Union Carbide Corporation

views updated Jun 27 2018

Union Carbide Corporation

39 Old Ridgebury Road
Danbury, Connecticut 06817
U.S.A.
(203) 794-2000
Fax: (203) 794-7031

Public Company
Incorporated: 1917 as Union Carbide & Carbon Corp.
Employees: 15,000
Sales: $5 billion
Stock Exchanges: New York Amsterdam Basel Brussels Frankfurt Geneva Lausanne London Paris Zurich
SICs: 2869 Industrial Organic Chemicals Nee; 2821 Plastics Materials & Resins; 2813 Industrial Gases; 6719 Holding Companies Nee

Union Carbide Corporation is the world’s largest producer of ethylene glycol, commonly used as antifreeze, and is a leading manufacturer of the world’s most widely used plastic, polyethylene. In spite of a massive fatal disaster at its Bhopal, India, pesticide plant in 1984 and a devastating takeover attempt that followed, the corporation remained one of top twenty exporters in the United States in the early 1990s. Union Carbide pioneered the petrochemicals industry and introduced the first two modern plastics. The company became known as “chemist to the chemical industry and metallurgist to the metals industry” because of its production of many of the building blocks of those two industries.

The Union Carbide & Carbon Corp. (UCC) was formed in 1917 from the combination of four companies: Union Carbide Co. (incorporated 1898), Linde Air Products Co. (incorporated 1907), National Carbon Co., Inc. (incorporated 1899), and Prest-O-Lite Co., Inc. (incorporated 1913). The new entity was organized as a holding company, with its four members acting relatively autonomously and cooperating where their businesses converged.

The merger combined what had often been competing interests to form an industrial chemicals powerhouse. The oldest member of the quartet, Union Carbide, had been formed to manufacture calcium carbide, which was used in the production of metal alloys. A by-product of alloying calcium carbide with aluminum was acetylene, a gas that company executives hoped would prove useful for street and household lighting. But when Thomas Edison’s electric incandescent light bulbs proved more practical for most lighting, it looked as if Union Carbide’s acetylene lighting business was obsolete. Luckily, a French researcher discovered that acetylene could be burned in oxygen to produce a hot, metal-cutting flame. A whole new market for the gas emerged, and UCC was ready to take advantage of it.

The company continued to manufacture calcium carbide at plants in Sault Ste. Marie, Michigan, and Niagara Falls, New York, and by 1900 the Union Carbide’s capital stock stood at $6 million. Union Carbide combined America’s first commercial high-carbon ferrochrome process, which had been developed by company founder Major James T. Moorhead in the late 1890s, with a metal alloying business acquired in 1906. The subsidiary created a line of metals composed of iron and one or more other metals, known in the industry as ferroalloys. Ferroalloys made the production of alloy steels more efficient, because they could be incorporated more easily with steel to create new metals with specific properties. Union Carbide’s low-carbon ferrochrome, for example, was a precursor of modern stainless steel.

Union Carbide had been involved with the Linde Air Products Co. through joint acetylene experiments for about six years before the formation of the UCC holding company. As one of America’s first oxygen-producing concerns and (after 1917) part of one of the country’s largest chemical companies, Linde soon became the world’s largest producer of industrial gases like acetylene, hydrogen and nitrogen. These gases formed the foundation of the petrochemical industry. The Prest-O-Lite Company had been one of Union Carbide’s primary competitors for most of the two companies’ histories, but three years of cooperative acetylene experiments among UCC, Prest-O-Lite, and Linde made the merger more smooth. Before the turn of the century, National Carbon Co. had produced the first commercial dry cell battery and offered it under the Eveready trademark. The well-known brand would be a UCC staple for the next seven decades.

With combined research efforts and a national push for new technologies to help win World War I, new developments came in rapid succession at Union Carbide. New products included batteries for portable radios and corrosion and heat-resistant ferroalloys that strengthened the steel used to build skyscrapers, bridges, and automobiles. The government’s need for ethylene during “the great war” also generated interest in hydrocarbon byproducts. These substances were made from calcium carbide and would later become the raw materials for the production of plastics, synthetic rubber, fibers, solvents, explosives, and industrial chemicals. In 1919 the first production of synthetic ethylene began. Ethylene would develop into the industry’s most important industrial hydrocarbon, eventually used in polyethylene (plastics), polystyrene (styrofoam), and antifreeze, among other products. Union Carbide’s Prestone brand ethylene glycol soon became the top-selling antifreeze, a position it held throughout the twentieth century.

The new corporate structure enabled UCC to leverage the combined assets of its four primary subsidiaries and embark on an acquisitions spree that wasn’t even halted by the Great Depression. In 1919 alone, the company acquired an acetylene manufacturer, created Canadian subsidiaries of National Carbon Co. and Prest-O-Lite, and purchased a new headquarters at 42nd Street and Madison Avenue in New York City. This new home served the company until the late 1970s. During the 1920s, Union Carbide expanded its overseas interests with the acquisition of a Norwegian hydroelectric plant in 1925 and a calcium carbide/ferroalloy plant in that same country in 1929. The holding company added to its battery business with the purchase of Manhattan Electrical Supply Co. in 1926. UCC annexed two domestic industrial gases interests in 1928 and strengthened its industrial electric furnace business with the acquisition of the Acheson Graphite Corporation in 1928.

One of UCC’s most vital acquisitions of the 1920s was the purchase of U.S. Vanadium Co.’s Colorado mine, mill, and reduction plant in 1926. Carbide’s subsequent vanadium research was a truly corporate venture that coordinated several of the company’s subsidiaries and eventually involved the company in the government’s atomic energy program. Uranium-bearing materials were located and provided by U.S. Vanadium. UCC scientists demonstrated that gaseous diffusion could be used to separate quantities of uranium-235 and contracted with the federal government in 1943 to operate the Oak Ridge Gaseous Diffusion Plant. After intensive research, UCC’s Linde Company perfected a refining process for treating uranium concentrates. A plant was built and operated by the Electro Metallurgical Company (acquired in 1922) to provide extensive metallurgical research, and manufacture uranium. Finally, Union Carbide and Carbon Research Laboratories contributed to the development of the atomic weapon itself.

In 1939 UCC acquired the Bakelite Corporation, which developed the first modern plastic, phenol formaldehyde. And in 1941, Carbide made permanent-press fabrics possible with its development of glyoxal.

Union Carbide earned a reputation for developing raw materials for the chemical and metals industries during World War II. Since natural rubber was in very short supply during the war, the company resumed its experiments with butene, a hydrocarbon that was developed into a synthetic rubber. Modern neoprene is a familiar example of butene’s application.

Postwar prosperity camouflaged nagging problems at UCC: the company was chalking up a bad track record of discovering new substances and processes, but not capitalizing on them. For example, UCC pioneered urethanes, but didn’t commit enough financial resources to the new field in time to profit. The company also made permanent-press fabrics possible with its development of glyoxal, but couldn’t come up with a consumer product that maximized its profit potential. It often ended up riding the coattails of movements it had spawned. Union Carbide’ s program of internal promotion engendered company loyalty, but also stifled creativity. The company started a slide into relative mediocrity that, with few exceptions, would consume the next three decades.

