Author Archives: Racheal Du

Posts: 9 (archived below)
Comments: 3

Crisis Developments

Posted on April 21, 2013 by Racheal Du

Some news/events that happened within a week of the crisis…

  • Factory in Bhopal where the gas leak had taken place had been closed down.
  • Five managers arrested for negligence.
  • Union Carbide might be asked to pay hundreds of million of dollars in compensation.
  • Indian police seized all factory records and refused to allot a US executive access to the Union Carbide pesticides plant.
  • Doctors in Bhopal’s hospitals report that at least 3,000 are dead. Many of the estimated 60,000 treated are expected to suffer long-term heart, kidney and lung disorder.
  • Mr Anderson, chairman of Union Carbide, stated that the company had set aside $1m for immediate distribution for victims of the tragedy.

BBC Monitoring Service: Asia-Pacific. Gas Leak Disaster in India. Factiva. N.p., 05 Dec. 1984. Web. 21 Apr. 2013. <http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=bbcfe00020011205dgc500dz6>.

“Mr Warren Anderson, Chairman of Union Carbide, Has Said That Victims of the Bhopal Gas Leak Could Be Fairly Compensated without Marked Effect on the Financial Condition of the Company.” Factiva. Textline Multiple Source Collection (1980-1994), 11 Dec. 1984. Web. 21 Apr. 2013. <http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=tmsc000020011207dgcb02t8d>.

“Overseas News: Police Refuse US Chief Entry to Plant.” Editorial. Financial Times 07 Dec. 1984: 1+. Factiva. 07 Dec. 1984. Web. 21 Apr. 2013. <http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505dgc7031g5>.

Sharma, K. K. “Union Carbide May Face Big Indian Claim.” Editorial. Financial Times 06 Dec. 1984: 1+. Factiva. 06 Dec. 1984. Web. 21 Apr. 2013. <http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505dgc6031mb>.

“Studies of the Accident at the Union Carbide Pesticide Works in Bhopal, India, by Investigative Reporters Suggest That the Number of Dead Has Been Underestimated, and That Most Damage Was Done by Phosgene, Not Methyl Isocyanate.” Factiva. Textline Multiple Source Collection (1980-1994), 09 Dec. 1984. Web. 21 Apr. 2013. <http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=tmsc000020011207dgc902srj>.

 

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Company Response

Posted on April 16, 2013 by Racheal Du

I found this Factiva post that includes the company’s initial response!

http://global.factiva.com/aa/?ref=NYTF000020080722dh1s000jh&pp=1&fcpil=en&napc=S&sa_from

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Could the crisis have been prevented?

Posted on April 16, 2013 by Racheal Du

This crisis could’ve definitely been prevented.

Reporters of The New York Times started on a seven-week investigation on this “accident.” According to present and former employees, company technical documents and the Indian Government’s chief scientist, the gas leak resulted from operating errors, design flaws, maintenance failures, training deficiencies and economy measures that endangered safety.

After looking through company documents and interviewing with chemical experts, plant workers, company officials and former officials, evidence of violations surfaced:

  1. Several months before the accident, plant employees say, managers shut down a refrigeration unit designed to keep the methyl isocyanate cool and inhibit chemical reactions. The shutdown was a violation of plant procedures.
  2. The leak began about two afters after a worker washed out a pipe that had not been properly sealed. This worker has not been properly trained and that procedure is prohibited by plant rules. Numerous workers think the most likely source of the contamination that started the reaction leading to the accident was water from this process.
  3. There are three main safety systems in the plant. At least two of them were built according to specifications drawn for Union Carbide plant. One system was unable to cope with conditions that happened at the night of the incident, another one was out of service for maintenance for several weeks and the last system was inoperable for several days.
  4. “Plant operators failed to move some of the methyl isocyanate in the problem tank to a spare tank as required because, they said, the spare was not empty as it should have been. Workers said it was a common practice to leave methyl isocyanate in the spare tank, though standard procedures required that it be empty.”
  5. According to Shakil Qureshi, the isocyanate supervisor on duty at the time of the accident, instruments at the plant were undependable. For that reason, he said, he overlooked the early warning of the accident, a gauge’s indication that pressure in one of three methyl isocyanate storage tanks had risen fivefold in an hour.
  6. The Bhopal plant does not have the computer system that other operations use to observe their tasks and quickly prepared the staff to leaks, employees said. The management depended on workers to sense escaping methyl isocyanate as their eyes started to water. Thit practice violated specific orders in the parent corporation’s technical manual, titled ”Methyl Isocyanate,” which sets out the basic policies for the manufacture, storage and transportation of the chemical. The manual says: ”Although the tear gas effects of the vapor are extremely unpleasant, this property cannot be used as a means to alert personnel.”
  7. There was little automated equipment at the methyl isocyanate plant and in 1983 the staff was cut from 12 operators on a shift to 6. The plant ”cannot be run safely with six people,” said Kamal K. Pareek, a chemical engineer who began working at the Bhopal plant in 1971 and was senior project engineer during the building of the methyl isocyanate facility there eight years ago.
  8. “There were no effective public warnings of the disaster. The alarm that sounded on the night of the accident was similar or identical to those sounded for various purposes, including practice drills, about 20 times in a typical week, according to employees. No brochures or other materials had been distributed in the area around the plant warning of the hazards it presented, and there was no public education program about what to do in an emergency, local officials said.”

