HOUSTON — The Lyondell/Millennium polyolefins combo isn't planting any ``for sale'' signs just yet, in spite of industry speculation that some of the massive venture's holdings will have to go in order to maintain Lyondell's trademark low-cost strategy.
``Our goal is to understand these businesses and how best to operate them,'' Debra Starnes, Lyondell's senior vice president of petrochemicals, said in a Sept. 17 interview at her Houston office. ``We're not going into it with a plan to divest assets.''
The partnership, 57 percent of which is owned by Lyondell, creates a polymers entity that annually can crank out 3.4 billion pounds of high density polyethylene, 1.7 billion pounds of low density PE, 1.1 billion pounds of linear LDPE and 680 million pounds of polypropylene from eight sites on the Gulf Coast and in the Midwest. Its total PE production of 6.2 billion pounds ranks first in North America.
The company also will have an enormous feedstocks position, with 7.2 billion pounds of ethylene capacity and 2.2 billion pounds of propylene capacity.
The as-yet-unnamed venture will open for business Dec. 1 with offices in Houston. Its value is estimated at $5 billion, although it will carry debt of $1.75 billion.
Starnes, who also will serve as senior vice president of polyolefins in the new venture, acknowledged the presence of sell-off rumors, but she insisted Lyondell's management consists of ``operating people.''
``We're not in it as the financial type,'' she said. ``People think if a company has that large of a product line, some of the smaller businesses will get lost in the shuffle and the company will get rid of them, but our expectation is to add value through those businesses.''
Combining the Lyondell and Millennium product slates will allow the new firm to take ``a package of resins'' to buyers, according to Starnes.
``We'll be able to consolidate suppliers and multiple production sites will give security of supply to our customers,'' she said.
And what about Lyondell's hard-earned ``low-cost producer'' reputation?
``As we've acquired polymers businesses, we've been able to run the same philosophy,'' she said. ``We've stripped out layers of management so our employees have the ability to implement ideas without having to do a lot of checking with management.''
Industry observers across the board agreed the Lyondell/Millennium move was a good fit since it combined Lyondell's strong feedstock position with the sheer capacity volume Millennium commanded. At the same time, many companies would have been hesitant to take such a step with several economists predicting a trough period for the industry in 1998 and 1999.
Lyondell also sees the cycle coming down currently, but Starnes said the firm's concerns in that area are only tied to the standard ethylene cycle and are not long-term problems.
``We don't think it looks as if the U.S. economy is going into a deep recession and demand is going to fall off,'' Starnes said. ``There's a large supply in ethylene and, since that industry drives the market, we expect it to spill over into polymers.''
With a number of Millennium staff transferring from the firm's Cincinnati offices and sales, marketing and administrative staffs needing to be aligned, both firms have had their hands full lately. And there's still that matter of a name to be decided.
``Some of our employees have suggested we should call ourselves `Big Dog,''' Starnes said. ``But I don't think we're going to go with that one.''