A succession of well-meaning chief executives kept UCC in “turnaround mode.” Under the direction of CFO Morse G. Dial, Carbide absorbed its major operating subsidiaries and formally relinquished its holding company status in 1949. Dial hoped to reverse the excessive autonomy at UCC by creating a “President’s Office” composed of the corporation’s division heads. The company name was changed to Union Carbide Corporation in 1957 to reflect its reorganization from a holding company to a diversified corporation. By that time, Union Carbide and Carbon Corporation had established some 400 plants in the United States and Canada, in addition to overseas affiliates. The company went from having 18 autonomous divisions to just four primary domestic groups: Union Carbide Chemicals Co., Linde Co., Union Carbide Plastics Co., and Union Carbide Consumer Products Co. Even though these corporate segments were technically divisions, the retention of the word “company” in each section’s name represented the perpetuation of the decentralized management structure of a holding company, and its detrimental effect on Union Carbide continued.

Polyethylene, a plastic used in squeeze bottles (high-density polyethylene), as well as in films and sheeting (low-density polyethylene), became Union Carbide’s largest dollar-volume product after World War II. An olefins division was set up in the 1950s to supply low-cost raw materials for the chemicals and plastics industry in the 1950s. For several years the company sold these plastics to other manufacturers. But Carbide finally capitalized on this discovery in 1964, when Glad branded plastic wraps, bags, and straws were introduced. Within just four years, Glad became the leading brand in its market.

By the 1960s, Union Carbide occupied the top spot in many of its primary fields, including industrial gases, carbon electrodes for industrial electric furnaces, batteries, atomic energy, polyethylene plastic, and ferroalloys. In 1965 the conglomerate’s sales topped $2 billion for the first time. And from 1956 to 1966, Union Carbide parlayed a few plants in a dozen countries into 60 major subsidiary and associated companies with plants in 30 countries serving over 100 markets. International operations of the conglomerate contributed 29 percent of its annual sales, and mid-decade the company name was changed to Union Carbide International Co. to reflect its increased global presence.

But in spite of consistently rising sales (which doubled from 1960 to 1970 to $3 million) Union Carbide’s profits plummeted and stayed low from 1966 to 1971. Carbide could claim leading market shares, but top shares of low-margin commodities still equaled low profits. Industry-wide overcapacity in ferroalloys ran as high as 70 percent in the early 1960s, and prices for these products fell 25 percent. The company was compelled to cut its ferroalloys work force by 40 percent and close a major plant at Niagara Falls. To make matters worse, the market for low-density polyethylene stagnated for the first time in over 20 years.

Union Carbide was still the United States’ second-largest chemical producer, but it invariably lagged behind most of its competitors in terms of growth and profitability during this period. Misguided investments in petroleum, pharmaceuticals, semiconductors, mattresses, and undersea equipment, combined with a $1 billion petrochemicals complex at Taft, Louisiana, which ran in the red for the last three years of the 1960s, further tarnished Union Carbide’s standing. Not surprisingly, the conglomerate’s stock dropped from $75 in 1965 to $45 in 1968 as the company “earned a reputation for aimless fumbling,” according to Business Week.

Unfortunately for Union Carbide, environmental complaints about the company’s Marietta, Ohio, ferroalloy plant came to a head in 1971, when consumer champion Ralph Nader brought a decade of local residents’ complaints into the national spotlight. For four years, the conglomerate had largely ignored public and government efforts to make it clean up several plants that were polluting the air over West Virginia. Union Carbide’s resistance to outside influence gave it the public image of a reactionary bully concerned only with profits and scornful of the environment, a stigma that would haunt the company for years to come. In 1971, UCC capitulated to federal orders that it immediately use more expensive low-sulphur coal to reduce noxious sulfur dioxide emissions by 40 percent. The company was given a fall 1974 deadline to install $8 million in advanced emissions scrubbers.

The bad news continued, as the recession of 1970-71 hammered commodities companies like UCC, with the chemicals and plastics markets entering another cycle of overcapacity. From 1968 to 1973, UCC’s sales grew by only 4 percent annually, well below the industry average. CFO and president F. Perry Wilson, who had been promoted to those offices in 1971, made his bid to turn Union Carbide around. His restructuring plan included three primary changes. First, he tried to pare back peripheral activities and focus on plastics and chemicals. Among the businesses sold were a bedding company, most of UCC’s oil and gas interests, a pollution-monitoring devices business, a plastic container line, a fibers business, a jewelry line, and an insect repellant business. Second, he worked to shift the corporate focus from market share to profitability. Finally, Wilson tried to plan capital and capacity investments so that UCC could avoid the inefficiencies and plummeting prices that had accompanied industry-wide overcapacity in the past.

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 A A 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.

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. 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. Newsweek magazine called the incident “the worst industrial accident in history.”

Five senior Indian executives of Union Carbide were arrested. The Indian government charged Warren Anderson, chairman of Union Carbide’s board, with “corporate and criminal liability” and accused the Union Carbide management of “cruel and wanton negligence.” Many class action suits were filed against Union Carbide on behalf of the victims. In April 1988, a court in India ordered Carbide to pay $192 million in “interim” damages. Union Carbide and the Indian government reached a much-criticized settlement for $470 million in 1989.

In addition to the human toll, the tragedy set off a chain reaction at Carbide: by 1985, the company’s market value dropped by two-thirds to less than $3 billion, and GAP Corp.’s Samuel Heyman accumulated enough stock to mount a hostile takeover bid of $5.3 billion. After working for two decades to expand its consumer products lines, Carbide was forced to sell off its Consumer Products Division, a profitable group that included Glad trash bags, Eveready batteries, Prestone, and STP automotive products, for $840 million. The corporation borrowed $2.8 billion, raised a total of $3.6 billion in asset sales, and repurchased $4.4 billion in stock to repulse Heyman’s attack.

Carbide scaled back to the three main business lines— chemicals and plastics, industrial gases, and carbon products— that were once its strength, and benefitted from sharply reduced interest rates and falling costs of petrochemical feedstocks. But the company had lost the safety net provided by its consumer products. Union Carbide’s debt stood at 63 percent of capital and its equity was cut to a quarter of its former value. Income rose 78 percent in 1987 to $232 million, but high debt service made it hard for the company to develop and introduce new products. In 1988 UCC reduced its debt by more than $400 million and increase equity by almost $600 million.

By 1988, Union Carbide’s corporate identity had begun to take clearer shape. Sales hit $8.3 billion (one-third below the 1981 peak), profits were up to more than $300 million, and the company had a new CEO, Robert D. Kennedy. His goals for the company included growth—an ambitious prospect in the face of depleted finances. His solution was to trim operating expenses and generate profits. Between 1984 and 1988, payroll was reduced from 98,000 employees to 43,000, while Carbide set up joint ventures with British Petroleum Co. and Allied-Signal Corp. and made a few modest acquisitions.

In 1989 Carbide advanced slightly on its long journey toward financial recovery. Net income was $573 million. Profits in the chemicals and plastics divisions put Carbide in the number two spot on the list of the top ten publicly traded companies in America. The company succeeded in reducing its debt-to-capital ratio to below 50 percent, and invested $181 million in research and development. That year, the company introduced its proprietary LIHDE Oxygen Combustion System, which used pure oxygen to burn organic wastes.

