Dow Chemical Company

The Dow Chemical Company (NYSE: DOW TYO: 4850) is an American multinational corporation headquartered in Midland, Michigan. As of 2007, it is the second largest chemical manufacturer in the world (after BASF).^[1]

Dow Chemical is a provider of plastics, chemicals, and agricultural products with presence in more than 175 countries and employing 43,000 people worldwide. It spends more than $1 billion annual expenditure in R&D. Its stated mission under the current CEO, Andrew N. Liveris, is:

"To constantly improve what is essential to human progress by mastering science and technology" with the vision: "to be the largest, most profitable, and most respected chemical company in the world".^[2]

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.^[3] 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.^[4] 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.^[5]

Dow has been called the "Chemical companies' Chemical company"^[6] in that most of their product is sold to other manufacturers rather than to end users. Dow had periods of selling into the Human and Animal Health markets as well as into the Consumer Products market (the latter most visible with Saran Wrap), but all of these facilities have been sold over the years.

Dow Chemical is an active member of the American Chemistry Council, and an active partner in different programs and initiatives in both the World Bank and United Nations.

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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.^[7] Its most well-known consumer products include Styrofoam brand insulation. Former Dow product lines, Saran wrap and Ziploc bags, Scrubbing Bubbles have been sold to S. C. Johnson & Son.

Performance plastics

Performance Plastics make up 25% of Dow's sales^[8], 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 chloride (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 ANGUS Chemical Company ^[9], a wholly owned subsidiary of the Dow Chemical Company. Important polymers include Dowlex^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 (Dow AgroSciences) provides 7% of sales, and are responsible for a range of insecticide s (such as Lorsban^TM), herbicides and fungicides. Genetically modified plant seeds are also an important, growing area. Dow AgroSciences sells seeds comercially under the following brands: Mycogen (grain corn, silage corn, sunflowers, alfalfa, and sorghum, Atlas (soybean) and PhytoGen (cotton).

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.^[10] 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

Early 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 the bleach 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.^[11] In 1905 German bromide producers drastically reduced their price of bromides in the US in an effort to prevent Dow from expanding its sales of bromides in Europe. Dow was able to purchase German-made bromides in the US, ship them back to Europe and still sell them at a lower price than the German producers were charging. ^[12] 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.

Diversification into plastics

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.

WW II - Magnesium and the beginnings of geographic diversification

In 1940-1, Dow built its first plant to produce magnesium extracted from seawater rather than underground brine. This marked the first time man had 'mined the ocean for metal'.[2]

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.

Freeport - Texas Operations

In 1940, Dow began plant construction in Freeport, Texas. This is now the home to Dow's largest site - and one of the largest integrated chemical manufacturing sites in the world. One of the first plants to come on stream was the first facility to extract magnesium from seawater. The site grew quickly - with power, chlorine, caustic soda and ethylene also soon in production. [3]

Based on 2002-2003 data, the Freeport plants (known as Texas Operations internally) produced 27 billion pounds of product - or 21% of Dow's global production. [4]

Post WW II

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.

The 1990's - transition from geographic alignment to global business units

In the early 1990s, Dow embarked on a major structural reorganization. The former reporting hierarchy was geographic based, with the regional president reporting directly to the overall company President and CEO. The new organization groups together the same businesses from different sites, irrespective of which region they belong (i.e. the vice president for Polystyrene is now in charge of these plants all over the word), almost reducing the regional president to a figurehead.

Bill Stavropoulos served as President and Chief Executive Officer from 1995-2000 and again from 2002-2004. He relinquished his board seat on April 1, 2006, having been a director since 1990 and chairman since 2000. During his first tenure, he led the purchase of Union Carbide which had proven controversial, as it was initially blamed for poor results under his successor as CEO Mike Parker. Parker was dismissed and Stavropoulos returned from retirement to lead a turnaround of Dow.[5]

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.

