NEWS OF THE WEEK
CARBIDE AFTER BHOPAL: Board chairman reveals strategy In the aftermath of the Dec. 3 inci dent at Bhopal, India, in which poi sonous methyl isocyanate gas spilled from a Union Carbide subsidiary plant into the surrounding city, sev eral points—both positive and nega tive—have come to light. On the positive side, a team of U.S. doctors who visited Bhopal af ter the accident reported that far fewer survivors sustained severe eye damage than first thought. In addi tion, a new official Indian govern ment account reportedly put the death toll at 1380 instead of previ ous estimates that ranged from 2000 to 2500. For Carbide, in addition to the immediate negative impact resulting from the incident, further bad news has arrived in the form of a down grading of the company's debt rat ing, a development that is likely to increase questions about the firm's ability to manage successfully both the current crisis and its day-to-day business at the same time. In an interview with C&EN last week, Carbide chairman and chief executive officer Warren M. Ander son refuted the rationale given for lowering Carbide's debt rating by Standard & Poor's, the New York City debt rating service. He also talked emphatically about his desire for a speedy settlement that would get money to victims of the disaster quickly and discussed ways in which he thinks the accident will change the approaches taken by Carbide, the chemical industry, and other in dustries to safety precautions and plant siting throughout the world. In reducing Carbide's debt rat ings to the lowest investment grades, Standard & Poor's explained that it was concerned about potential "neg ative spillover" in dealings with cus tomers and suppliers; that manage ment would be too preoccupied with 6
January 14, 1985 C&EN
Anderson: some good will emerge Bhopal to run day-to-day business effectively; and that the company's access to capital markets would be restrained during a "period of great uncertainty." On the other hand, S&P downplayed the potential harm to Carbide of liability costs related to the accident. According to Anderson, there has been no "negative spillover" with customers and suppliers. On the con trary, he says, those doing business with Carbide have offered help in the form of orders and other mea sures. He also denies that the com pany's attention will be diverted from business, explaining that Car bide has restructured temporarily its management so that he deals pri marily, though not solely, with is sues related to Bhopal, while presi dent Alec Flamm deals primarily with running the company. He says that part of the board of directors had been detailed to deal with Bhopal at the board level. This com mittee is headed by former Envi
ronmental Protection Agency direc tor Russell E. Train. Anderson says that access to capi tal markets is not a significant is sue, because, first, the company doe not anticipate more than minima refinancing needs in 1985, and, sec ond, the company has extended it bank credit line to $1.5 billion sine the accident occurred. In addition he points out, despite the lower deb rating, Carbide now can resort t< commercial paper markets again t< raise funds if need be. As previous ly, Anderson says the company's in surance was adequate to cover an] claims. He declines to disclose th< extent of that insurance coverage rumored to total some $200 million In discussing the ramifications ο the Bhopal incident, Anderson con tinually returns to a theme of strik ing a balance between compassioi and practicality. He says that hi chief concern is getting mone] quickly to those who need it anc denies reports published elsewhere in the press last week that the pri mary reason for his trip to Indi; last month was to stave off litigation "What I would like to see is ai ability to sit down with the prope people who represent the survivors the relatives of the deceased, th< city of Bhopal, the state of Madhy; Pradesh, the government of India U n i o n Carbide India Ltd., anc Union Carbide Corp. and come uj with an answer. The key is a way ο recompensing—it's hard to say mon ey is going to solve things, but it'i the only real means you have—tha would be compassionate and rea sonable. And to do it quickly, be cause the longer you wait, the mon complicated life becomes," he says. Anderson won't comment on th< type or size of settlement he woulc prefer, saying that disclosing sue! details now could prejudice negoti