Carbide’s fate was far from settled. A $3.3 billion debt stymied both diversification and overseas expansion. Carbide’s sales were dependent on cyclical commodities such as polyethylene, and as the chemical industry stumbled, earnings declined. Net income decreased 46 percent from 1990. The brightest prospects were in the industrial gas unit—Carbide remained number one in North America in that industry, with $2.4 billion in sales.

The company launched a “work simplification program” in the early 1990s. The program had a cost reduction goal of $400 million a year by the end of 1994. Carbide progressed toward this goal by repurchasing 20 million shares, spinning off two small businesses, and selling 50 percent of its carbon business in 1990.

As a fitting mark to Union Carbide’s 75th anniversary in 1992, the company had the year’s best-performing stock on the Dow Jones list of 30 industrials. Carbide was half way to achieving its $400 million cost reduction goal, and had endured a loss of $187 million. The dramatically smaller corporation had shifted its focus from diversification to becoming a low-cost leader in basic chemicals. This strategy included uncharacteristic environmentalism: Carbide anticipated “inevitable government mandates on waste reduction and recycling” when it started reprocessing plastic bottles in 1992. After Bhopal, UCC’s efforts helped raise industry performance standards and levels worldwide, and the company was praised for its “Responsible Care” efforts.

Sales showed a slight gain in the 1993 first quarter, closing at $1.19 billion. The sale of Union Carbide’s OrganoSilicon business for $220 million completed Kennedy’s program to divest $500 million in assets. Although some Wall Street analysts predicted that Union Carbide Corporation would be subsumed by another firm, others characterized it as a “surprisingly potent company.”

Principal Subsidiaries

Amerchol Corporation; Amko Service Company; Bay ox, Inc.: Beaucar Minerals, Inc.; BEK III Inc.; Be-Kan, Inc.; Bentley Sales Co. Inc.; Blue Creek Coal Company, Inc.; Catalyst Technology, Inc.; Cellulosic Products, Inc.; Chemicals Marine Fleet, Inc.; Dexter Realty Corporation; Gas Technics Gases and Equipment Centers of Eastern Pennsylvania, Inc.; Gas Technics Gases and Equipment Centers of New Jersey, Inc.; Gas Technics Gases and Equipment Centers of Ohio, Inc.; Global Industrial Corporation; Hampton Roads Welders Supply Company, Inc.; Harvey Company; Innovative Membrane Systems, Inc.; International Cryogenic Equipment Corporation; Iweco, Inc.; Karba Minerals, Inc.; KSC Liquidation, Inc.; XTI Chemicals, Inc.; Linde Homecare Medical Systems, Inc.; Linox Welding Supply Co.; London Chemical Company, Inc.; Media Buyers Inc.; Merritt-Holland Company; Mon-Arc Welding Supply, Inc.; Nova Tran Corporation; Pauls-boro Packaging Inc.; Phoenix Research Corporation; Polysak, Inc.; Prentiss Glycol Company; Presto Hartford, Inc.; Presto Welding Supplies, Inc.; Seadrift Pipeline Corporation; Soilsery, Inc.; South Charleston Sewage Treatment Company; UCAR Capital Corporation; UCAR Energy Services Corporation; UCAR Interam, Inc.; UCAR Louisiana Pipeline Company; UCAR Pipeline Incorporated; UCORE Ltd.; Umetco Minerals Exploration; Umetco Minerals Sales Corporation; Unigas, Inc.; Union Carbide Africa and Middle East, Inc.; Union Carbide Canada Ltd. (74.5%); Union Carbide Caribe, Inc.; Union Carbide Communications Company, Inc.; Union Carbide Engineering and Hydrocarbons Service Company, Inc.: Union Carbide Engineering and Technology Services; Union Carbide Ethylene Oxide/Glycol Company; Union Carbide Europe, Inc.; Union Carbide Films-Packaging, Inc.; Union Carbide Grafito, Inc.; Union Carbide Imaging Systems, Inc.; Union Carbide Industrial Services Company; Union Carbide Inter-America, Inc.; Union Carbide International Capital Corporation; Union Carbide International Sales Corporation; Union Carbide Polyolefins Development Company, Inc.; UNISON Transformer Services, Inc.; Vametco Minerals Corporation; V.B. Anderson Co. (85.33%); Welders Service Center of Nebraska, Inc.; Wolfe Welding Supply Company, Inc. The company also lists subsidiaries in the following countries: Australia, Austria, Belgium, Bermuda, Brazil, Canada, Colombia, Costa Rica, Ecuador, Egypt, France, Ghana, Greece, Guatemala, Hong Kong, India, Indonesia, Iran, Italy, Japan, Kenya, Malaysia, Malawi, Mexico, Netherlands, Netherlands Antilles, New Zealand, Nigeria, Pakistan, Panama, Philippines, Puerto Rico, Singapore, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, U.S. Virgin Islands, Venezuela, West Germany, and Zimbabwe.

Union Carbide Corporation

views updated May 21 2018

Union Carbide Corporation

39 Old Ridgebury Road
Danbury, Connecticut 06817
U.S.A.
(203) 794-2000

Public Company
Incorporated: November 1, 1917
Employees: 91,459
Sales: $6.343 billion
Market value: $3.703 billion
Stock Index: New York Amsterdam Basle Brussels
Frankfurt Geneva Lausanne London Paris Zurich

In 1876, the first carbon arc street light changed light into day in Cleveland, Ohio with the help of Charles F. Brush. As a result of this invention, a company was formed in 1886 to make street light carbons and later carbon electrodes for electric furnaces. Soon the Eveready trademark became a part of this company. Four years later, it produced the first commercial dry cell battery and then, in 1894, built one of the first industrial research laboratories in the United States.

Meanwhile in North Carolina in 1892 two men attempted to make aluminum in an electric furnace. Thomas L. Willson and Major James T. Morehead produced calcium carbide, resulting in acetylene. These two chemicals were considered mere laboratory curiosities at the time, but Morehead convinced several Chicago entrepreneurs in the use of acetylene for city and home lighting, and the Union Carbide Company was formed in 1898 to manufacture calcium carbide. Morehead didn’t give up hope for his electric furnace idea. In fact, in 1897, he, with the help of Guillaume de Chalmot, produced America’s first commercial high-carbon ferrochrome and furnished ferrochrome for armorplate during the Spanish-American War.

Electric lighting became practical during this time, eliminating any expansion for Union Carbide’s acetylene lighting business. But their calcium carbide plants continued to operate in Sault Ste. Marie, Michigan and Niagara Falls, New York. In 1900 their capital stock was $6,000,000, par value $100. Dividends were at 4 percent, with Charles F. Dieterich as president, George O. Knapp as vice president, and A.B. Proal as secretary and treasurer. Their main office was located in Chicago, Illinois. In 1906 the company purchased an alloys business and a metals research laboratory, and established a separate division to produce alloys for steelmaking. Under the direction of Dr. Fredrick M. Becket, its chief metallurgist, the new company began a line of alloying metals that were respected in the field. One example is their creation of low-carbon ferrochrome, resulting in the development of modern stainless steels.