This crisis could’ve been prevented if management took the proper precautions. Management should’ve been responsible for plant maintenance, hiring and properly training employees.

Diamond, Stuart. “THE BHOPAL DISASTER: HOW IT HAPPENED.” Editorial. New York Times 28 Jan. 1985: 1+. Factiva. 28 Jan. 1985. Web. 16 Apr. 2013. <http://global.factiva.com/aa/?ref=NYTF000020080612dh1s000b5>.

“Union Carbide Has Stated That an Inspection of Its Bhopal Pesticides Works in 1982 Showed Serious Problems with Plant and Safety Procedures.” Factiva. Textline Multiple Source Collection (1980-1994), 12 Dec. 1984. Web. 16 Apr. 2013. <http://global.factiva.com/aa/?ref=tmsc000020020316dgcc01fw9>.

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How did it all happen?

Posted on April 11, 2013 by Racheal Du

I decided to take a look into a few articles that came out on the day after the incident has happened and tried to put pieces of this event together.

On December 3, 1984 about 11:30 P.M., workers in the methyl isocyanate structure of the Bhopal plant, about 100 feet from the control room, detected a leak. Their eyes started to water. V. N. Singh, an operator, saw a drip of liquid about 50 feet off the ground, and some yellowish-white gas in the same place. He then went to the control room about 11:45 P.M. and told Mr. Qureshi (the plant’s supervisor for about 2 years) of a methyl isocyanate leak. But Mr. Qureshi said he would see the leak after tea. According to the employees on duty, no one took an initiative to investigate the leak until after tea ended. The leak of methyl isocyanate from one of the plant’s three underground tanks started shortly after midnight. The tank contained 45 tons of methyl isocyanate when a pressure build-up led to the rupture of a valve. Methyl isocyanate is stored in liquid form but erupts into gas at 21 degrees centigrade. “Mr Kumaraswamy, regional manager of Union Carbide in New Delhi, said any escaping gas would normally be neutralised by a caustic soda scrubber but that yesterday pressure apparently rose too fast for the safety equipment to be activated in time to prevent a large volume from escaping.” Doctors estimate that 4,000 people were badly affected by the gas and another 10,000 victims were given emergency treatment. Five managers at the plant have been detained. A judicial inquiry is to be held. Union Carbide described the accident as “unprecedented.”

“At Least 400 People in the Central Indian City of Bhopal Have Died after a Leak of Poisonous Gas from the Union Carbide Pesticides Factory.” Factiva. Textline Multiple Source Collection (1980-1994), 04 Dec. 1984. Web. 11 Apr. 2013. <http://global.factiva.com/aa/?ref=tmsc000020011207dgc402s72>.

Diamond, Stuart. “THE BHOPAL DISASTER: HOW IT HAPPENED.” Editorial. New York Times 28 Jan. 1985: 1+. Factiva. 28 Jan. 1985. Web. 11 Apr. 2013. <http://global.factiva.com/aa/?ref=NYTF000020080612dh1s000b5>.

Sharma, K. K. “Financial Times.” Editorial. Factory Gas Leak Kills More than 350 in India 04 Dec. 1984: 1+. Factiva. 4 Dec. 1984. Web. 11 Apr. 2013. <http://global.factiva.com/aa/?ref=FTFT000020070505dgc4031x3>.

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Strategy

Posted on April 1, 2013 by Racheal Du

According to my last post on long term objective, Union Carbide uses the strategy of divestment to reach its goal.

Divestment also known as divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.

After the Bhopal incident, Union Carbide added diversification, simplification, and joint ventures to its strategy.

In the early 1990s, Union Carbide launched a “work simplification program.” This program had a cost reduction goal of $400 million a year by the end of 1994. Union Carbide acted on this goal by repurchasing 20 million shares, spinning off two small businesses and selling 50% of its carbon business in 1990.

 

“A New Union Carbide Is Slowly Starting to Gel,” Business Week, April 18, 1986, p. 68.

http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=tmsc000020011207dh8102ed8&pp=1&fcpil=en&napc=S&sa_from=

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Long Term Objective

Posted on April 1, 2013 by Racheal Du

Union Carbide drew up a five year plan in 1979. It was intended that sales and earnings in 1983 should be respectively $14bn and $940m. In 1980 the group’s figures were $10bn and $673m. To reach its five-year goal, the group estimated that annual capital expenditure of $1.2bn would be required. It now expects actual capital expenditure to be running at $1.3bn-$1.4bn a year by 1983.

Recent activities have been characterised by a series of divestments. But now the group has a number of projects for expansion in hand. These include the building of a carbon fibres plant in California, consideration of a carbon fibres project in France, construction of a silicones plant in Italy, and expansion of battery operations in Europe.

