Review of the policies of DuPont, a large chemical corporation.
Warning
When you read the next parts, or company reports, treat with suspicion buzz words like those in the following list
List of popular managers’ buzzwords
- At the end of the day
- clear goal
- countless
- Diversity
- Downsizing
- Event horizon
- Globalization
- Going forward
- impact
- Leverage
- moving forward
- outside the box
- Paradigm
- Push the envelop
- seamless
- streamlining
- Sustainability
- Value-added
- Synergy
- win-win
A. History
In 1802, Éleuthère Irénée du Pont, a prominent physiocrat and economic adviser to Louis XVI who had fled to America during the French Revolution, built a black-powder gunpowder mill outside Wilmington, Delaware. By 1811, DuPont was the largest supplier of gunpowder for US military, supplying U.S. troops during the War of 1812. A century later the company was still family-owned, and under three DuPont cousins, great-grandsons of Éleuthère, trained at the Massachusetts Institute of Technology, it had reinvented itself by amassing a near monopoly on munitions, only to have that business broken up by the government under the Sherman Antitrust Act.
From 1902 to 1912 DuPont expanded quickly into production of smokeless powder and dynamite. During WW1, 40% of explosive used by the world powers was supplied by DuPont. Along the way, DuPont purchased smaller chemical companies and eventually in 1902, the government took DuPont to the court and declared that DuPont was having a monopoly by dominating the explosive business. Based on the court ruling DuPont had to move most of its explosives businesses to new subsidiaries called Atlas Powder Company and Hercules Powder Company, which, eventually were bought by other chemical corporations.
In 1914, DuPont invested and got largely involved in automobile industry. From 1920 to 1935 DuPont discovered important polymers: the first synthetic rubber, nylon,Teflon and polyester.
In the 1930s the company’s munitions business again faced intense scrutiny: The Nye Commission charged that DuPont had profiteered in World War I. By then the company had diversified from explosives to one of the most cutting-edge of then, contemporary sciences, chemistry, producing dyes, lacquers and leather finishes, synthetic polymers and specialty materials. One of the cousins, Pierre, had invested in General Motors Corp. He went on to become chairman of GM, and in 1920, DuPont stepped in to save the foundering car maker; Pierre took over as GM’s president. In 1962 the government forced DuPont to unload its 37 percent GM stake under the Clayton Antitrust Act.
During WW2 (from 1941 to 1945), DuPont became the largest producer of war supplies. DuPont also played an important role in the Manhattan Project and in the production of the first atomic bombs, that were later on dropped on Hiroshima and Nagasaki. During the same war, DuPont produced 4.5 billion pounds of explosives for military use.
From 1950s to 1970s DuPont came up with new plastic products like Dacron, Mylar, Lycra, Corfarm and Corian.
DuPont’s bio-science foray surfaced as long ago as 1980, when CEO Shapiro announced it to BusinessWeek. Shapiro’s successor, Edward Jefferson, became CEO in 1981, the same year he plunged into a high-profile battle with Joseph E. Seagram & Sons for the oil producer Conoco. Oil had nothing to do with bio-science, but buying Conoco ensured that DuPont would have access to reasonably priced petroleum as a feedstock. The high price of oil had been a problem in the crisis wracked 1970s, though having a captive supplier was less compelling when prices tumbled in the ’80s. The acquisition of Conoco made DuPont one of the top ten US producers of oil and gas.
At about that time, DuPont made another strategic shift, entering pharmaceuticals. DuPont had bought a small, family-run pharmaceuticals business called Endo Laboratories in 1969, and cash flow from Conoco helped fund a pharma R&D and M&A push; DuPont ballyhooed a joint venture with Merck & Co. in 1991 as a way to become “a competitive force in life sciences.” But in the 1990s earnings and profitability stalled as pharma consolidated, a situation exacerbated by the fact that the fibers business was facing brutal overseas competition.
In 1989, under the CEOship of Edgar Woolard Jr., DuPont began to pare expenses and restructure. Chad Holliday took over from Woolard in 1998 and pressed that restructuring. He sold Conoco to Phillips oil company. In 2001 Holliday unloaded DuPont Pharmaceuticals Co. to Bristol-Myers Squibb Co. for $7.8 billion. Three years later he sold DuPont’s textile operation to Koch Industries for $4.2 billion.
Currently, the brightest spot on the company’s balance sheet, by far, is DuPont’s agriculture technology businesses: seeds, crop protection, nutrition and health. DuPont started assembling the building blocks for this strategy in 1999, when Holliday acquired the country’s biggest seed producer, Pioneer Hi-Bred, for $7.7 billion. In 2011, Kullman, the next DuPont president, paid $7 billion for Danisco, a Danish enzyme and food ingredients company. These investments have paid off. Pioneer, crop protection and the nutrition and health divisions now account for some 40 percent of DuPont’s earnings and revenue and look to be its most promising sources of growth. The company’s ag sales jumped 13 percent in 2013 over the previous year; no other business segment experienced more than 4 percent growth. DuPont devotes more than 60 percent of its $2.15 billion R&D budget to its ag and food divisions.
