Dow Chemical Company

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Dow Chemical Company (NYSE: [DOW] TYO: [4850] ) is an American multinational corporation. Headquartered in Midland, Michigan, it is the largest chemical company in the world measured by market capitalization, followed closely by DuPont.

Contents

University Governor Resigns Over Former Dow Director Appointment

John Rowlands, a member of the University of Wales, Bangor's Governing Council, resigned 10/7/2006 over the appointment of a former Dow Chemical Director to its midst. He said "Whilst the former director may well have views at odds with Dow's activities, I could not serve while the University is associated with Dow, a company linked to several chemical controversies".

Overview

The company was founded in 1897 by Canadian-born chemist Herbert Henry Dow, who had invented a new method of extracting the bromine that was trapped underground in brine at Midland, Michigan. While at first the company sold only bleach and potassium bromide, Dow today has seven major operating segments, with a wide variety of products offered by each. The company's 2005 sales totaled $46.3 billion, with a net income of $4.5 billion. Traded on the New York Stock Exchange, as of 2005 Dow has about 105,000 shareholders.

In September 2004, the company obtained the naming rights to the Saginaw County Event Center in Saginaw, Michigan; the center is now called the Dow Event Center. The Saginaw Spirit (of the Ontario Hockey League) plays at the Center, which also hosts events such as professional wrestling and live theater.

Products

Dow is the world's largest producer of plastics, including polystyrene, polyurethanes, polyethylene, polypropylene, and synthetic rubbers. It is also a major producer of the chemicals calcium chloride, ethylene oxide, and various acrylates, surfactants, and cellulose resins. It produces many agricultural chemicals, perhaps being most famous for its pesticide Lorsban. Its most well-known consumer products include Styrofoam and Silly Putty. Two former Dow product lines, Saran wrap and Ziploc bags, have been sold to SC Johnson.

Performance plastics

Performance Plastics make up 25% of Dow's salesChemical and Engineering News, Vol. 84, Issue 22 (May 29, 2006), pp 10-15, with many products designed for the automotive and construction industries. The plastics include polyolefins such as polyethylene and polypropylene, as well as the polystyrene most often seen in Styrofoam^TM insulating material. A complete range of epoxy resin intermediates and products are manufactured by Dow, including bisphenol A and epichlorohydrin. Polyurethane, polyether polyols and specialty acrylates are all derived from ethylene oxide (EO). The Saran^TM range of resins and films is based on polyvinylidene dichloride (PVDC).

Performance chemicals

The Performance Chemicals (17% of sales) segment produces materials for water purification, pharmaceuticals, paper coatings, paints and advanced electronics. Major product lines include nitroparaffins such as nitromethane, used in the pharmaceutical industry and manufactured by the Angus Chemical Company, a Dow subsidiary. Important polymers include Dowex^TM ion exchange resins, acrylic and polystyrene latex, as well as Carbowax^TM polyethylene glycols. Specialty chemicals are used as starting materials for production of agrochemicals and pharmaceuticals.

Agricultural sciences

Agricultural Sciences provides 7% of sales, and are responsible for a range of insecticide s (such as Lorsban^TM) and fungicides. Genetically modified plant seeds are also an important, growing area.

Basic plastics

Basic Plastics (26% of sales) end up in everything from diaper liners to beverage bottles and oil tanks. Products are based on the three major polyolefins – polystyrene (such as Styron^TM resins), polyethylene and polypropylene.

Basic chemicals

Basic Chemicals (12% of sales) are used internally by Dow as raw materials, and are also sold worldwide. Markets include dry cleaning, paints and coatings, snow and ice control and the food industry. Major products include ethylene glycol, caustic soda, chlorine, vinyl chloride monomer (VCM, for making PVC) and calcium chloride. Ethylene oxide (EO) and propylene oxide and the derived alcohols ethylene glycol and propylene glycol are major feedstocks for the manufacture of plastics such as polyurethane and PET.

Hydrocarbons and energy

The Hydrocarbons and Energy operating segment (13% of sales) oversees energy management at Dow, succeeding in raising energy efficiency by 92% since 1990.Chemical and Engineering News, Vol. 84, Issue 22 (May 29, 2006), pp 10-15 Fuels and oil-based raw materials are also procured. Major feedstocks for Dow are provided by this group, including ethylene, propylene, 1,3-butadiene, benzene and styrene.