ations or litigation in the future. He did not say any negotiations are under way at present between Carbide and Indian parties, but he says he thought the Indians were listening to his requests for such talks. "The issue has been: How do you get all those people represented in a negotiation rather than in a confrontation? That's what we've been working on," he says. As a sign of possible rapprochement between the company and Indian authorities, Anderson revealed that Carbide's offer of $1 million for immediate relief assistance to India—a check that was rejected when first proffered shortly after the accident—has now been accepted by the prime minister's office in New Delhi "within the past week." A similar check for $840,000 from Union Carbide India offered to the state government of Madhya Pradesh apparently has not yet been accepted. Anderson stresses that the aid has nothing to do with potential compensation and says the original rejection of the relief funds was due to a misunderstanding of the company's motives. Anderson also says that another good sign was news last week that the attorney general of India, K. Parasaran, would be visiting the U.S. soon to discuss jurisdiction issues. He says he hopes the visit, in which the Indian attorney general is expected to meet with American legal experts, will persuade the Indians to work toward settlement rather than to trust to litigation. He did not say whether he or Carbide representatives will attempt to meet the attorney general in the U.S. In its efforts to foster negotiations, the chairman says, Carbide investigated the use of intermediaries but decided to let its own employees do the talking. On the other hand, the $1 million relief check was presented to the Indian government on behalf of Carbide by the U.S. ambassador to India, Harry Barnes, according to Carbide. Questions as to whether the State Department was involved in other ways, particularly in helping set up negotiations between the involved parties, received noncommittal answers from both Carbide and the State Department in Washington,
which says it did not even know that Ambassador Barnes had presented the check. It also is unclear whether the Indian attorney general's-plan to visit the U.S. might have come in response to U.S. urging. In talking about the difficulty of creating just the framework for a settlement, Anderson says that the rush of U.S. personal injury attorneys to Bhopal had "confused the issue over there" and implied that the settlement process probably would be further along if they had not intruded. Anderson repeatedly has said that he considers India the proper place to work out a settlement and for litigation. Observers outside the company just as repeatedly have noted that it undoubtedly would be less costly for Carbide if India were to retain jurisdiction. On another key issue—that of what precisely h a p p e n e d at the
plant—Anderson explains that because of incomplete access to personnel and the plant, Carbide's investigation of the accident's cause probably will take another four to five weeks. He says he feels "reasonably sure" that the company will have an answer within that period. Pointing out that many multinational manufacturing companies probably will be reappraising their overseas strategies as a result of the accident, Anderson also says that some good probably will emerge from the tragedy. "We have a commitment and an obligation to lead the way, if we can, to how we will now worry about safety," he says. "The world's going to be a better place. It's a hard way to learn a lesson, but if you went through a disaster like this and didn't learn anything, that would be the worst," he adds. D
R&D funding predicted to rise 11% in 1985 Research and development expenditures in the U.S. will surpass $107 billion in 1985, Battelle Columbus Laboratories says in its annual R&D forecast. That will be $10 billion (11%) more than the $97 billion that the National Science Foundation estimates actually was spent for R&D in 1984. Battelle adds that the real increase will be on the order of 3.9%, assuming a 6.5% inflation rate. Of the total, industry will furnish $55 billion (51%), the federal government $49 billion (45%), colleges and universities almost $2.3 billion (2.1%), and other nonprofit institutions slightly more than $1.3 billion (1.2%). Until 1979, Battelle notes, the government provided
more funds for R&D than did industry. But during the past decade, real R&D support has grown an average 5.4% per year (compounded) for industry, compared to 3.0% for government. According to Battelle economists Jules J. Duga and W. Haider Fisher, industry will spend 11% more on R&D than in 1984. Eight broad industrial sectors each will spend more than $1 billion. Biggest spender will be the aerospace industry, with projected expenditures of $20 billion. But almost 76% of that will come from government, only 24% from the industry itself. In contrast, R&D in the other seven sectors—electrical machinery/communications, ma-
Chemicals R&D most heavily self-funded sector in 1985 $ Billions
Aerospace Electrical machinery/communications Machinery Chemicals Transportation equipment Instruments Petroleum products Rubber products
Total funds
Industry funds
Government funds
Industry share
$20.01 16.94 9.79 8.94 7.21 5.47 2.58 1.49
$ 4.87 11.28 8.86 8.43 6.38 4.63 2.34 1.07
$15.14 5.68 0.93 0.51 0.83 0.84 0.23 0.42
24.3% 66.5 90.5 94.3 88.5 84.6 91.1 71.7
I
Source: Battelle Columbus Laboratories
January 14, 1985 C&EN
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