement includes an Opportunity Grant of $1 million and up to $700,000 in job training assistance. The Commonwealth has pledged up to $500,000 in job training costs between 2004 and 2005, and up to $200,000 in job training costs between 2005 and 2006.

Bayer plans on investing $100 million in Pennsylvania between 2004 and 2006. Up to 435 employees are to transfer to a new 104,000-square-foot facility in Findlay, Pa., outside of Pittsburgh by Nov. 1. The company, which will employ a total of 1,800 in the area, also considered Akron, Ohio, and Charleston, S.C., for the headquarters

China joint venture brings fourth plant
In other news, Bloomberg reported Lanxess will move a factory from Baytown, Texas, to China's eastern Shandong province by May 2005, as part of plans to form a $23 million chemical joint venture with Weifang Yaxing Chemical Co., the Chinese company said in an article posted on Xinhuanet.com. No numbers were given on how many people the Texas plant employs.

Overseas companies are moving production to China to take advantage of lower labor costs and rising demand in an economy that expanded 9.7% in the first half, the fastest rate of the world's 20 biggest economies. Chinese factory workers earn less than 1/20th of U.S. wages, according to the Bloomberg report.

The Baystown plant, which is to be dismantled in December, is one of the largest in the world for producing hydrazine hydrate, a chemical used in the water treatment, pharmaceutical, plastics and agriculture industries. The Chinese plant is to have initial annual production capacity of 12,000 tons of hydrazine hydrate, whose market has been growing by 10% a year.

The Bloomberg report said the venture will have registered capital of $9.2 million, with Lanxess investing 55% and Yaxing Chemical investing 45%. It will be Lanxess fourth chemical plant in China.

PA governor glad HQ will stay local
"Bayer applauds Governor Rendell's initiatives to revitalize Pennsylvania's economy," said Attila Molnar, Bayer Corporation President and CEO. "Strong companies make strong communities through tangible benefits like employment, wages and taxes. Bayer is proud to go beyond that with strong intangible activities of company-sponsored support for education and the arts and support for employees who work to strengthen their communities. That's because it's just as true that strong communities make strong companies. Bayer and Pennsylvania have demonstrated a solid commitment to invest in each other," Molnar said.

Bayer's former Bayer Chemicals Corp. business, now operating as a new company called Lanxess Corp., is covered under a separate agreement. Bayer AG plans to list Lanxess on the stock market by early 2005 through the spin-off of Lanxess shares to Bayer AG stockholders. In July 2004, it placed substantial parts of its existing chemicals and polymers activities into Lanxess.

In exchange for $10 million in investment, the state agreed to make available to Lanxess up to $872,000 in an Opportunity Grant, $554,000 in job-training assistance, and $435,000 in job creation tax credits. Allegheny County also pledged a Community Development Block Grant of up to $200,000.

Bayer currently employs more than 1,400 in Allegheny County, principally at its campus in Robinson Township. The location is home to Bayer's U.S. headquarters and the NAFTA operations of its Bayer MaterialScience unit. Lanxess employs 2,100 nationally and 20,000 worldwide, and generated 5.8 billion euros in sales in 2003 [1 euro = US$1.23].

In 2002, Bayer Consumer Care, a subgroup of Bayer HealthCare, completed a $50 million expansion of its existing Bayer® Aspirin plant in Myerstown, Pa., 30 miles east of Harrisburg. That plant is the exclusive production facility for Bayer Aspirin in North America, producing more than 4 billion tablets a year. The plant also produces several Bayer over-the-counter remedies, including Phillips'® Milk of Magnesia, Midol® and Flintstones® vitamins.

Bayer Corp., headquartered in Pittsburgh, is part of the worldwide Bayer Group, an international health care, nutrition and innovative materials group based in Leverkusen, Germany. Bayer employs 23,300 in North America with net North American sales of 8.8 billion euros in 2003. Bayer's three operating business areas - HealthCare, CropScience, and MaterialScience - improve people's lives through a broad range of products that help diagnose and treat diseases, protect crops, and advance automobile safety and durability.

The Bayer Group has 115,400 employees. For 2003, the Group recorded sales of 28.6 billion euros. Capital expenditures totaled 1.7 billion euros, and 2.4 billion euros were invested in research and development. Bayer is a research-based, growth-oriented global enterprise that concentrates on its core competencies in health care, nutrition and innovative materials.

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