It's not easy being cutting-edge and traditional at the same time, but that's exactly what Keith Smith is trying to do at the Engineering Polymers unit of DuPont Co.
Engineering Polymers ``is one of the largest strategic business units in DuPont, so we've got several roles to play,'' said Smith, the unit's vice president and general manager, in an interview at DuPont headquarters in Wilmington.
``We're a mature business, so we're counted on for earnings and cash flow,'' he added. ``But our other big role is in leading corporate infrastructure into developing economies. Engineering polymers is the largest DuPont business in China and India.''
The ``mature business'' that Smith refers to includes nylon 6/6, one of DuPont's bedrock businesses. The firm has produced Zytel-brand nylon for almost 70 years and continues to lead the global market in production. Other plastic materials in DuPont's engineering polymers lineup include Delrin-brand acetal, Hytrel copolyester and Rynite polyester.
``Nylon averages 4-6 percent growth over time and will have up years and down years,'' said Smith, a 28-year DuPont veteran who's held his current role since 2005. ``[Polybutylene terephthalate] grows faster and [high-temperature] specialty nylon grows much faster. We're working with downstream customers to get a higher penetration rate.''
Much of that higher penetration rate needs to happen in the North American automotive market, where more pounds per vehicle are needed to make up for plunging auto production.
``Lightweighting is happening at every level on every size car,'' Smith said. ``We're getting into small, high-performance plastic parts.''
Globally, DuPont engineering polymers' business is divided evenly between the Americas, Europe and Asia. New projects in Asia in the past two years alone include a new automotive research center in Nagoya, Japan, a new research and development center in Shanghai and almost 100 million pounds of new compounding capacity in Shenzhen, China. That capacity expansion is set to start up in mid-2009.
``DuPont went to Asia a long time ago, when electronics and toys migrated there and we followed our customers in those products,'' Smith said. ``We laid the groundwork with sales, manufacturing and technical centers.
``Right now, a large portion of our business in China is with global companies, but the growth percentage is starting to be set by local innovators.''
Smith also is optimistic about DuPont's efforts in the bioplastics market. The firm makes resins based on organic feedstocks at a plant in Loudon, Tenn., through a joint venture with Tate & Lyle LLC.
``It's only a matter of time until petrochemical and bio-based cost curves cross,'' he said. ``Petrochemical [costs] are getting higher. Bio starts high but is driving scale and coming down. Long term, bio may have lower costs than petrochemical. And sometimes, the bio materials have property advantages, like in laser welding and surface appearance. But for now, it's a question of whether the customer and final consumer will pay a premium.
``Overall, bioplastics is a bet for the future. The value proposition is there,'' Smith said.
The challenge of rising feedstock costs is another issue DuPont's engineering polymer business has grappled with this year.
``As long as we buy [feedstocks] competitively and pass on the increases, we're OK,'' Smith said. ``But passing on those costs is problematic. We're doing what we can to improve our production yields and reduce waste. We've improved our fixed costs and taken cost out.''
DuPont actually got a head start on this process by launching a massive quality performance review three years ago.
``We've adopted a lot of lean practices since then,'' Smith said. ``We took our customer defects and looked at the root cause the same as we'd look at a yield loss. We just needed to catch it.''
The review ``included everything from feedstocks to shipping schedules'' to find out where any time was wasted throughout the value chain, he added.
In spite of clouds looming over the American financial market and alleged health risks recently attributed to some plastics Smith has a positive outlook for DuPont's lineup, and for the industry in general.
``When you look at the market trends out there, they're still very positive,'' he said. ``Plastics are still affordable and plastic prices have gone up at lower rates than metal or other materials. In most of the markets we're in, the customer doesn't see their product as a plastic product. Like in laptop computers or cars, they don't think of it as a plastic computer or a plastic car. The consumer doesn't see under-the-hood auto parts and even when they do, they're not always aware those parts are made of plastic. They just see a material that works for that application.
``From a global perspective, we're seeing relatively steady growth with substitution of more plastics. Unless there's a major global recession, that global demand will continue to grow,'' Smith said.
DuPont Engineering Polymers is part of the firm's Performance Materials group, which rang up first-half sales of $3.5 billion in 2008 up almost 8 percent vs. the same period last year. The firm doesn't report a separate sales number for engineering polymers.
DuPont Performance Materials ranked second among the firm's five business groups in the first half, accounting for about 20 percent of sales.