Author Archives: erin.donahue

For our Management 4880 MNE profile we will be covering the company Union Carbide. Union Carbide landed itself as a company dealing with crisis from the notorious “Bhpoal Tragedy”. Union Carbide is a “wholly owned subsidiary of The Dow Chemical Company. “Dow”, often refers generically to The Dow Chemical Company and its consolidated subsidiaries” (unioncarbide.com). Union Carbide is a company producing products in the chemical manufacturing industry. Many of its products are used in our daily lives. Some of the products they sell include: “ethylene glycol and hundreds of solvents, alcohols, surfactants, amines and other specialty products” Union Carbide primarily produces chemicals and polymers that undergo one or more further conversions by customers before reaching consumers. Some of these materials are high-volume commodities, while others are specialty products meeting the needs of smaller market niches. The end-uses served include paints and coatings, packaging, wire and cable, household products, personal care, pharmaceuticals, automotive, textiles, agriculture and oil and gas. (unioncarbide.com).

The Bhopal Tragedy is considered to be the worst industrial accident for any company up to this day. The incident occurred in 1984 at a pesticide plant in Bopal, Madyaha Pradesh. There was a gas leak at the plant and there were over 3000 immediate deaths after the gas leaked with thousands more in the following weeks as well as over 500,000 injuries (http://www.bhopal.net /oldsite/death-toll.html). That being said, the actual number is unknown even 27 years later because of the extensive reach the gas leak had. What is even more unfortunate after this disaster occurred is the fact that decades later this incident legally points out that Union Carbide is not liable for what happened to the people who passed away or got injured from the gas leak. “The summary judgement record certainly indicates that UCIL consulted with UCC about its waste disposal plans and on non-environmental business matter like its strategic plan. However, nothing in the evidence suggests the necessity of UCC’s approval for the actions about which plaintiffs complain,” the court said in its order… Moreover, there is no evidence in this extensive record indicating that UCIL manufactured pesticides on UCC’s behalf, entered into contracts or other business dealings on UCC’s behalf, or otherwise acted in UCC’s name,” it said.(news.outlookindia.com).

Since Union Carbide is a company that manufactures chemicals it needs to have locations that can provide ample space when producing the chemicals. According to the Bureau Labor of Statistics “The Chemical Manufacturing subsector is based on the transformation of organic and inorganic raw materials by a chemical process and the formulation of products. This subsector distinguishes the production of basic chemicals that comprise the first industry group from the production of intermediate and end products produced by further processing of basic chemicals that make up the remaining industry groups.” Even though the focus of this assignment is more towards the company’s international strategy, to make the industry easier to understand, guidelines on what chemicals are classified as are included. Again, according to the BLS “The chemical manufacturing subsector consists of these industry groups:

• Basic Chemical Manufacturing: NAICS 3251
• Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing: NAICS 3252
• Pesticide, Fertilizer, and Other Agricultural Chemical Manufacturing: NAICS 3253
• Pharmaceutical and Medicine Manufacturing: NAICS 3254
• Paint, Coating, and Adhesive Manufacturing: NAICS 3255
• Soap, Cleaning Compound, and Toilet Preparation Manufacturing: NAICS 3256
• Other Chemical Product and Preparation Manufacturing: NAICS 3259″

Due to the fact this industry deals with heavy toxins that can weaken or even destroy life, where a plant that produces these chemicals needs to be placed in locations that can limit impact on the general population. Even though we do not think about it, a lot of the materials we use in our daily lives consists of these heavy toxins companies such as Union Carbide produces. Since we use chemicals such as gas, soap, antifreeze etc. (all end products Union Carbide produces) we are able to keep many companies in the chemical manufacturing sector alive and thriving. Our consumerism is what determines the success of the chemical manufacturing industry. Even if we decided to take a more “green approach” and used less harsh chemicals the industry will still do well because chemicals/chemistry is a basic element we need to survive.

Union Carbide is a big company it has over 2,400 employees and possesses some of the industry’s most advanced process and catalyst technologies, and operates some of the most cost-efficient, large-scale production facilities in the world (unioncarbide.com). Its top competitors consist of BASF SE, Exxon Mobile Chemical Company, Chevron Phillips Chemical Company LP. All of these companies are privately owned and therefore are not subject to sharing its company information with the public if it does not want to. That being said we want to continue the focus of Union Carbide. 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.

Even though 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. Past five year plans is profiled here because it shows the company’s ambitions. It is safe to say that currently Union Carbide has similar ambitions of growth, if not more than what it had in the past. Recent activities have been characterized 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 fibers plant in California, consideration of a carbon fibers project in France, construction of a silicones plant in Italy, and expansion of battery operations in Europe.

When looking at a company it is always important to take a look at a “SWOT analysis”. For Union Carbide  the breakdown of the analysis is as stated below:

Strengths:

1. Technology leadership and innovation – advanced process technologies have given them a leadership position in their large Basic Chemicals and Polymers businesses. They produce their product very quickly because of their knowledge of technology. (global.factiva.com)
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. (global.factiva.com)
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.

In regards to the company’s market penetration strategy a New Business Development Department was formed in 1970 to coordinate the three areas outside of chemicals and plastics that Wilson didn’t sell: Biomedical Systems, Marine Foods, and Agricultural Systems. Another key organizational change was the disbanding of the Consumer & Related Products Division, which had contributed 22 percent of UCC’s annual revenues. The Eveready business was split off into a Battery Products Division, while Glad and Prestone were coordinated in a division with the production of their raw materials. Despite the fragmentation of the Consumer Products Division, there is hope that consumer products would contribute 50 percent of UCC’s revenues in the future. It was recognized that these relatively stable, high-margin product lines sustained Union Carbide through economic downturns (referenceforbusiness.com/history/ Ul-Vi/Union-Carbide-Corporation.html).

Weakness: As mentioned many times previously, Union Carbide’s weaknesses stem from products it produces. All the chemicals it manufacturers most definitely has some sort of detriment to the people who work with these chemicals and also to the environment around it.

Opportunities: While the company (and other companies in the industry) will most likely always produce harmful chemicals that will pollute the environment, there is an opportunity to be able to produce chemicals that could be less harmful than what is being released into the environment now.

Threats: Threats for Union Carbide certainly have heavy impacts. The chemical manufacturing industry is heavily competitive, especially with other huge conglomerate companies producing similar products. Not only that, the threat of potentially causing disasters similar to the Bhopal Tragedy always looms.

Producing its products on a domestic front vs. and international front has both pros and cons and it is understandable why a company such as Union Carbide would want to offshore/outsource its product development in other areas outside of the United States. With the creation of the EPA here, there is now more regulation and observation towards companies such as Union Carbide. Such “police dog” institutions don’t exist in other countries that might house a plant of the company’s. That being said, besides the recent news in 2012 rejecting Union Carbide as the liable source for the tragedy in Bhopal, this company has been continue to do what it does and produce the end user products we continue to buy today.