When its proposed commodity plastics joint venture with a Kuwaiti firm fell through in late 2008, Dow Chemical Co. officials could have spent the next year brooding and lamenting their fate, hanging out in hotel bars and not answering their cell phones.
But they didn't.
Instead, the Midland, Mich.-based firm took a different approach.
During all these turbulent times, we intensified our focus on our customers, Dow Senior Vice President Juan Luciano said during a March 24 interview in Houston.
The Dow Basic Plastics unit includes polyethylene, polypropylene, polycarbonate and part of Dow's Styron business, which recently was sold to private equity firm Bain Capital LLC of Boston. Sales from the unit accounted for about 20 percent of the firm's $45 billion total in 2009. But officials began shopping it around after the company announced its intention to focus on specialty products.
We were all ready to invoice customers as K-Dow [the name of the proposed venture] and when things didn't work out, prospects were for a tough year. But we said there were customers out there who needed to be helped and we continued our emphasis on them.
Dow then introduced more new grades of PE and PP than it had in any year in recent memory. The list of new products included several premium grades of PE under the Dowlex, Continuum and Elite brand names, new high-clarity offerings in Inspire-brand PP, as well as other Inspire products for rigid packaging, and Dow Health+ PE polymers for medical packaging.
The company also installed a new seven-layer blown film line at its plant in Freeport, Texas, to allow customers to sample and test its materials.
Our customers want to bring new solutions to their customers, Luciano said. That brought people into focus. More than 30 percent of our sales come from new products introduced within the last five years.
And although Dow continues to seek a partner for its Basic Plastics unit, Luciano said management is under no pressure to find a buyer by the end of the year. He confirmed Dow is in talks with three potential partners, at least one of which is based in the Middle East. All three potential partners have access to feedstocks needed by the business.
Dow is determined to keep a 50 percent stake in Basic Plastics, Luciano added.
We want to keep a share of the franchise and make sure that it grows, he said. We may hold on to it for three or four more years if we need to. It's a very important business for Dow, but we need a partner in order to grow beyond what Dow can do on its own.
Luciano also said Dow isn't interested in partnering with private equity at this time.
In the current North American PE market, Dow is using sales control with its customer base, as tight ethylene supplies have affected the firm's PE production. Officials have said the regional ethylene market should remain tight for the next 60-90 days.
Everybody [in North American PE] was short on inventories to start the year and things have stayed tight, Luciano said. Then we had an electrical problem at our ethylene unit in St. Charles, [La.], and a lot of producers, including Dow, often do heavy maintenance in the second quarter.
And maintenance really can't be postponed, because it's related to safety and operating right in the long-term. We're not going to sacrifice that for short-term profit.
Dow will continue its current approach even as it continues its search for a partner.
What our behavior shows is that we didn't want to lighten up or abandon the business, Luciano said. We never departed from that strategy. We want to defend the loyalty of our customers.
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