Souce: http://www.bbc.co.uk/news/10354583
This an overview of how the different stakeholders were affected by union carbide crisis.
This is a nice study take a look at it this can help us
“A multiple-perspectives understanding of crises
This chapter employs a multiple-perspectives analysis of Bhopal (Shrivastava 1992). This approach seeks to understand the crisis from the perspectives of all key stakeholders. Stakeholders are individuals and organizations that influence, or are influenced by, the crisis. The key stakeholders in the Bhopal crisis included victims (i.e. the community in Bhopal), Union Carbide Corporation, and the Government of India.
A multiple-perspectives approach also acknowledges the complexity of causes and the importance of contextual factors. It interprets causes in systemic terms (Mitchell, Devine, and Jagger 1989). Technological, organizational, and societal systems are susceptible to multiple, simultaneous, and interacting failures. A main limitation of the traditional systems view of causation is that it does not indicate which causes are more or less important, and from whose point of view. The multiple-perspectives approach addresses this limitation and accepts the impossibility of unambiguously fixing blame for industrial crises. Attempts to affix blame are reductionist: they merely divert analysts from proper understanding of the events. Finally, the multipleperspectives approach regards controversies and conflicts as an integral part of crises. Such conflicts cannot be denied or brushed away: they are the central defining features of crises.
The most controversial elements of crises are their impacts or consequences. Consequences are difficult to ascertain because they are many, diverse, and difficult to measure. Some consequences are indirect, some are unknown, some are trans-generational, and some extend in space to unforeseeable areas. In the Bhopal case, victims saw the crisis largely in terms of personal losses: they lost their lives or faculties, their health, their sources of income, and their sense of community. An army of lawyers, government officials, activists, reporters, and researchers invaded Bhopal. The lives of residents have already been disrupted for months and years, and will continue to be disrupted for a long time to come. In these circumstances, recovery has involved efforts to rebound from multifaceted losses.
Officials at Union Carbide viewed this crisis as an unfortunate technological “incident.” Because of its long history in the chemical industry, the company was familiar with the types of losses such incidents generate. These include legal liability for damages, financial losses, and bad reputation. Union Carbide’s main concern was to protect its financial assets and reputation. It embarked on an elaborate strategy of legal defence, financial restructuring, and public relations (Union Carbide Corporation 1985).
For the Government of India, the crisis was a socio-economic and political disaster. As the institution responsible for safeguarding public safety, the government had failed abysmally. It needed to redeem itself in the eyes of the public, by deflecting responsibility for its role in the disaster. It was also saddled with the far more difficult task of managing recovery and rehabilitation of victims.”
Source : http://archive.unu.edu/unupress/unupbooks/uu21le/uu21le0c.htm#a%20multiple%20perspectives%20understanding%20of%20crises
Found Union Carbide’s company response following the crisis.. more to come in regards to what their stance was/is + beyond
| “The 1984 gas leak in Bhopal was a terrible tragedy that understandably continues to evoke strong emotions even 28 years later. In the wake of the gas release, Union Carbide Corporation, and then chairman Warren Anderson, worked diligently to provide aid to the victims and set up a process to resolve their claims. All claims arising out of the release were settled 21 years ago at the explicit direction of and with the approval of the Supreme Court of India.The Bhopal plant was owned and operated by Union Carbide India, Limited (UCIL), an Indian company in which Union Carbide Corporation held just over half the stock. The other stockholders included Indian financial institutions and thousands of private investors in India. Union Carbide India Limited designed, built and managed the plant using Indian consultants and workers. In 1994, Union Carbide sold its entire stake in UCIL to Mcleod Russel India Limited of Calcutta, and UCIL was renamed Eveready Industries India Limited (Eveready Industries). As a result of the sale of its shares in UCIL, Union Carbide retained no interest in – or liability for – the Bhopal site. The proceeds of the UCIL sale were placed in a trust and exclusively used to fund a hospital in Bhopal, which now provides specialist care to victims of the tragedy.