On August 31, 2006 Dow announced that it had plans to close facilities at three locations:^[13]

• It will shut down all of its production in Sarnia, Ontario by the end of 2008. Sarnia had been Dow's first manufacturing site in Canada. In 1942, the Canadian government invited Dow to build a plant there to produce styrene (an essential raw material used to make synthetic rubber for World War II). Dow then built a polystyrene plant in 1947. Up to the early 1990s, the Chemical Valley site contained numerous plants, while Dow Canada's headquarters were located at the Modeland Centre, and a new River Centre complex was opened which housed Research and Development. Since then, several plants on the site have been dismantled and Dow Canada headquarters were moved to Calgary, Alberta, while the Dow Fitness Centre was donated to YMCA of Sarnia-Lambton, and the Modeland Centre was sold to Lambton County and the City of Sarnia. In 2000, Sarnia Site was the location of a pilot plant for ethylene-styrene interpolymer (ESI) but ending up production never progressed and the project was ended. In 2002, the old steam plant was demolished and land on the site was sold to TransAlta which built a new natural gas power plant. As of 2003, the remaining plants on the site produce Polystyrene, Low Density Polyethylene (LDPE), Epoxy Resins, Polyols (Propylene Oxide Derivatives), and Latexes.[6]
• One plant (Dow terminology for a production unit) at its site in Porto Marghera (Venice), Italy, which had been shut down for planned maintenance earlier that month, will not be restarted.
• Two plants at its major site in Fort Saskatchewan, Alberta were to be shut down by the end of October 2006.

Environmental Record

Based on year 2000 data,^[14] researchers at the Political Economy Research Institute determined that Dow Chemical was ranked eleventh among corporations in a measure of toxicity of airborne pollutants emitted in the United States, releasing more than 14 million pounds of toxins into American air in that year. (The statistics given are not correlated to the volume of production.) ^[15] According to United States Environmental Protection Agency (EPA) documents Dow has some responsibility for 96 of the United States' worst Superfund toxic waste dumps, in tenth place by number of sites. One of these, a mining site, is listed as the sole responsibility of Dow: all the rest are shared with numerous other companies. Fifteen sites have been listed by the EPA as finalized (cleaned up) and 69 are listed as "construction complete", meaning that all required plans and equipment for cleanup are in place.^[16]

Union Carbide Bhopal disaster

Main article: Bhopal disaster

In 1984, a chemical factory operated by Union Carbide, an American company, leaked 40 tonnes of lethal methyl isocyanate (MIC) gas into the surrounding environment, which has caused more than 20,000 deaths and 100,000 disabilities.^{[citation needed]}

In 1991, The Supreme Court of India upheld a US $470 million civil settlement. The court required the Indian government to use the money to fund a group medical plan for up to 100,000 persons who might develop symptoms at a later date, and dismissed all petitions challenging the settlement. In 1994, Union Carbide sold its interest in Union Carbide India Limited (UCIL).[7]

In 1999, Dow purchased Union Carbide, which is now a wholly owned subsidiary. Dow denies legal liability for the disaster, since it did not own or operate the Bhopal factory. Because of this disaster, there are thousands of people who are sick today and have been dying. ^[17][18]

Dioxins in Michigan

Starting in the early 2000s, residents living along 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. [8]

Chlorpyrifos

Chlorpyrifos, marketed by Dow as Dursban, is well known as a home and garden insecticide, and until 2000 it was one of the most widely used household pesticide in the US. The pesticide is also a nerve toxin and suspected endocrine disruptor and has been associated with carcinogenicity, reproductive and developmental toxicity, and acute toxicity. One study claims that Dow has contributed to 80% of the Chlorpyrifos burden of the US.

In 1995, Dow was fined $732,000 for not sending the EPA reports it had received on 249 Dursban poisoning incidents. In June 2000, Dow withdrew registration of chlorpyrifos for use in homes and other places where children could be exposed, and severely restricted its use on crops. The company, however, continues to market Dursban in industrializing countries, including India, where Dow's sales literature claimed Dursban has "an established record of safety regarding humans and pets."

In 2003, Dow agreed to pay $2 million - the largest penalty ever in a pesticide case - to the state of New York, in response to a lawsuit filed by the Attorney General to end Dow's illegal advertising of Dursban as "safe".