Holliday retired in 2009; Ellen Kullman replaced him. When Kullman assumed the CEO position, she had to let go 4,500 employees while mastering a still-giant company in the midst of a wrenching recession. She also reworked the management structure, removing one layer by eliminating a group of vice presidents and handing oversight of most operations to three managers. She consolidated 23 businesses into 13 and regionalized and localized them while boosting market interaction. And since then she has offered shareholders a blend of addition, her acquisition of Danisco was the second largest in DuPont’s history, and subtraction: selling off performance coatings and, currently, splitting performance chemicals.
In 2014 to 2015, the investor Peltz tried to take over DuPont, split it into segments and sell the segments for more than selling the whole company would have made.
B. Policies
It is accepted that politicians make promises which they do not intend to keep. However, it is not accepted that this is a privilege of industrial leaders. DuPont, is one of the world’s largest chemical companies. In 1998 to 2003 it was the second largest chemical company in the world, but by 2012 it dropped to the number 9 position.
Most years, the top managers, in their yearly report to the shareholders, describe the long term strategy of the company.
Charles O. Holliday Jr. was the president of the company in 1997 and later he also became its chairman. In the 1997 report he wrote:
A clear sense of direction
DuPont is a chemical, materials and energy company that derives its competitive advantage from technological strengths in chemistry and chemical engineering, biotechnology, and geology. Our chemicals and specialties businesses are world class with strong core technology platforms, leading market and cost positions, value-added products, global presence and financial strength. The DuPont superbrand is among the most recognized in the world, and our many brand franchises offer unparalleled opportunity for our businesses in established and developing markets.
After years of streamlining our businesses and restructuring both our portfolio and the way we work, DuPont is less susceptible to the impact of chemical and petroleum industry cycles. Even in the present uncertain times we remain committed to delivering record performance. Our target of 15 percent total annual return to shareholders over time remains unchanged.
Strategies translated into actions
We have restructured our chemicals and specialties portfolio to focus on those businesses where we can be number one or a strong number two globally, based on clear technological advantages that provide profitable growth. During 1997 we took bold steps in acquiring several businesses from ICI. These acquisitions will propel our polyester business by providing a very strong ingredient position based on world class technology and by substantially strengthening our polyester films and resins businesses. The pending purchase of ICI’s considerable titanium dioxide assets will allow us to lead the world in white pigments and accelerate our growth in both Europe and Asia.
In energy, Conoco is well along its path to doubling its value by 2003 In Venezuela. We established and completed financing on a joint venture that will give us access to major oil reserves for many years. In addition, the acquisition of natural gas fields in the Lobo Trend of South Texas represents a potential 70 percent increase in Conoco’s U.S. gas reserves when fully developed. Conoco’s worldwide proven reserves were up 38 percent, the largest single-year increase in Conoco’s history, and a fourfold increase over production. By ,1999 we expect a 15 percent increase in Conoco’sproduction from these and earlier strategic initiatives.
Among our most exciting future prospects is the growth we anticipate in our life sciences businesses. We are one of the world’s industrial leaders in biotechnology and expect life sciences to account for at least 30 percent of earnings by .2002 About one-third of our annual research and development expenditure is focused on these businesses. In ,1997 we strengthened our position in the feed, food and industrial materials markets through an alliance with seed company Pioneer Hi-Bred International and through the purchase of Protein Technologies International from Ralston Purina. These actions will clearly strengthen our position as one of the top suppliers of crop protection and enhanced food and feed products worldwide.
Synergy between our life sciences and materials businesses
We believe that the application of biotechnology will redefine our company in the coming decades. While currently applied largely in the pharmaceuticals, food and feed businesses, biotechnology also has enormous potential in our traditional materials businesses. We expect that we will eventually produce chemicals and specialty products from plants andmicroorganisms instead of petrochemicals. By maintaining world class efforts in biotechnology and applying them to both the life sciences and traditional chemical businesses, DuPont is uniquely positioned to capture the full potential ofbiotechnology long term for our shareholders.
In 1999, CEO Charles Holliday announced that DuPont was abandoning its slogan, “Better Things for Better Living … Through Chemistry,” which after 64 years was nearly as famous as the company itself. Holliday’s new corporate slogan “The Miracles of Science” lacked the appeal of “Better Things for Better Living,” but it did suggest an attempt to transform the company through R&D.