The discovery in France of a hot metal-cutting flame resulting from burning acetylene in oxygen, created a high demand for such resources. Charles Brush interested several electrode producers in forming the first oxygen-producing company in 1907. This company later became the Corporation’s present Linde Division. In 1911, Union Carbide bought interest in the oxygen company, therefore bringing together for the first time the carbon and carbide interests.

Union Carbide’s major competitor during this period was the Prest-O-Lite Company, the largest single purchaser of calcium carbide for acetylene lamps for automobiles. When an alternative form of acetylene was requested, Dr. George O. Curme, Jr. was hired by Prest-O-Lite in 1914 to find it. He consulted scientists from the Linde Company and Union Carbide to conduct research on the gas. The cooperative efforts resulted in the formation of the Union Carbide and Carbon Corporation in 1917.

The government’s need for ethylene during the World War I regenerated interest in hydrocarbon byproducts. In 1919 the first production of synthetic ethylene began. Dr. Curme and his associate, James A. Rafferty, predicted a future need for synthetic organic chemicals, and America’s petrochemical industry and the Corporation’s chemicals business were established in 1920. With combined research efforts, new developments occurred rapidly. New products included ethylene glycol (today’s Presione anti-freeze and coolant), batteries for portable radios, quiet flickerless carbons used for the first sound movies, and ferroalloys to improve the steels used to build skyscrapers, bridges, and automobiles. The company’s technology included the production of corrosion- and heat-resistant alloys. Six years later it acquired vanadium interests on the Colorado Plateau, which eventually supplied the uranium for atomic energy. Graphite skills were added to the Corporation’s carbon activities in 1928 with the Acheson Graphite Corporation. The Chicago World’s Fair in 1933 enabled Union Carbide to exhibit more than half of the known chemical elements to the public. Today, Union Carbide works with more than 90 of the 107 chemical elements named by scientists.

With the advent of World War II Union Carbide focused its attention on developing raw material resources and utilization of by-products. Carbide resumed its butadiene studies, begun years before, to succeed in developing a synthetic rubber, and soon acquired the Bakelike Corporation, increasing its technology in the field of plastics. Carbide was also responsible for research on vanadium that eventually involved the Corporation in the government’s atomic energy program. Scientists demonstrated that gaseous diffusion could be used to separate quantities of uranium-235. Union Carbide and the Manhattan Engineer District entered into a contract on 18 January 1943 to operate the Oak Ridge Gaseous Diffusion Plant. After intensive research, Linde perfected a refining process for treating uranium concentrates. A plant was built and operated by the Electro Metallurgical Company, presently the Metals Division, to provide extensive emergency metallurgical research, and to manufacture uranium. Graphite products and special carbons were developed and manufactured by National Carbon, presently Carbon products. Uranium-bearing materials were located and provided by the United States Vanadium, now part of the Metals Division, also constructing three plants for treating uranium ores with newly developed processes. Finally, Union Carbide and Carbon Research Laboratories contributed to the development of the atomic weapon itself.

Following World War II, Union Carbide expanded. Polyethylene, a plastic used in squeeze bottles, as well as in films and sheeting, became its largest dollar-volume product. Other materials such as gases and carbon products also continued to succeed.

Restructuring of the Union Carbide Company began during the 1950’s. Interest in new fields of technology emerged. The Metals Division was established to handle worldwide ore procurement, and a food casings business, formally the Visking Company, was also established. By 1957 Union Carbide and Carbon Corporation had established some 400 plants in the United States and Canada, in addition to overseas affiliates. The public was becoming increasingly aware of its activities, so the company decided to change its name to the Union Carbide Corporation in 1957. Consumer products such as Eveready batteries and Presione anti-freeze continued to increase in sales. To accommodate this, a separate division strictly for consumer products was established in 1959. Then in the early 1960’s the Glad line of plastic wraps, bags, and straws was introduced and became a leading brand in its field.

International operations of Union Carbide was restructured in 1966 to accommodate new subsidiaries, including Union Carbide Pan America, Inc., Union Carbide Europe, Inc., Union Carbide Eastern, Inc., Union Carbide Africa and Middle East, Inc., and Union Carbide Canada Limited (a 75-% owned subsidiary). A new division was named in 1969—Films-Packaging Division (previously the Visking casings business), consolidating activities in food casings and related products. During the late 1960’s and early 1970’s, Union Carbide decided to sell and dissolve some of its businesses in order to concentrate on further expansion of certain industries. Among the businesses sold were Neisler Laboratories (acquired in 1965), the Stellite, or Materials Systems Division, Ocean Systems, Inc., a subsidiary underwater work, The Englander Company, Inc. (a bedding company acquired in 1964), most of its oil and gas interests, a pollution-monitoring devices business, a plastic container line, a fibers business, a jewelry line, and an insect repel-lant business. Other organizational changes came about during this period as well. The New Business Development Department, formed in 1970, merged with the Corporate Technology Department in 1971. Two years later, the Consumer Products Division was elminiated to form a Battery Products Division. Preston and Glad products acquired the Home and Automotive Products Division. The Agricultural Products Division, developed in 1976, began producing Sevin insecticide, Temik pesticide, and similar materials.

In 1972 a comprehensive long-term program was established by Union Carbide with the following objectives: “Strengthening the assignment of individual responsibilities and accountabilities, strengthening business management methods, allocating resources selectively in strategic planning units, and practicing good corporate citizenship at home and abroad.” With the advent of new strategies came new materials and processes, including molecular sieve adsorbents and catalysts, specialized electronic materials, foamed plastics, biomedical systems, pollution abatement systems, energy (converting coal to gases and liquids for fuel), miniature batteries, food (chemicals to increase food yield, raising salmon, trout, and other fish species, shrimp fishing off the coast of India), Thornel carbon-graphite fibers (used in aerospace, gold club shafts, tennis rackets, and fishing rods).

In addition to these developments, Union Carbide had established additional pesticide and fertilizer producing plants in particular, Bhopal, India. During the mid-1960’s India was experiencing a chronic food shortage. The central government’s “Green Revolution” included increasing use of pesticides. When Union Carbide approached New Delhi authorities with an offer to build a plant in Bhopal, they were gladly accepted. In 1975 the Indian government granted Union Carbide a license to manufacture pesticides, and the plant was built, Union Carbide owning 51 percent and India’s private companies owning 49 percent. The plant was built on the outskirts of the city, not densely populated at that time. But with construction came more residents: more than 900,000 people eventually lived in this capital of Madhya Pradesh. Union Carbide increased its ties with the local government and helped the city to build a park. The company also hired local residents for management positions.

By the late 1970’s, Union Carbide had established itself as having one of the better safety records in the chemical industry throughout all its subsidaries, including India. But a massive disaster at the Bhopal plant in December 1984 led to the deaths of some 2500 people, with a huge additional number possibly permanently disabled. It has been called “the worst industrial accident in history” (Newsweek ).