History

The company originally sold only bleach and potassium bromide, achieving a daily bleach output of 72 tons a day in 1902. Early in the company's existence, a group of British manufacturers attempted to drive Dow out of business by cutting prices. Dow survived by cutting prices in response and, although losing about $90,000 in income, began to diversify its product line. Even in its early history, the company set a tradition of rapidly diversifying its product line. Within twenty years, Dow had become a major producer of agricultural chemicals, elemental chlorine, phenol and other dyestuffs, and magnesium metal.

In the 1930s, Dow began production of plastic resins, which would grow to become one of the corporation's major businesses. Its first plastic products were ethylcellulose, made in 1935, and polystyrene, made in 1937.

In 1930, Dow built its first plant to produce magnesium extracted from seawater rather than underground brine. Growth of this business made Dow a strategically important business during World War II, as magnesium became important in fabricating lightweight parts for aircraft. Also during the war, Dow and Corning began their joint venture, Dow Corning, to produce silicones for military and later civilian use. In 1942 Dow began its foreign expansion with the formation of Dow Chemical of Canada in Sarnia, Ontario to produce styrene for use in styrene-butadiene synthetic rubber.

In the post-war era, Dow began expanding outside North America, founding its first overseas subsidiary in Japan in 1952, with several other nations following rapidly thereafter. Based largely on its growing plastics business, it opened a consumer products division beginning with Saran wrap in 1953. Based on its growing chemicals and plastics businesses, Dow's sales exceeded $1 billion in 1964, $2 billion in 1971, and $10 billion in 1980.

Today, Dow is the world's largest producer of plastics; with its 2001 acquisition of Union Carbide, it has become a major player in the petrochemical industry as well.

Dow Corning

Equally owned by Dow and Corning, Inc. (formerly Corning Glass Works), Dow Corning was founded in 1943 by the two companies as a joint venture. The company's focus is silicon-based products and technology. Dow Corning in turn owns 63% of the Hemlock, Michigan-based Hemlock Semiconductor Corporation, which manufactures polycrystalline silicon for semiconductor chips.

Dow Corning manufactured silicone breast implants, which were the cause of controversy and legal liability in the 1980s and 1990s (see below.)

Board of directors

Current members of the board of directors of Dow Chemical Co. are Arnold Allemang (who is also a senior adviser to the company); chemistry professor Jacqueline Barton; former Boeing manager James A. Bell; Whirlpool Corporation chairman and CEO Jeff Fettig; former U.S. Secretary of Commerce Barbara Franklin; Dow chairman and CEO Andrew N. Liveris; Dow CFO Geoffery E. Merszei; former Dow Brazil finance director J. Pedro Reinhard; Illinois Tool Works Inc. vice chairman James Ringler; Duke Energy Corporation president Ruth Shaw; and Claris Capital chairman Paul Stern (who is Dow's presiding director and a member of the Council on Foreign Relations.)

Controversies

Bhopal

In 1984, a chemical factory operated by Union Carbide, an American company, leaked lethal gases into the surrounding environment, which caused almost 3,000 deaths within a few days and thousands more thereafter. Dow Chemical had no affiliation with Union Carbide at the time of the disaster; however, in 1999, Dow purchased Union Carbide, which is now a wholly-owned subsidiary. Dow currently denies legal liability for the disaster, since it did not own or operate the Bhopal factory and Union Carbide reached a legal settlement with the government of India in 1989.

Breast implants

A major manufacturer of silicone breast implants, Dow Corning was successfully sued in 1977 for damages arising from a woman whose implants ruptured; it was the first such successful suit, and Dow Corning paid $170,000 in a settlement. During the 1980s, Ralph Nader's Public Citizen Health Research Group publicised its belief that the implants were cancer-causing; in December of 1990, an episode of Face to Face with Connie Chung addressed the dangers of silicone implants. More lawsuits, as well as Food and Drug Administration reviews, Congressional hearings, and scientific studies took place in the ensuing years; as of December 1991, 137 individual lawsuits were filed against Dow Corning, a figure that would rise to 3,558 in December 1992, and 19,092 by December 1994. Amidst the flurry of lawsuits in May 1995, Dow Corning filed for Chapter 11 bankruptcy protection; several judgments against Dow Corning and Dow Chemical were handed down in lawsuits.

Napalm

During the Vietnam War, Dow became the sole supplier of napalm to the United States military. Napalm, an incendiary liquid used as a weapon in Vietnam, led to human casualties that were widely displayed in the news media. Protests of Dow took place at many colleges (the first taking place in October 1966 at University of California, Berkeley and Wayne State University in Michigan); some were in response to Dow recruiters coming to college campuses. Despite the public outcry, in 1967 Dow's board of directors voted to continue production of napalm (after attempting to persuade the U.S. Department of Defense to accept responsibility for napalm and exculpate Dow's management.) The napalm controversy caused a major increase in the public's awareness of Dow; ironically, the company's image was not always harmed by the napalm-related publicity, with the number of interviews on campuses increasing.

