HOUSTON — Equistar Chemicals LP celebrated its first birthday last month, but executives at the Houston-based petrochemicals giant may have been too busy to enjoy a slice of birthday cake.
There's been a lot to do in merging the polyolefin and olefin holdings of Lyondell Petrochemical Co. of Houston with those of Millennium Chemicals Inc. of Iselin, N.J. The job became even larger when Equistar added Occidental Chemical Corp.'s olefins, ethylene oxide and derivatives business in March.
The resulting mega-company is North America's largest polyethylene and ethylene maker as well as a sizable player in polypropylene, propylene and other petrochemical feedstocks. Lyondell owns 41 percent of the venture, with Millennium and OxyChem each owning 29.5 percent.
The new company and its 5,300 employees have been up to the task so far, according to W. Norman Phillips, Equistar's senior vice president of polymers.
``Any kind of combination like this is much harder than an acquisition, where one company just buys another company,'' Phillips said in a Sept. 17 interview at his Houston office.
``We've had to face the generic challenge of [the merger], combined with a difficult business environment and a rail crisis that's been problematic at best. But overall it's going very well.''
The merger process has been helped out by practices as simple as weekly customer surveys, which kept track of any effects the deal was having on service. The surveys gave Equistar the immediate feedback it needed in its first year of operation.
``In this sort of effort, there's the risk of becoming internally focused and if you do that you're in trouble,'' said Phillips, who joined Lyondell in 1977. ``You need to stay in touch with your customers.''
Equistar is enjoying some other short-term benefits as well. The company is seeing consistent savings because of its combined purchasing power and has been able to realign production at some of its eight polyolefin manufacturing sites.
As an example, Phillips cited Equistar's Chocolate Bayou plant for high density polyethylene in Alvin, Texas, which now is tightly focused on producing HDPE for blow molding markets.
``Re-optimizing like that doesn't affect the overall market but it makes us more efficiient,'' he said. ``We were all in the basic end uses but each company has a sweet spot that allows us to target a facility to one particular end use.''
Phillips added that Equistar officials have found that some plants that ``weren't so great'' at producing commodity resins have proved valuable in producing specialty polymers such low density PE with a high ethylene vinyl acetate content.
The merger created a financially stronger company that can afford to invest in improvements now, despite the current slump in petrochemical prices. PE and PP prices have dropped 15-20 percent this year, but Equistar still plans to add 600 million pounds of capacity to its HDPE plant in Matagorda, Texas, by late 1999.
Research and development efforts also have been boosted by the addition of Millennium's technology center in Cincinnati.
``Lyondell didn't have the scale and scope necessary to justify major R&D and now we have it,'' Phillips said.
Even the job reductions that were made in the wake of Equistar's initial Lyondell/Millennium phase turned out a little differently than the company had expected. About 450 administrative jobs were eliminated, but Equistar ended up with about 100 job openings created by employees who chose not to relocate to Houston from Millennium's Cincinnati office.
When computer systems, shipping schedules and management lineups are all settled, there's still the issue of one-on-one relationships to be dealt with. Phillips believes the Equistar partnership has succeeded in this area as well.
``The three companies have really come together to focus on our internal working structure,'' Phillips said. ``But if you don't get the `me' issue out of the way, it can be a problem.''