After the incident, Bhopal police arrested five senior Indian executives of Union Carbide. In a written statement, Arjun Singh, chief minister of Madhya Pradesh state, charged Warren Anderson, chairman of Union Carbide’s board, with “corporate and criminal liability,” and accused the Union Carbide management of “cruel and wanton negligence.” Many class action suits were filed against Union Carbide on behalf of all the victims by two Florida attorneys, Michael Tobin and Jack Thompson, in association with the San Francisco lawyer Melvin Belli. According to the Cook County Municipal Law Library, these suits were later filed in India. Union officials claim that at least five tons of methyl isocyanate (MIC) seeped out in the 30 minutes before the leaking tank was sealed. The effects of the chemical on humans resemble those of nerve gas (Newsweek ).

In addition to the human toll, the tragedy halted business at the $9 billion company, and Union Carbide shut down production and distribution of methyl isocyanate at their plant in Institute, West Virginia. Stock prices plunged 12 points. Union Carbide may never be able to recover from the 1984 Bhopal disaster. As Chairman Warren Anderson concedes, “We have a stigma and we can’t avoid it.”

Principal Subsidiaries

Amerchol Corporation; Amko Service Company; Bayox, Inc.; Beaucar Minerals, Inc.; BEK III Inc.; Be-Kan, Inc.; Bentley Sales Co. Inc.; Blue Creek Coal Company, Inc.; Catalyst Technology, Inc.; Cellulosic Products, Inc.; Chemicals Marine Fleet, Inc.; Dexter Realty Corporation; Gas Technics Gases and Equipment Centers of Eastern Pennsylvania, Inc.; Gas Technics Gases and Equipment Centers of New Jersey, Inc.; Gas Technics Gases and Equipment Centers of Ohio, Inc.; Global Industrial Corporation; Hampton Roads Welders Supply Company, Inc.; Harvey Company; Innovative Membrane Systems, Inc.; International Cryogenic Equipment Corporation; Iweco, Inc.; Karba Minerals, Inc.; KSC Liquidation, Inc.; KTI Chemicals, Inc.; Linde Homecare Medical Systems, Inc.; Linox Welding Supply Co.; London Chemical Company, Inc.; Media Buyers Inc.; Merritt-Holland Company; Mon-Arc Welding Suppy, Inc.; Nova Tran Corporation; Paulsboro Packaging Inc.; Phoenix Research Corporation; Polysak, Inc.; Prentiss Glycol Company; Presto Hartford, Inc.; Presto Welding Supplies, Inc.; Seadrift Pipeline Corporation; Soilsery, Inc.; South Charleston Sewage Treatment Company; UCAR Capital Corporation; UCAR Energy Services Corporation; UCAR Interam, Inc.; UCAR Louisiana Pipeline Company; UCAR Pipeline Incorporated; UCORE Ltd.; Umetco Minerals Exploration; Umetco Minerals Sales Corporation; Unigas, Inc.; Union Carbide Africa and Middle East, Inc.; Union Carbide Canada Ltd. (74.5%); Union Carbide Caribe, Inc.; Union Carbide Communications Company, Inc.; Union Carbide Engineering and Hydrocarbons Service Company, Inc.; Union Carbide Engineering and Technology Services; Union Carbide Ethylene Oxide/Glycol Company; Union Carbide Europe, Inc.; Union Carbide Films-Packaging, Inc.; Union Carbide Grafito, Inc.; Union Carbide Imaging Systems, Inc.; Union Carbide Industrial Services Company; Union Carbide Inter-America, Inc.; Union Carbide International Capital Corporation; Union Carbide International Sales Corporation; Union Carbide Polyolefms Development Company, Inc.; UNISON Transformer Services, Inc.; Vametco Minerals Corporation; V.B. Anderson Co. (85.33%); Welders Service Center of Nebraska, Inc.; Wolfe Welding Supply Company, Inc. The company also lists subsidiaries in the following countries: Australia, Austria, Belgium, Bermuda, Brazil, Canada, Colombia, Costa Rica, Ecuador, Egypt, France, Ghana, Greece, Guatemala, Hong Kong, India, Indonesia, Iran, Italy, Japan, Kenya, Malaysia, Malawi, Mexico, Netherlands, Netherlands Antilles, New Zealand, Nigeria, Pakistan, Panama, Philippines, Puerto Rico, Singapore, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, U.S. Virgin Islands, Venezuela, West Germany, and Zimbabwe.

Union Carbide Corporation

views updated May 29 2018

Union Carbide Corporation

Union Carbide Corporation
400 West Sam Houston Parkway South
Houston, Texas 77042
U.S.A.
Telephone: (713) 798-2016
Fax: (713) 978-2394
Web site: http://www.unioncarbide.com

Wholly Owned Subsidiary of The Dow Chemical Company
Incorporated: 1917 as Union Carbide & Carbon
Corporation
Employees: 3,800
Sales: $5.86 billion (2004)
NAIC: 3251 Basic Chemical Manufacturing

Union Carbide Corporation is the world's largest producer of ethylene glycol, commonly used as antifreeze, and is a leading manufacturer of the world's most widely used plastic, polyethylene. In spite of a disaster at its Bhopal, India, pesticide plant in 1984 that resulted in numerous deaths and serious health problems for people living in the region, as well as a devastating takeover attempt that followed, the corporation remained one of top 20 exporters in the United States in the early 1990s. Union Carbide pioneered the petrochemicals industry and introduced the first two modern plastics. The company became known as "chemist to the chemical industry and metal-lurgist to the metals industry" because of its production of many of the building blocks of those two industries.

Origins

The Union Carbide & Carbon Corporation (UCC) was formed in 1917 from the combination of four companies: Union Carbide Co. (incorporated 1898), Linde Air Products Co. (incorporated 1907), National Carbon Co., Inc. (incorporated 1899), and Prest-O-Lite Co., Inc. (incorporated 1913). The new entity was organized as a holding company, with its four members acting relatively autonomously and cooperating where their businesses converged.

The merger combined what had often been competing interests to form an industrial chemicals powerhouse. The oldest member of the quartet, Union Carbide, had been formed to manufacture calcium carbide, which was used in the production of metal alloys. A by-product of alloying calcium carbide with aluminum was acetylene, a gas that company executives hoped would prove useful for street and household lighting. When Thomas Edison's electric incandescent light bulbs proved more practical for most lighting, however, it looked as if Union Carbide's acetylene lighting business was obsolete. Luckily, a French researcher discovered that acetylene could be burned in oxygen to produce a hot, metal-cutting flame. A whole new market for the gas emerged, and UCC was ready to take advantage of it.

The company continued to manufacture calcium carbide at plants in Sault Ste. Marie, Michigan, and Niagara Falls, New York, and by 1900 the Union Carbide's capital stock stood at $6 million. Union Carbide combined America's first commercial high-carbon ferrochrome process, which had been developed by company founder Major James T. Moorhead in the late 1890s, with a metal alloying business acquired in 1906. The subsidiary created a line of metals composed of iron and one or more other metals, known in the industry as ferroalloys. Ferroalloys made the production of alloy steels more efficient because they could be incorporated more easily with steel to create new metals with specific properties. Union Carbide's low-carbon ferrochrome, for example, was a precursor of modern stainless steel.