In November 2002 the tune was quite godlike:
DuPont Vision Statement : November 14, 2002
We, the people of DuPont, dedicate ourselves daily to the work of improving life on our planet.We have the curiosity to go farther and the imagination to think bigger and the determination to try harder and and the conscience to care more.
Our solutions will be bold. We will answer the fundamental needs of the people we live with to ensure harmony, health and prosperity in the world.
Our methods will be our obsession. Our singular focus will be to serve humanity with the power of all the sciences available to us.
Our tools are our minds. We will encourage unconventional ideas, be daring in our thinking, and courageous in our actions. By sharing our knowledge and learning from each other and the markets we serve, we will solve problems in surprising and magnificent ways.
Our success will be ensured. We will be demanding of ourselves and work relentlessly to complete our tasks. Our achievements will create superior profit for our shareholders and ourselves.
Our principles are sacred. We will respect nature and living things,work safely, be gracious to one another and our partners, and each day we will leave for home with consciences clear and spirits soaring.
In his message to the general assembly of shareholders in early 2003, Holliday declared that he is not asking for a raise this year and will be satisfied with his current salary of $1,085,000, and the same small bonus as in 2002 of $2,200,000, and a small assignment of only 464,200 share options.However, in 2008, his last year at DuPont, his salary and options were over $10 million.
Ellen Kullman replaced Holliday in 2009
Kullman’s vision, on Nov. 3, 2009 – was directed to the stock market
DuPont expects to build on its core competitive advantage of market-driven scientific innovation and its strong position in targeted global growth markets to deliver 20 percent compound annual earnings growth for the 2009-2012 period.
“Our focus is on delivering superior growth for our shareholders through customer-driven and science-based solutions, carefully prioritized investments, industry-leading productivity, and strict accountability, By acting on our commitments to shareholders over the past 12 months, DuPont is meeting the economic recovery as a stronger, faster and more agile global competitor. We are well-positioned to outperform the rate at which markets recover and improve.”
By executing on its priorities, DuPont expects to generate about 10 percent top-line compound annual growth for the 2009-2012 period. The company also plans to capture $1 billion in fixed cost productivity and $1 billion in working capital productivity gains during the 2010-2012 time frame.
DuPont expects to deliver, on average, 20 percent earnings per share growth, from 2009 estimated full-year earnings on a year-over-year basis through 2012. The company said that it expects to grow earnings in 2010 — despite anticipated declines in pharmaceutical royalties after patents expire in 2010 — to a range of $2.10 to $2.40 per share. DuPont also reaffirmed its full year 2009 earnings outlook of $1.95 to $2.05 per share, excluding significant items which are estimated to be $0.15 per share for full-year 2009 or $1.80 to $1.90 per share on a reported basis.
The company plans to capitalize on global growth opportunities by sharply focusing its innovation pipelines on four megatrends to: meet the increasing demand for food productivity; protect people and the environment; decrease dependence on fossil fuels; and capitalize on the growth of emerging markets where about one-third of DuPont’s sales are currently generated.
In addition, DuPont is strengthening its alignment with customers and markets; driving disciplined scientific innovation directly from market needs; increasing transparency and accountability for results with a simplified organization; and continuing its intense focus on productivity.
“DuPont’s leadership in market-driven science uniquely positions the company to capitalize on four global trends that will define the coming years, We will accomplish this by driving responsibility and accountability ever-closer to our customers and regions, providing greater transparency to our progress and results, and maintaining an intense commitment to constantly improving productivity.”
Ellen Kullman to investors on May 28, 2014:
DuPont is creating value for customers and shareholders by executing against the strategic and operational priorities that shape its plan to build a higher growth, higher value company. DuPont has made very purposeful and meaningful strides in advancing the company’s plans through a series of recent strategic decisions to build or strengthen world-leading positions in agriculture and nutrition, industrial biosciences and advanced materials. DuPont is a stronger company today with positive momentum as a result of the steps taken to create strong positions in secular growth markets, redeploy capital to growth opportunities, enhance its portfolio and significantly lower its cost structure. With the separation of its Performance Chemicals segment, DuPont is seizing the opportunity to redesign its business support across the company. It is a “fresh start, Our goal is to lessen bureaucracy, increase speed of execution and make a step change improvement in overall productivity by redesigning end-to-end processes, simplifying work, and standardizing and digitizing data.”
DuPont has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment.
By 2014, Ellen Kullman, 58, has been in office five years. A mechanical engineer by training who worked at General Electric Co. and Westinghouse Electric Corp. before joining DuPont, Kullman has tried just about everything short of breaking up the company: layoffs, reorganizations, asset sales, reinvestment in R&D, acquisitions. In the fourth quarter of last year, the board agreed to a $5 billion share buyback program. And Kullman has stressed the value of DuPont’s legacy, describing herself in Forbes in 2013 as “transformer-in-chief” while trying to put current efforts at reinvention in context: “The first 100 years we made explosives, the next 100 was modern chemistry, and about 20 years ago we started in biotechnology. The next 100 years is going to be about integrating the sciences.”