 

 

http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206de1500knz&pp=1&fcpil=en&napc=S&sa_from=

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Different Businesses

Posted on April 1, 2013 by Racheal Du

According to this http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206dea400wwa&pp=1&fcpil=en&napc=S&sa_from=

Union Carbide has two different segments. Commodities and Specialties.

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Financial Standing in Recent Years

Posted on March 29, 2013 by Racheal Du

I’m gonna analyze the financial standings for the years before and after the crisis!

1981: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206de1q00mxk&pp=1&fcpil=en&napc=S&sa_from=
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206dd8f01azx&pp=1&fcpil=en&napc=S&sa_from=

1982: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206df1q005fc&pp=1&fcpil=en&napc=S&sa_from=
reason: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011206debj012iq&pp=1&fcpil=en&napc=S&sa_from=

1983: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011205dg2g00urp&pp=1&fcpil=en&napc=S&sa_from=

1984: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=pr00000020011205dh2n002u9&pp=1&fcpil=en&napc=S&sa_from=

*Accident happened end of 1984 and S&P lowered their credit rating because of outstanding loans*
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505dh190475k&pp=1&fcpil=en&napc=S&sa_from=

1985: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=plrwbm0020011204di4a00810&pp=1&fcpil=en&napc=S&sa_from=

1986: many many debts and sells off many assets
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=tmsc000020011207di4803aqx&pp=1&fcpil=en&napc=S&sa_from=
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=chiabc0020011204di5l0079u&pp=1&fcpil=en&napc=S&sa_from=
Earnings: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011204dj1t009b3&pp=1&fcpil=en&napc=S&sa_from=

1987: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070428dk1r00qdy&pp=1&fcpil=en&napc=S&sa_from=

1988: http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=ftft000020011129dl1o00fnw&pp=1&fcpil=en&napc=S&sa_from=

From 1981 to 1984, earnings per share rose steadily and Union Carbide is in good financial standings according to their annual reports. By 1985, the company’s market value dropped by 2/3 to less than $3 billion. Union Carbide’s debt stood at 63% of capital, and its equity was cut to a quarter of its former value. Income rose to 78% in 1987 to $232 million, but high debt service made it hard for the company to develop and introduce new products. In 1988, Union Carbide reduced its debt by more than $400 million and increase equity by almost $600 million.

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Strengths and Weaknesses

Posted on March 29, 2013 by Racheal Du

Strengths

1. Technology leadership and innovation – Advanced process technologies have given them a leadership position in their large Basic Chemicals and Polymers businesses. “For nearly 80 years Union Carbide laboratories have been the source of a steady stream of innovation. Ethylene, ethylene oxide, ethylene glycol and the hundreds of other chemicals that became the building blocks of the chemical industry were developed in their laboratories.” They produce their product very quickly because of their knowledge of technology.
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505dg6m02wic&pp=1&fcpil=en&napc=S&sa_from=

2. Cost efficiency. Union Carbide Corporation “operates some of the largest, most cost-efficient chemical plants in the world.” Union Carbide Corporation operates two business segments. Specialties & Intermediates converts basic chemicals into a diverse portfolio of chemicals and polymers for industrial customers. The Basic Chemicals & Polymers segment produces chemicals for use by both the Specialties & Intermediates segment and third party customers. Because Union Carbide Corporation does not further process chemicals into specific consumer products, their operations are of bulk scale and allow for planning and timing of production to maintain high efficiency goals.
http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505dea40104i&pp=1&fcpil=en&napc=S&sa_from=

3. Joint ventures. Union Carbide Corporation has built a number of joint ventures with foreign corporations. These joint ventures have increased the amount of potential customers in foreign markets, and introducing Union Carbide Corporation to many new international markets. Union Carbide Corporation has formed joint ventures with Petrochemical Industries Company of Kuwait to produce chemicals primarily for Asian markets. They have also formed a joint venture with Enichem of Italy, named Polimeri Europa, which “is poised to become Europe’s lowest-cost polyethylene producer.” These, and other strategic investments and alliances have promoted profitable growth globally.

4. Managerial strategy – “The new human resources policies now reflect shared responsibility with employees for Union Carbide’s success.” Union Carbide Corporation has trimmed its middle level management and implemented “Teams” in every department to facilitate these new policies. Each team member has a voice and is educated in his specific field such that the teams can collaborate on any issues and develop solutions without a Manager. Only decisions that are not supported in existing policies must be further approved. This grants employees a great amount of empowerment and “spares some of the red tape” formerly involved in addressing day to day issues within the chemical plants. “Given more responsibility and encouraged to redesign the way they work, our people slash plant downtime and overtime costs, sharply reduce costly inventories of products and raw materials, simplify organizational structures, eliminate bottlenecks and reduce paperwork.”
“Carbide Lays Out Its Strategy through 1983,” Chemical Week, September 19, 1979, p. 49.

Weaknesses

Mostly environmental issues. The process of making chemicals can be very hazardous to the environment and to the communities that surround them.

http://global.factiva.com.remote.baruch.cuny.edu/aa/?ref=FTFT000020070505de8j012ql&pp=1&fcpil=en&napc=S&sa_from=

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