Union Carbide had been involved with the Linde Air Products Co. through joint acetylene experiments for about six years before the formation of the UCC holding company. As one of America's first oxygen-producing concerns and, after 1917, part of one of the country's largest chemical companies, Linde soon became the world's largest producer of industrial gases such as acetylene, hydrogen, and nitrogen. These gases formed the foundation of the petrochemical industry. The Prest-O-Lite Company had been one of Union Carbide's primary competitors for most of the two companies' histories, but three years of cooperative acetylene experiments among UCC, Prest-O-Lite, and Linde made the merger smoother. Before the turn of the 20th century, National Carbon Co. had produced the first commercial dry cell battery and offered it under the Eveready trademark. The well-known brand would be a UCC staple for the next seven decades.

With combined research efforts and a national push for new technologies to help win World War I, further developments came in rapid succession at Union Carbide. New products included batteries for portable radios and corrosion and heat-resistant ferroalloys that strengthened the steel used to build skyscrapers, bridges, and automobiles. The government's need for ethylene during the "Great War" also generated interest in hydrocarbon byproducts. These substances were made from calcium carbide and would later become the raw materials for the production of plastics, synthetic rubber, fibers, solvents, explosives, and industrial chemicals. In 1919, the first production of synthetic ethylene began. Ethylene would develop into the industry's most important industrial hydrocarbon, eventually used in polyethylene (plastics), polystyrene (Styrofoam), and antifreeze, among other products. Union Carbide's Prestone brand ethylene glycol soon became the top-selling antifreeze, a position it held throughout the 20th century.

The new corporate structure enabled UCC to leverage the combined assets of its four primary subsidiaries and embark on an acquisitions spree that was not halted even by the Great Depression. In 1919 alone, the company acquired an acetylene manufacturer, created Canadian subsidiaries of National Carbon Co. and Prest-O-Lite, and purchased a new headquarters at 42nd Street and Madison Avenue in New York City. This new home served the company until the late 1970s. During the 1920s, Union Carbide expanded its overseas interests with the acquisition of a Norwegian hydroelectric plant in 1925 and a calcium carbide/ferroalloy plant in that same country in 1929. The holding company added to its battery business with the purchase of Manhattan Electrical Supply Co. in 1926. UCC annexed two domestic industrial gas interests in 1928 and strengthened its industrial electric furnace business with the acquisition of the Acheson Graphite Corporation in 1928.

U.S. Vanadium Co. Acquired

One of the most vital acquisitions UCC made during the 1920s was that of U.S. Vanadium Co.'s Colorado mine, mill, and reduction plant in 1926. Carbide's subsequent vanadium research was a truly corporate venture that coordinated several of the company's subsidiaries and eventually involved the company in the government's atomic energy program. Uranium-bearing materials were located and provided by U.S. Vanadium. UCC scientists demonstrated that gaseous diffusion could be used to separate quantities of uranium-235 and contracted with the federal government in 1943 to operate the Oak Ridge Gaseous Diffusion Plant. After intensive research, UCC's Linde Company perfected a refining process for treating uranium concentrates. A plant was built and operated by the Electro Metal-lurgical Company (acquired in 1922) to provide extensive metallurgical research and manufacture uranium. Finally, Union Carbide and Carbon Research Laboratories contributed to the development of the atomic weapon itself.

In 1939, UCC acquired the Bakelite Corporation, which developed the first modern plastic, phenol formaldehyde. In 1941, Carbide made permanent-press fabrics possible with its development of glyoxal.

Postwar prosperity camouflaged nagging problems at UCC: the company was chalking up a bad track record of discovering new substances and processes but not capitalizing on them. For example, UCC pioneered urethanes, but did not commit enough financial resources to the new field in time to profit. The company also made permanent-press fabrics possible with its development of glyoxal, but could not come up with a consumer product that maximized its profit potential. It often ended up riding the coattails of movements it had spawned. Union Carbide's program of internal promotion engendered company loyalty, but it also stifled creativity. The company started a slide into relative mediocrity that, with few exceptions, would consume the next three decades.

Company Perspectives:

Union Carbide Corporation is a chemical and polymers company with over 3,800 employees. The company 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. 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.

A succession of well-meaning chief executives kept UCC in "turnaround mode." Under the direction of CFO Morse G. Dial, Carbide absorbed its major operating subsidiaries and formally relinquished its holding company status in 1949. Dial hoped to reverse the excessive autonomy at UCC by creating a "President's Office" composed of the corporation's division heads. The company name was changed to Union Carbide Corporation in 1957 to reflect its reorganization from a holding company to a diversified corporation. By that time, Union Carbide and Carbon Corporation had established some 400 plants in the United States and Canada, in addition to overseas affiliates. The company went from having 18 autonomous divisions to just four primary domestic groups: Union Carbide Chemicals Co., Linde Co., Union Carbide Plastics Co., and Union Carbide Consumer Products Co. Even though these corporate segments were technically divisions, the retention of the word "company" in each section's name represented the perpetuation of the decentralized management structure of a holding company, and its detrimental effect on Union Carbide continued.

UCC Develops Polyethylene

Polyethylene, a plastic used in squeeze bottles (high-density polyethylene), as well as in films and sheeting (low-density polyethylene), became Union Carbide's largest dollar-volume product after World War II. An olefins division was set up in the 1950s to supply low-cost raw materials for the chemicals and plastics industry in the 1950s. For several years, the company sold these plastics to other manufacturers. However, Carbide finally did capitalize on this discovery in 1964, when Glad branded plastic wraps, bags, and straws were introduced. Within just four years, Glad became the leading brand in its market.

By the 1960s, Union Carbide occupied the top spot in many of its primary fields, including industrial gases, carbon electrodes for industrial electric furnaces, batteries, atomic energy, polyethylene plastic, and ferroalloys. In 1965, the conglomerate's sales topped $2 billion for the first time. From 1956 to 1966, Union Carbide parlayed a few plants in a dozen countries into 60 major subsidiary and associated companies with plants in 30 countries serving over 100 markets. International operations of the conglomerate contributed 29 percent of its annual sales, and by mid-decade the company name was changed to Union Carbide International Co. to reflect its increased global presence.

In spite of consistently rising sales, which doubled from 1960 to 1970 to $3 million, Union Carbide's profits plummeted and stayed low from 1966 to 1971. Carbide could claim leading market shares, but top shares of low-margin commodities still equaled low profits. Industry-wide overcapacity in ferroalloys ran as high as 70 percent in the early 1960s, and prices for these products fell 25 percent. The company was compelled to cut its ferroalloys work force by 40 percent and close a major plant at Niagara Falls. To make matters worse, the market for low-density polyethylene stagnated for the first time in over 20 years.

Union Carbide was still the second-largest chemical producer in the United States, but it invariably lagged behind most of its competitors in terms of growth and profitability during this period. Misguided investments in petroleum, pharmaceuticals, semi-conductors, mattresses, and undersea equipment, combined with a $1 billion petrochemicals complex at Taft, Louisiana, which ran in the red for the last three years of the 1960s, further tarnished Union Carbide's standing. Not surprisingly, the conglomerate's stock dropped from $75 in 1965 to $45 in 1968 as the company "earned a reputation for aimless fumbling," according to Business Week.