After the disaster, plant owner UCIL obtained permission from the government to conduct clean-up work at the site and did so under the direction of Indian central and state government authorities. Eveready Industries continued this remediation effort until 1998. That year, the Madhya Pradesh State Government, which owns and had been leasing the property to Eveready, took over the facility and assumed all accountability for the site, including the completion of any additional remediation. What additional clean-up work, if any, has been undertaken since that time is unclear. Shortly after the gas release, Union Carbide launched an aggressive effort to identify the cause. Engineering consulting firm, Arthur D. Little, Inc., conducted a thorough investigation. Its conclusion: The gas leak could only have been caused by deliberate sabotage. Someone purposely put water in the gas storage tank, and this caused a massive chemical reaction. Process safety systems had been put in place that would have kept the water from entering into the tank by accident. Union Carbide, together with the rest of the chemical industry, has worked to develop and globally implement Responsible Care to help prevent such an event in the future by improving community awareness, emergency preparedness and process safety standards.” http://www.bhopal.com/union-carbide-statements |
Which activities are standardized across markets? Which activities are localized to meet market demands and tastes? Why? Evaluate and compare the cost gains from standardization and the market gains from localization.
The choices made by Union Carbide were driven by the outgrowing pesticide market in India. ” The events in Bhopal revealed that expanding industrialization in developing countries without concurrent evolution in safety regulations could have catastrophic consequences “. The disaster is a proof that local problems of industrial hazards and toxic contamination are closely related to global market dynamics. Nothing was made to go around environmental regulations in the U.S., in fact the plant was built in Madhya Pradesh to exploit the large and growing Indian pesticide market.
Lesson Learned ?
Governments should not allow industrial facilities to be located within urban areas. In case of such accidents municipalities and local authorities should make sure that they have the adequate medical facilities to assist a large number of employees in case of mass casualty emergency. Yet, “Public health infrastructure was very weak in Bhopal in 1984.” example: poor quality tap water only available for only a few hours a day, no functioning sewage system, untreated human waste.
No matter how profitable the market looks like, there is a need to take into account existing public health infrastructure when hazardous industries choose to localize their manufacturing plants. Advanced planning should done before any disaster occurs. Locations ” that do not possess infrastructure and technical expertise to respond adequately to such industrial accidents should not be chosen as sites for hazardous industry”.
“National governments and international agencies should focus on widely applicable techniques for corporate responsibility and accident prevention as much in the developing world context as in advanced industrial nations . Specifically, prevention should include risk reduction in plant location and design and safety legislation ”
Source :http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1142333/
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:
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:
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.
Even though this is not recent news, I think this shows one of the few techniques they used in 1967 to succeed internationally.
*I can’t copy and paste the text in the link so click on the link to read the article, it is very short.
http://search.proquest.com.remote.baruch.cuny.edu/docview/133197447/fulltextPDF?accountid=8500
In 1984, Union Carbide reported sales of $9.5 billion, reflecting its position as one of the largest industrial companies in the United States and the world. International operations represented nearly 30 percent of total sales that year. India was one of three dozen countries where the company had affiliates and business interests.
Divided by industry segments, sales encompassed petrochemicals (28 percent); technology, services, and specialty products (26 percent); consumer products such as batteries, automotive supplies, and plastic wraps and bags (20 percent); industrial gases (16 percent); and metals and carbon products (10 percent).
Financially, 1984 was a good year for Union Carbide. The company was pursuing ambitious commercial plans in the People’s Republic of China. Twelve promising new high- performance specialty products were being marketed. A joint venture with Shell Chemical Company was moving forward. Union Carbide was keeping pace as the U.S. economy recovered from the persistent recession that had begun in 1981.
In 1984, Union Carbide India Limited was celebrating its 50th anniversary. UCIL had sales of about $200 million annually. It operated 14 plants, and was organized into five operating divisions with 9,000 employees. It was a diversified manufacturing concern. The shares of the Indian company, publicly traded on the Calcutta Stock Exchange, were held by more than 23, 000 shareholders. About 24 percent of the shares were owned by government-run insurance companies. Union Carbide Corporation held 50.9 percent of the stock as part of a corporate global business strategy that evolved in the post World War II era. By investing in companies abroad, Union Carbide expected to contribute to — and benefit from — growing national economies around the world.The massive disaster at Union Carbide’s pesticide plant in Bhopal, India, in December 1984 struck the corporation just as it was beginning to make lasting strides toward profitability.
