By: Robert Grace
June 10, 2013
GUANGZHOU, CHINA — The global head of DuPont Performance Polymers got her first taste of Chinaplas recently, and offered her thoughts on the fast-growing Asian market and on several other topics in a wide-ranging interview at her company's booth.
Diane Gulyas, Wilmington, Del.-based president of the $4.2 billion Performance Polymers unit, commented on the current state of DuPont's polymers business, the impact of recent corporate cutbacks, market shifts in China and Asia, the status of some DuPont expansions and North America's reshoring trend, among other subjects.
For starters, said the 34-year DuPont veteran, her unit's own sales performance in 2013's first quarter — down 5 percent — is reflective of the mixed general economy, which she described as "lumpy." For example, the automotive sector accounts for half of DuPont Performance Polymers' business worldwide. In Asia alone, China's auto builds were up 13 percent in the quarter, while activity in both Japan and India was down 10 percent.
Overall for the three months ended March 31, Performance Polymers' operating earnings were up 21 percent. She described the unit's productivity as great, and said its product mix is good, citing DuPont's broad portfolio of 12 different polymer families as one of its strengths.
DuPont Co.'s announcement in October that it was cutting 1,500 jobs companywide had very little impact on the Performance Polymers unit, Gulyas said. The unit is shutting down a small Canadian compounding operation in Maitland, Ontario, and transferring those products to other compounding sites in North America. The site employed fewer than 100 people, and is just one of Performance Polymers' 37 sites worldwide.
The Maitland site compounded Zytel-brand nylon resins and now is shifting some of that work to the firm's Parkersburg, W.Va., plant, while also eliminating some excess capacity.
Looking to Asia
Meantime, Asia continues to rise in importance as a region. Globally speaking, "from a sales point of view, coming out of 2009-2010, we were about even — one-third, one-third, one-third," Gulyas said. "Today, Asia is our largest region and obviously will be for a long time." Asia now accounts for about 36 percent of the Performance Polymers unit's revenue, vs. roughly 32 percent each for Europe and the Americas.
Gulyas said her group has been focused on balancing its footprint, from both a people and an asset point of view. By early 2014 she expects the unit's 5,000 employees to be evenly spread across the three major regions.
James Hay, DuPont Performance Polymers regional director for Asia-Pacific, added that the firm has been working on its global supply-chain efforts, to reflect where the business is. Now, he said, more than 90 percent of what it sells in Asia is made in Asia.
And such global reach is vital, Gulyas suggested, since "decisions get made in one place, but they get actualized or molded in another place, and so, being able to connect the dots is really, really important."
Hay noted that DuPont wants to be not only where the growth is, but also where the growth decision is. And Gulyas said that, to her, "that is the great 'a-ha!' about China today vs., say, three or four years ago." Rather than China being simply a huge export market, it now is a huge domestic market, and in fact exports are down quite a bit.
"We used to think of China as not a place where decisions were being made, [but] now more and more, the designs are being done here, the decisions are being made here, and they're being molded here. So we've had to gear up our capability, both in computer-aided engineering and computer-aided design, to be where the decisions made here and participate in the creation of new designs and new ideas in ways we would not have done three, four, five years ago."
Still quite a bit of manufacturing is shifting from China to even lower-cost countries in Asia. As a result, the Performance Polymers unit is adding people in Indonesia and Thailand. But most of the decisions, at least by Chinese auto¬makers such as Geely, Chery or BYD, are still being made on the mainland.
Hay pointed out that of DuPont's 11 innovation centers worldwide, five are in Asia. Its China Research & Development Center in Shanghai, which was built in 2005, was supposed to see the company through until 2015. But it ran out of room in 2011, and the firm is adding some 188,000 square feet of space, effectively doubling its size, this year. This full-fledged R&D center will be adding 150-200 employees, and the expansion is due to be done in the first quarter of 2014. DuPont employs more than 2,000 people total in China now.
"I couldn't be more bullish on automotive," Gulyas said. "For once, all the trends are going in my direction." All automakers are looking to lightweight their vehicles — whether internal combustion engine, electric vehicles or hybrids.
Lightweighting also is a factor in another, less-obvious product — solar panels. These have to go on the roofs of houses, and they're heavy. So, borrowing from some of their automotive know-how, "we're looking at some integrated plastics design that can make them lighter weight, [and for] ease of assembly, snap-fits and things," she said.
On the topic of sustainable materials, such as bioplastics, Gulyas offered this opinion: First, they must be functionally equivalent to their petroleum-based counterparts. There can be no compromise in properties at all. Also, "we've never believed that anyone would pay a premium" for a greener plastic. Once the functionality and price factors are met, then customers start to get interested in the sustainability factor. OEMs in automotive and consumer electronics are showing the most interest so far, she indicated.
As for the trend of reshoring, or the return of manufacturing to North America from far-flung, low-cost regions such as China and Southeast Asia, Gulyas said: "Mexico is a real bright spot in the global economy right now. We saw it throughout 2012 and we continue to see it in 2013."
She said Mexico's competitiveness and its location are proving to be very advantageous for many of DuPont's customers to get parts. "I think some of it definitely is reshoring, because it's just been very strong — stronger than the rest of the region."
Further north, in the United States, DuPont is boosting polymerization capacity for its Zytel HTN polyamide resin at its existing Chattanooga, Tenn., and Richmond, Va., plants, which is prompting the firm to hit the pause button on a previously announced expansion for that activity in Singapore. Two years ago, the firm announced it would build its first Zytel HTN polymerization plant in Asia, with capacity to produce 44 million pounds by this year. But the economics changed, and it is now much less expensive to tweak its existing U.S. facilities rather than to build a greenfield plant in Singapore, Gulyas explained.
The company maintains Zytel and Zytel GRZ compounding capacity in China, and even after doubling capacity in 2010 at its 15-year-old Shenzhen plant, the facility is "nearly full," she said, with room for only one or two more lines. Shenzhen is now the largest compounding site in the DPP global network.
As for her first visit to the Chinaplas show, Gulyas said, "I think it's amazing. The fact that there are three halls of producers of materials kind of blew my mind. And the level of activity — it's noisy and crowded and full of people asking good questions. You can feel the potential and growth of the industry. Our booth is mobbed.
"For me, it's kind of gratifying … our business was really one of the first in DuPont to put in a footprint in China, and we've seen the benefits."
China has its challenges, for sure. "First, there's lots of competition. As a supplier, you really have to differentiate yourself. ... The one thing that is different is the speed at which they expect responses. That has been a challenge for us. ... The speed at which they develop applications is a clock-speed faster than what we're used to in the U.S. and Europe."
Hay noted that it's easy to grow in China and not make a lot of money, so one needs to be disciplined and "not chase a lot of shiny objects" that don't offer an adequate return on investment. He feels DuPont has done a good job at being very targeted.
In commenting on one of China's regional rivals, they both suggested that India is about five years behind China in plastics industry development, and Hay said the plastics industry in China is 13 times larger than that of India. "It's in a different stage of development." DuPont put its first compounding line in India in 1998, and the market is slowly beginning to understand and use some of its more sophisticated engineering materials. "We're investing to create a performance polymers industry there now," he said.
Gulyas concluded by saying: "I feel like we're really getting China right, and we're just starting to build up India." After that, Brazil is strong, and of the BRIC countries, Russia is lagging behind as a market where specifying is taking place.
"I'm excited about Indonesia and Turkey — those are the next on my list," she said. "They're the next up-and-comers. I base that on where I see tools going, where I see molding being done, and where I start to get calls" from customers seeking help.