Unfortunately for Union Carbide, environmental complaints about the company's Marietta, Ohio, ferroalloy plant came to a head in 1971, when consumer champion Ralph Nader brought a decade of local residents' complaints into the national spotlight. For four years, the conglomerate had largely ignored public and government efforts to make it clean up several plants that were polluting the air over West Virginia. Union Carbide's resistance to outside influence gave it the public image of a reactionary bully concerned only with profits and scornful of the environment, a stigma that the company would bear for years to come. In 1971, UCC capitulated to federal orders that it immediately use more expensive low-sulphur coal to reduce noxious sulfur dioxide emissions by 40 percent. The company was given a fall 1974 deadline to install $8 million in advanced emissions scrubbers.

The bad news continued, as the recession of 1970 and 1971 hammered commodities companies like UCC, with the chemicals and plastics markets entering another cycle of overcapacity. From 1968 to 1973, UCC's sales grew by only 4 percent annually, well below the industry average. CFO and president F. Perry Wilson, who had been promoted to those offices in 1971, made his bid to turn Union Carbide around. His restructuring plan included three primary changes. First, he tried to pare back peripheral activities and focus on plastics and chemicals. Among the businesses sold were a bedding company, most of UCC's oil and gas interests, a pollution-monitoring devices business, a plastic container line, a fibers business, a jewelry line, and an insect repellant business. Second, he worked to shift the corporate focus from market share to profitability. Finally, Wilson tried to plan capital and capacity investments so that UCC could avoid the inefficiencies and plummeting prices that had accompanied industry-wide overcapacity in the past.

Key Dates:

1917:: The company is incorporated as Union Carbide & Carbon Corporation and acquires Linde Air Products Company, National Carbon Company, Inc., Prest-OLite Company, Inc., and Union Carbide Company.
1920:: Carbide and Carbon Chemicals Corporation is established.
1926:: U.S. Vanadium Company is acquired.
1939:: The company merges with Bakelite Corporation.
1957:: The company's name is changed to Union Carbide Corporation.
1959:: Union Carbide Consumer Products Company is formed.
1984:: A gas leak at a plant in Bhopal, India, results in tragic loss of life.
1986:: Amerchol Corporation is acquired.
1989:: Union Carbide Corporation becomes a holding company owning the subsidiaries UCAR Carbon Company, Union Carbide Industrial Gases Inc., and Union Carbide Chemicals and Plastics Company, Inc.
1992:: Union Carbide Industrial Gases is spun-off as an independent company named Praxair, Inc.
1994:: Union Carbide launches a joint venture, Polimeri Europa, with EniChem.
1997:: Union Carbide launches a joint venture, Univation Technologies, with Exxon Chemical Company.
1998:: Union Carbide launches a joint venture in Malaysia with Petronas.
1999:: Union Carbide launches a joint venture with Tosco Corporation.
2001:: Union Carbide is acquired by the Dow Chemical Company.

A New Business Development department was formed in 1970 to coordinate the three areas outside of chemicals and plastics that Wilson did not 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 five 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.

Disaster Strikes in India

The 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. 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. This plant was built, owned, and operated by Union Carbide India, Limited (UCIL), in which Union Carbide Corporation held just over half the stock.

In December 1984, at least five tons of methyl isocyanate gas (MIC) seeped out of the plant over a 30 minute period. Union Carbide maintained that the accident, which killed 3,800 people and permanently injured another 10,000, was sabotage. Newsweek magazine called the incident "the worst industrial accident in history." According to a statement posted on the Union Carbide Web site, "An initial investigation by Union Carbide experts reported that a large volume of water had apparently been introduced into the MIC tank, causing a chemical reaction forcing the chemical release valve to open and allowed the gas to leak. A committee of experts working on behalf of the Indian government conducted its own investigation and reached the same conclusion. An independent investigation by the engineering consulting firm Arthur D. Little determined that the water could only have been introduced into the tank deliberately, since safety systems were in place and operational that would have prevented water from entering the tank by accident."

Five senior Indian executives of Union Carbide were arrested. The Indian government charged Warren Anderson, chairman of Union Carbide's board, with "corporate and criminal liability" and accused the Union Carbide management of "cruel and wanton negligence." Many class action suits were filed against Union Carbide on behalf of the victims. In April 1988, a court in India ordered Carbide to pay $192 million in "interim" damages. Union Carbide and the Indian government reached a much-criticized settlement for $470 million in 1989. In 1994, Carbide sold its share of the Bhopal plant to MacLeod Russell (India) Limited. Proceeds of the sale were used to fund a hospital in Bhopal for victims of the tragedy.

In addition to the human toll, the incident set off a chain reaction at Carbide. By 1985, the company's market value dropped by two-thirds to less than $3 billion, and GAF Corporation's Samuel Heyman accumulated enough stock to mount a hostile takeover bid of $5.3 billion. After working for two decades to expand its consumer products lines, Carbide was forced to sell off its Consumer Products Division, a profitable group that included Glad trash bags, Eveready batteries, Prestone, and STP automotive products, for $840 million. The corporation borrowed $2.8 billion, raised a total of $3.6 billion in asset sales, and repurchased $4.4 billion in stock to repulse Heyman's attack.

Carbide scaled back to the three main business lines (chemicals and plastics, industrial gases, and carbon products) that were once its strength and benefited from sharply reduced interest rates and falling costs of petrochemical feedstocks. Nevertheless, the company had lost the safety net provided by its consumer products. Union Carbide's debt stood at 63 percent of capital, and its equity was cut to a quarter of its former value. Income rose 78 percent in 1987 to $232 million, but high debt service made it hard for the company to develop and introduce new products. In 1988, UCC reduced its debt by more than $400 million and increase equity by almost $600 million.

By 1988, Union Carbide's corporate identity had begun to take clearer shape. Sales hit $8.3 billion (one-third below the 1981 peak), profits were up to more than $300 million, and the company had a new CEO, Robert D. Kennedy. His goals for the company included growth, an ambitious prospect in the face of depleted finances. His solution was to trim operating expenses and generate profits. Between 1984 and 1988, payroll was reduced from 98,000 employees to 43,000, while Carbide set up joint ventures with British Petroleum Co. and Allied-Signal Corporation and made a few modest acquisitions.

In 1989, Carbide advanced slightly on its long journey toward financial recovery. Net income was $573 million. Profits in the chemicals and plastics divisions put Carbide in the number two spot on the list of the top ten publicly traded companies in America. The company succeeded in reducing its debt-to-capital ratio to below 50 percent and invested $181 million in research and development. That year, the company introduced its proprietary LIHDE Oxygen Combustion System, which used pure oxygen to burn organic wastes.

Carbide's fate was far from settled. A $3.3 billion debt stymied both diversification and overseas expansion. Carbide's sales were dependent on cyclical commodities such as polyethylene, and as the chemical industry stumbled, earnings declined. Net income decreased 46 percent from 1990. The brightest prospects were in the industrial gas unit: Carbide remained number one in North America in that industry, with $2.4 billion in sales.

The company launched a "work simplification program" in the early 1990s. The program had a cost reduction goal of $400 million a year by the end of 1994. Carbide progressed toward this goal by repurchasing 20 million shares, spinning off two small businesses, and selling 50 percent of its carbon business in 1990.