Energy Conservation

On 2007, Dow was awarded an American Chemical Council (ACC) award of 'Exceptional Merit' in recognition of its longstanding energy efficiency and conservation efforts. Between 1995 and 2005, Dow reduced energy intensity (BTU per pound produced) by 22%. This is equivalent to saving enough electricity to power eight million US homes for a year. [9]

Environmental Awards

In 2007, Dow subsidiary Dow Agrosciences won an United Nations Montreal Protocol Innovators Award for its efforts in helping replace methyl bromide - a compound identified as contributing to the depletion of the ozone layer. In addition, Dow Agrosciences won an EPA "Best of the Best" Stratospheric Ozone Protection Award. [10]

Human rights controversies

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 then-alleged 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.

Several panels of independent experts, including the Institute of Medicine, have since found that silicone breast implants do not appear to cause any systemic diseases or cancers. ^{[19] [20]}

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 but 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).

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, 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.^[21] The lawsuit was thrown out.^[22] 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.^[23]

DBCP

Until the late 1970's Dow produced DBCP (1,2-Dibromo-3-chloropropane), a soil fumigant and nematicide sold under the names the Nemagon and Fumazone. Workers at Dow's DBCP production were made sterile by exposure to DBCP. These male reproductive effects were consistent with animal experiments showing that DBCP sterilized rabbits. The workers successfully sued the company, and most domestic uses of the chemical were banned in 1977. Amid growing concerns over DBCP's effects on male workers, Dow ceased production and reclaimed DBCP that had been shipped to its users. Despite warning from the company about its health effects, Dole Food Company, who was using the chemical on its banana plantations in Latin America, threatened to sue Dow if it stopped DCBP shipments, so Dow shipped half a million gallons of DBCP to Dole, much it reclaimed from other users. Plantation workers who became sterile or were stricken with other maladies subsequently sued both Dow and Dole in Latin American courts, alleging that their ailments were caused by DCBP exposure. While the courts agreed with the workers and awarded them over $600 million in damages, they have been unable to collect payments from the companies. A group of workers then sued in the United States, and, on November 5, 2007, a Los Angeles jury awarded them 3.2 million dollars. Dole and Dow vowed to appeal the decision.^[24]

Dow Corning

Main article: 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.^[25] Dow Corning in turn owns 63% of the Hemlock, Michigan-based Hemlock Semiconductor Corporation, which manufactures polycrystalline silicon for semiconductor chips.^[26]

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 The Dow Chemical Company 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; 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.)^[27]

2007 dismissals

On April 12, 2007, Dow dismissed two senior executives for "unauthorized discussions with third parties about the potential sale of the company." The two figures are executive vice president Romeo Kreinberg, and director and former CFO J. Pedro Reinhard. Dow claims they were secretly in contact with J. P. Morgan; at the same time, a story surfaced in Britain's Sunday Express regarding a possible leveraged buyout of Dow. The two executives have since filed lawsuits claiming they were fired for being a threat to CEO Liveris, and that the allegations were concocted as a pretext.^[28]

Major Sponsorships

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.^[29][30]

In October 2006 the company bought the naming rights to the stadium used by the Single-A Minor League baseball team located in its hometown of Midland, Michigan. The stadium (which opens in April 2007) is called Dow Diamond. The Dow Foundation played a key role in bringing the team, the Great Lakes Loons, to the city.

The company also sponsors a global running relay to highlight the need for better drinking water in locations around the globe. The run will roughly follow the 41st North parallel and cover nearly 12,000 miles (19,000 km). The run is organized by the Blue Planet Run Foundation.

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. ^[31] 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. ^[32] All this is occurring in the context of adverse operating conditions, caused by high energy and raw material costs, and the effects of two damaging hurricanes.

Liveris supports 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: ^[32]

• 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.

The Human Element

The Dow Chemical Company has from June 20, 2006 run several advertisements in a variety of media, starting with a video campaign and under the theme "The Human Element", designed to increase the awareness of the human aspect of the company, to highlight its vision of addressing some of the most pressing economic, social and environmental concerns facing the global community in the coming decade.^[33] The advertisements feature a human face with 7E+09 at the bottom. The face is behind a fake periodic table entry, labeled "Hu", symbolizing the new element, the human element.^[34]

Notes

Further reading

• E. Ned Brandt. (2003). Growth Company: Dow Chemical's First Century. Michigan State University Press. ISBN 0-87013-426-4
• Jack Doyle. (2004). "Trespass Against Us: Dow Chemical and the Toxic Century." Common Courage Press. ISBN 1-56751-268-2