Feb. 26, 2015 – DuPont Executive Vice President James C. Borel discussed growth priorities driven by key research advancements and product launches across the Agriculture and Nutrition & Health segments:
“While farmers worldwide met the challenge of building grain supplies the last two years, long-term demand for agricultural production is expected to continue at the pace of the last decade, when demand for corn and soybeans increased 40 percent. In order to meet this demand for more and better food, DuPont is delivering innovative solutions across the food value chain fueled by a robust research pipeline, which leverages our leading positions in seed, crop protection, ag services, biologicals, nutrition science and food formulation.”
Extending DuPont leadership in Agriculture and Nutrition is one of the company’s three strategic priorities to build a higher value, higher growth company. Following the separation of Performance Chemicals, the Agriculture and Nutrition & Health segments are expected to represent about half of total company sales.
March 5, 2015 – DuPont Executive Vice President Matthew L. Trerotola discussed strategy, progress and plans to accelerate growth in the three Advanced Materials segments for DuPont. Strengthening and growing the company’s leading position in high-value advanced materials is one of the three areas of strategic priority for DuPont.
“We’ve made excellent progress in Performance Materials, Safety & Protection and Electronics & Communications. Our bottom line earnings and operating margins have increased, and we are committed to further improvements. Moving forward, we are driving to accelerate growth while expanding margins in support of the DuPont strategy to build a higher growth, higher value company.
DuPont made strong progress across the company in 2014, including: further refining its portfolio with 10 strategic portfolio actions and the advancement of the anticipated mid-year spin-off of Chemours; increasing the company’s cost reduction targets for its operational redesign to at least $1.3 billion by 2017 on an annual run-rate basis; and continuing the company’s commitment to return significant capital to shareholders with $3.7 billion returned to shareholders through share repurchases and dividends in 2014 alone”
On July 1, 2015, after defeating Peltz’s attempt to take over DuPont and split it into many parts, DuPont Chair and chief executive officer Ellen Kullman declared:
“Today’s successful spin-off (of Chemours)advances DuPont’s transformation to a higher growth, higher value, global science and innovation company.We are now fully focused on markets where our science gives the company a distinct competitive advantage, enabling DuPont to drive higher, more stable growth. The next generation DuPont is leaner and more efficient, better able to capitalize on key capabilities that help solve major global challenges and enable our customers to provide plentiful, healthier food; renewably sourced advanced materials; ample energy; better infrastructure and transportation. As we move forward, we are committed to continuing to execute our strategy to deliver value for shareholders today, while positioning DuPont for a successful future.”
C. Assignment
Your mission is to analyze the actions of the DuPont managers and to find how the company accomplished (or not) its pledge to the shareholders.
Start by looking at the acquisition and sale of Conoco. Was it a good decision to buy and later to sell Conoco?
Look up the sales and profits of DuPont since 1997 and the sale or acquisition of other daughter companies during this period. Were those sales and acquisitions good for the company?
Have the presidents of DuPont followed up their pompous declarations of policies?
How did Kullman win the fight against Peltz? Was it good for the company to reject Petz?
Due to the enormous amount of data, and in order to limit the work required by you, summaries of most of the important data are available in the class sites.
These data include short financial summaries for 1987-2014:
1987-1997
1998-2002
2002-2006
2006-2010
2010-2014
1988-2014
DuPont-conoco-1988-2014
DuPont shares history
And a list of major sales and purchases of companies by DuPont
Full financial and other reports of DuPont for the last 4 years can be found in the company’s Investors section.
The number of reports is large, so better concentrate on the annual 10-K reports.
Most of the reports are in pdf form (Download Adobe Acrobat reader if needed).
A better pdf reader is the foxit reader, You may download it.
Additional information can be found with help of a search engine (Google is the best one).
D. links
DuPont corporate site
dupont-history
dupont-history-2
dupont-nylon-history
Dupont-nylon-history-2
DupontsUntoldSafetyFailures
dupont rap sheet
reliability history-dupont
Why Is Monsanto Evil, But DuPont Isn’t?
Nelson Peltz could change DuPont
WhitePaper by Peltz
End of an era at DuPont
Additional information about chemical companies can be found at:
http://www.chem.com/directory/
http://www.chemicalonline.com/
http://www.chemtechsearch.com/industry.asp
http://www.chemindustry.com/index.html
http://www.annualreportservice.com/
http://www.eia.gov/petroleum/index.cfm
http://duns100.globes.co.il/en/rating?did=1000962785
http://search.yahoo.com/search chemical companies
http://www.claessen.net/chemistry/comp_en.html