Agent Orange

Agent Orange, a chemical defoliant containing dioxin, was also manufactured by Dow for use by the U.S. military during the Vietnam War; the dioxin from the defoliant made its way into the food chain and was linked to a major increase in birth defects among Vietnamese people. In 2005, a lawsuit was filed by Vietnamese victims of Agent Orange against Dow and Monsanto Company, which also supplied Agent Orange to the military. The companies argued that no link between Agent Orange and the alleged health problems had been proven, and furthermore that the companies are not responsible for the manner in which their products are used by the military. The lawsuit was thrown out. In 2006, a court in South Korea did order Dow and Monsanto to compensate South Korean veterans of the Vietnam War and their families for Agent Orange-related injuries.

Dioxins in Michigan

Starting in the early 2000s, residents living on the Tittabawassee River near the company's headquarters in Midland and nearby Saginaw counties in Michigan filed a class-action lawsuit against the company for dioxin contamination (levels of dioxins were found above those allowed by the Department of Environmental Quality) in the soil on the riverbed and along its shores. As of June 2005, the case is still awaiting class certification. [link]

Outlook

Dow CEO Andrew N. Liveris called 2005 the company's "best year ever" with operating profits of $5.4 billion, a jump of 56.5% compared with the previous year. "Top 50 Chemical Producers", Chemical and Engineering News, Vol. 84, Issue 20 (May 15, 2006), pp 10-15 Net income rose more than 60% to $4.5 billion, on sales of $46.3 billion. 2006 looks as if it could be even better, with first-quarter net earnings of $1.2 billion. "Liveris Tells It Like It Is", Chemical and Engineering News, Vol. 84, Issue 22 (May 29, 2006), pp 10-15 All this is occurring in the context of adverse operating conditions, caused by high energy & raw material costs, and the effects of two damaging hurricanes.

Liveris is a staunch believer in the vertically integrated approach used at Dow, which produces everything from basic chemical feedstocks to high value products such as pesticides and reverse osmosis membranes. These value-adding product chains, along with Dow's wide product range, help the company to weather the storms of the global economy. Despite this, high energy and feedstock costs may begin to take their toll, particularly if global demand begins to fall just as supply is rising.

Like many chemical companies, Dow is facing pressures of regulation in the US and Europe, particularly as the EU introduces its new REACH policy. Litigation costs in the US taken over by Dow as a result of its 2001 takeover of Union Carbide also remain a concern.

For these reasons the company is looking to the Middle East and Asia for new projects. In Kuwait Dow is constructing (with PIC of Kuwait a new world-scale ethane cracker for production of ethylene, along with an ethylene oxide/ethylene glycol plant and (for 2008) a facility for production of aromatic hydrocarbons. In Oman, the company is working with the Oman government to build a new world-scale polyethylene plant. In China, the company is collaborating with Shenhua Group (the country's largest coal mining company) to improve catalyst efficiency to allow viable conversion of coal to olefins. Dow is also seeking to expand its R&D presence in Asia, adding 600 jobs in Shanghai by the end of 2007, and the company may open up a large R&D center in India.

The joint ventures planned for Asia are typical of Dow's "asset-light" approach, which works by offering a combination of intellectual property and money in exchange for a share in a world-scale production facility. At the same time, the company is considering selling a share of some of its existing assets in order to free up cash.

In June 2006 Liveris announced Dow's safety and environmental goals for 2015: "Liveris Tells It Like It Is", Chemical and Engineering News, Vol. 84, Issue 22 (May 29, 2006), pp 10-15

75% reduction in environmental, health and safety indicators from 2005. The company aims to have no fatalities, and a reduction in injuries, spillages and leaks.
25% increase in energy efficiency.
2.5% annual reduction in greenhouse gas emissions intensity.

Liveris expects these goals to be reached predominantly with fossil fuels, through energy conservation and reduction of energy intensity, as he does not expect alternative energy to play a major role for at least 10-20 years.

Notes

External links

Advocacy

[International Campaign for Justice in Bhopal]
[Studentsforbhopal.org], a student advocacy group based on the Bhopal disaster.
[Thetruthaboutdow.org], a parody/critical website against the corporation.
[Dow Chemical] entry at Knowmore.org
[SourceWatch article on Dow Chemical Company]
[Nature 2.0 beta | Legislation, Politics, Science and Spin Behind Genetically Modified Foods]