An alliance of German lubricant producers has folded a year after it was formed, due to the inability of members to agree on strategic priorities.
An official at a prospective member company said the International Oil Agency GmbH disbanded recently because his company wanted the alliance to focus on product development, while others insisted that joint procurement of base oils and additives be the first priority.
Their main objective was to be a purchasing company, Hansen and Rosenthal Chief Executive Officer Horst Hollstein said during a telephone interview yesterday. Hansen and Rosenthal is parent company of H&R Chemisch-Pharmazeutische Spezialitaten GmbH, aproducer of lubricants and specialty oils, which had been invited to join the agency. Our opinion was that procurement would not yield any real benefits for the members. We wanted to focus on product development.
We couldnt reach an agreement so we decided not to join. I believe it was our decision that led the rest of the members to disband, because we would have been the largest lubricant producer.
The IOA, which was headquartered in Cologne, was founded in February 2002 by a few lubricant industry veterans with the stated goal of helping mid-size lube producers cope with market consolidation caused by mergers and acquisitions. One outcome of those developments is that there are no longer any big oil companies based in Germany.
The IOA, which had its own staff, said it intended to serve as a conduit for member companies to cooperate in the areas of technology, procurement, production and logistics. At the time of its formation, the agency listed four members – H&R, Minerallwerke Meguin, Swd Lubricants and Minerallraffinerie Dollbergen. Hollstein said H&R never joined and that he was angered by IOAs assertion that it had.
The other three members claimed 10 percent of Germanys lubricant market. IOA officials said they hoped to attract other members inside and outside Germany.
Andreas Weissenberg, one of the agencys principals, said members spent much of last year trying to agree on a common strategy. The group also had to obtain permission from the Bundeskartellamt, a German fair-trade office, before engaging in its activities. The group received approval last fall and began negotiating purchasing contracts. But it disbanded several weeks ago before those efforts came to fruition.
Weissenberg left open the possibility of the alliance being revived at some point in the future. Hollstein said the concept has potential, although he maintained such a venture would only work if it focused on development of high quality products.
If you bring several companies together, you can obtain an economy of scale where the additive companies will be more willing to develop formulas, he said. Thats where the real benefits would come from.