As a fitting mark to Union Carbide's 75th anniversary in 1992, the company had the year's best-performing stock on the Dow Jones list of 30 industrials. Carbide was half way to achieving its $400 million cost reduction goal and had endured a loss of $187 million. The dramatically smaller corporation had shifted its focus from diversification to becoming a low-cost leader in basic chemicals. This strategy included uncharacteristic environmentalism: Carbide anticipated "inevitable government mandates on waste reduction and recycling" when it started reprocessing plastic bottles in 1992. After Bhopal, UCC's efforts helped raise industry performance standards and levels worldwide, and the company was praised for its "responsible care" efforts.

Expansion through Joint Ventures

During the 1990s, Union Carbide expanded its business worldwide by engaging in joint ventures with both American and foreign companies. In 1994, Carbide announced a joint venture with EniChem, a European chemicals company, to develop, manufacture, and sell polyethylene under the name Polimeri Europa. Each company would own 50 percent of the new firm. The arrangement would make Carbide and EniChem the largest producers of polyethylene in western Europe. EniChem's existing polyethylene plants in Germany, France, and Italy were made part of the new company, while a new 400,000-tons-a-year plant in Brindisi, Italy, was planned.

The year 1996 saw further expansion internationally when Carbide announced a joint venture with China's Shanghai Petrochemical Co., Ltd. to manufacture and sell latex polymer emulsions under the name Shanghai Petrochemical Union Car-bide Emulsion Systems Co., Ltd. The new company would construct a plant in Jinshanwei, China, near Shanghai. A second expansion into the Chinese market came later in 1996 with Carbide's subsidiary Amerchol Corp. announcing that it would be constructing a plant in Guangdong Province, China.

Carbide teamed with Exxon Chemical Company in 1997 to create the joint venture company Univation Technologies. Combining both Carbide's and Exxon's patented polyethylene manufacturing processes, Univation would manufacture polyethylene using these processes and license the technologies. Univation would also license the super condensed mode technology, which doubles polyethylene production.

Carbide expanded its presence in Asia with the 1999 announcement of a joint venture with Petronas, the national oil company of Malaysia. The two firms would build a petrochemical complex in Malaysia focusing on ethylene oxide and its derivatives and oxo alcohols and oxo derivatives. In 2001, the Kerteh Integrated Petrochemicals Complex opened, with Union Carbide owning 24 percent of the project.

Another joint venture was announced in 1999. Carbide and Tosco Corp. joined in a 50–50 venture to combine their polypropylene business. The deal was expected to take Carbide, ranked eighth in North America among makers of polypropylene, into the top five producers. Under the agreement, Tosco would build a 775 million-pound-per-year plant in Linden, New Jersey, while Carbide would contribute its two plants in Seadrift, Texas, and Norco, Louisiana.

Acquisition by Dow Chemical

On August 4, 1999, it was announced that Union Carbide would become a subsidiary of The Dow Chemical Company. The next two years saw negotiations between the two firms on the terms of the deal. Negotiations were also held with the European Commission and the Federal Trade Commission to get government approval of such a large merger. As part of the agreement, Dow was obliged to divest some of its holdings, including its gas-phase polyethylene metallocene technology, while Carbide had to divest its 50 percent ownership in Polimeri Europa, its joint venture with EniChem. Finally, all discussion was over and Dow acquired Carbide for $11.6 billion on February 6, 2001. The deal created the world's second-largest chemical company, just behind DuPont. According to Michael Parker, chairman and CEO of Dow, quoted by Robert Brown in Chemical Market Reporter: "While the negotiations took longer than first imagined, we are pleased with the outcome and consider it a win-win for everyone involved." Union Carbide chairman and CEO William H. Joyce called the deal, according to Joseph Chang in Chemical Market Reporter, "the right move at a good time. In a consolidating chemical industry where fewer, more powerful companies will exist, the combination of Dow and Union Carbide now sets the standard for the industry."

Since the acquisition, Carbide has seen generally positive financial growth. In 1999, the company posted net sales of $5.87 billion and a profit of $291 million. In 2000, net sales were $6.52 billion with a profit of $162 million. The next two years saw losses on lower net sales. 2001 sales were $5.4 billion with a loss of $699 million, while 2002 sales were $4.78 billion with a loss of $510 million. In 2003, however, Carbide moved into the black again with net sales of $5.16 billion and a profit of $313 million. This trend continued in 2004 with net sales of $5.86 billion and a profit of $687 million. For the first quarter of 2005, Carbide reported net sales of $1.68 billion and a profit of $280 million. As Union Carbide faced the 21st century with rising sales and profits, its chemical products continued to be essential to the manufacturing of countless other products throughout the world.

Principal Subsidiaries

Amerchol Corporation; Amko Service Company; Bayox, Inc.; Beaucar Minerals, Inc.; BEK III Inc.; Be-Kan, Inc.; Bentley Sales Co. Inc.; Blue Creek Coal Company, Inc.; Catalyst Technology, Inc.; Cellulosic Products, Inc.; Chemicals Marine Fleet, Inc.; Dexter Realty Corporation; Gas Technics Gases and Equipment Centers of Eastern Pennsylvania, Inc.; Gas Technics Gases and Equipment Centers of New Jersey, Inc.; Gas Technics Gases and Equipment Centers of Ohio, Inc.; Global Industrial Corporation; Hampton Roads Welders Supply Company, Inc.; Harvey Company; Innovative Membrane Systems, Inc.; International Cryogenic Equipment Corporation; Iweco, Inc.; Karba Minerals, Inc.; KSC Liquidation, Inc.; XTI Chemicals, Inc.; Linde Homecare Medical Systems, Inc.; Linox Welding Supply Co.; London Chemical Company, Inc.; Media Buyers Inc.; Merritt-Holland Company; Mon-Arc Welding Supply, Inc.; Nova Tran Corporation; Paulsboro Packaging Inc.; Phoenix Research Corporation; Polysak, Inc.; Prentiss Glycol Company; Presto Hartford, Inc.; Presto Welding Supplies, Inc.; Seadrift Pipeline Corporation; Soilsery, Inc.; South Charleston Sewage Treatment Company; UCAR Capital Corporation; UCAR Energy Services Corporation; UCAR Interam, Inc.; UCAR Louisiana Pipeline Company; UCAR Pipeline Incorporated; UCORE Ltd.; Umetco Minerals Exploration; Umetco Minerals Sales Corporation; Unigas, Inc.; Union Carbide Africa and Middle East, Inc.; Union Carbide Canada Ltd.; Union Car-bide Caribe, Inc.; Union Carbide Communications Company, Inc.; Union Carbide Engineering and Hydrocarbons Service Company, Inc.; Union Carbide Engineering and Technology Services; Union Carbide Ethylene Oxide/Glycol Company; Union Carbide Europe, Inc.; Union Carbide Films-Packaging, Inc.; Union Carbide Grafito, Inc.; Union Carbide Imaging Systems, Inc.; Union Carbide Industrial Services Company; Union Carbide Inter-America, Inc.; Union Carbide International Capital Corporation; Union Carbide International Sales Corporation; Union Carbide Polyolefins Development Company, Inc.; UNISON Transformer Services, Inc.; UOP LLC; Vametco Minerals Corporation; V.B. Anderson Co.; Welders Service Center of Nebraska, Inc.; Wolfe Welding Supply Company, Inc.