Ironically, the plant at Bhopal had its origin in a humane goal: supplying pesticides to protect Indian agricultural production. The pesticides made at Bhopal were for the Indian market and contributed to the nation’s ability to transform its agricultural sector into a modern activity capable of feeding one of the world’s most heavily populated regions.
In the late 1960’s, operations at Bhopal packaged the pesticide Sevin, then considered an environmentally-preferred alternative to DDT, an insecticide now restricted by the U.S. Environmental Protection Agency.
Later, the Bhopal plant started handling methyl isocyanate shipped from the United States. The process, which reacted methyl isocyanate with another compound, was considered the leading technology for producing Sevin and another pesticide, Temik. The development was part of an active Indian government effort to achieve industrial self- sufficiency.
Ultimately, in the late 1970s those government objectives led to the construction of a plant for manufacturing methyl isocyanate at Bhopal. The plant was located on the outskirts of Bhopal on land leased to UCIL by the Indian state government of Madhya Pradesh.
Source (copied article from link):
http://www.bhopal.com/~/media/Files/Bhopal/browning.pdf
I thought this would be useful to see how it decided how to enter certain markets:
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, Wilson said that he hoped that consumer products would contribute 50 percent of UCC’s revenues in the future. He recognized that these relatively stable, high-margin product lines sustained Union Carbide through economic downturns.
For a few years, it looked as if the new strategy was working. From 1973 to 1981, earnings per share rose 100 percent. UCC increased productivity dramatically during the late 1960s and early 1970s to keep its corporate head above water. From 1967 to 1973, physical output of chemicals and plastics rose 60 percent, while per-pound production costs were cut by one-third. William S. Sneath continued these trends when he became chairman and CEO in 1977. Still, the company found itself increasingly strapped for cash. Steadily rising expenses in Europe resulted in a $32 million loss in 1978, which forced Carbide to divest virtually all of its European petrochemicals and plastics operations. That same year, UCC was forced by its creditors to retire $292 million in long-term debt, which forced it to borrow another $300 million in 1979. That year, Carbide’s Standard & Poor’s credit rating fell from AA to A+, and its stock fell as low as 42 percent below its $61 book value.
Chairman Sneath embarked on another round of cost-cutting in 1980, pruning the executive staff by 1,000 and divesting a total of 39 businesses. Sneath retained six primary businesses: graphite electrodes, batteries, agricultural products, polyethylene, and industrial gases. By 1980, Carbide had 116,000 employees at over 500 plants, mines, and laboratories in 130 countries, bringing in over $9 billion in annual sales. Sneath embarked on a plan to invest profits into high-margin consumer goods and specialty chemicals.
UCC had established battery plants in India as early as the mid-1920s, and had seven plants with 5,000 employees there by 1967. India’s chronic food shortages precipitated a government-sponsored “Green Revolution” in the 1960s, with the country’s socialist government eager to join Union Carbide in establishing pesticide and fertilizer plants. In 1975 the Indian government granted Union Carbide a license to manufacture pesticides, and a plant was built on the sparsely populated outskirts of the regional capital of Bhopal. The plant drew more than 900,000 people to Bhopal by 1984. Union Carbide officials estimated that at least five tons of methyl isocyanate (MIC) seeped out of the plant in just 30 minutes one day in December 1984. The accident killed over 2,300 people and permanently injured another 10,000. Newsweekmagazine called the incident “the worst industrial accident in history.”
Source – http://www.fundinguniverse.com/company-histories/union-carbide-corporation-history/
Article on why this information is important – huge milestone for the company’s prospects, even though it’s from 1999.
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http://money.cnn.com/1999/08/04/deals/dowchemical/
