The Chemical World This Week
THIRD QUARTER CONFIRMS PRODUCTIVITY UPTURN True to form for a business recovery, productivity in the chemical indus try made a king-size gain in the third quarter. At the same time, unit labor costs in the industry posted their first quarter-to-quarter decline in two and a half years. These results mean that, at least for a while, the deterioration in these two basic efficiency measures, which started in early 1973, has been stopped. Preliminary results figured by C&EN from government data show productivity (physical output per hour worked by nonsalaried person nel) for chemicals and allied prod ucts 4.4% higher in the third quarter than in the second quarter. This works out to an annualized rate of increase of 17.6%, more than double the average yearly rise for the past decade. This performance brings chemical productivity to a new record 52% higher than in the base year of 1967. The old record, set in second-quarter 1974, was 1% lower than the new figure. After secondquarter 1974, chemical productivity suffered a highly unusual series of declines until the pickup this spring. The big productivity leap in the third quarter follows a revised quar terly gain of 2.1% in the second quarter. At an annualized rate, this increase works out to a very respect able 8.4%. Preliminary estimates in August had put the quarter-to-quar ter gain in the second quarter at 1.1%. The summer's productivity up surge exceeded the rise in hourly wages. This is the first time this has happened since the opening quarter of 1973. The result is a welcomed quarter-to-quarter drop of 1.0% in unit labor cost (labor cost per unit of physical output) for chemicals and allied products. At an annualized rate of 4.0%, this de cline is in line with the chemical industry's average performance in the past decade. By contrast, unit labor costs had soared at annual rates of as much as 22% in the past two years. The rates of improvement in productivity probably will settle back in the next few quarters. If industry performance is about aver6
C&EN Nov. 3, 1975
% change from previous quarter at annual rate 3
1974
1975
a Productivity of nonsalaried workers in the chemi cals and allied products industry. Source: C&EN calculations from Department of Labor and Federal Reserve System data
age in the fourth quarter, produc tivity could eke out a slight gain for the full year over 1974. Unit labor costs would come out about 10% ahead of 1974. Both results still would be the worst in at least a decade because of the poor per formance in the first half of the year. Π
Toxic substances hearings wind down The Senate Commerce Com mittee's Subcommittee on the En vironment has held a concluding day of "fact-finding" hearings on a revised version of S. 776, the Toxic Substances Control Act of 1975. But whether much in the way of new facts were found that will be paid much attention to is debatable. Indeed, there are some hints that the subcommittee will report for full committee action, and for later Senate action, a bill that probably won't be significantly different from the staff version worked up before the hearings. All of which, if it hap pens, will make the testimony pre sented at the hearings rather moot —at least in terms of having an impact on the Senate bill. In any event, the hearings did provide an opportunity for the chemical industry, Environmental
Protection Agency, and others to add still more information to the mountain of testimony that has ac cumulated on the issue over the past several years. For example, Dr. John L. Buckley, an ecologist and a consultant to EPA's Office of Re search & Development, pointed out that polychlorinated biphenyls (PCB) offer an excellent example of the need for the type of regulatory authority contained in the proposed Toxic Substances Control Act. "Despite governmental efforts to control the PCB problem, despite voluntary action on the part of the sole U.S. manufacturer [Monsanto] of PCB to sell only to customers who have stated their intention to limit the uses of PCB, and despite a formal international agreement embodying a multinational com mitment to control PCB, environ mental contamination persists. All these factors demonstrate the need for this legislation now," he says. Another witness to testify before the subcommittee, which is chaired by Sen. John V. Tunney (D.-Cal if.), was Harry S. Havens, director of the Office of Program Analysis at the General Accounting Office. Ha vens' testimony consisted of a GAO staff paper that compared esti mates of the cost of S. 776 to the chemical industry prepared by EPA, the Manufacturing Chemists Association, and Dow Chemical. The staff report reaches the unsur prising conclusion that implemen tation of a tough toxic substances bill would not be nearly as expen sive as some in the chemical indus try maintain—as much as $2 bil lion—but it will cost more than EPA's estimate of $80 million to $140 million (C&EN, Oct. 27, page 5). However, he added that "be cause all of the studies consider costs to industry, but not cost to consumers, no figures are given for the cost of delays to consumers. These costs could be substantial." MCA witnesses were introduced by Sen. Tunney with the comment that industry witnesses are always complaining that they are the last to go on and that the press has long since departed. Hence, the indus try's message is not reported. Tun ney then welcomed MCA's witness es, including George S. Dominguez, of Ciba-Geigy Corp. Whereupon most of the press left the hearing room. Among other things, Dominguez noted that the revised version of S. 776 could have an even greater eco-
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Tunney: mountain of testimony
nomic impact than the original bill. This is because "sweeping, discre tionary powers" given EPA include a mandate to list not less than 300 chemical substances (other than new chemical substances) with the highest priority for testing. Dominguez also detailed the findings of an industry-sponsored survey conducted by Foster D. Snell Inc. that indicates that, de pending on how EPA interprets the law, cost to the chemical industry could range from $358 million to $1.3 billion. This probably came as no surprise to the two subcommittee members at the hearing—Sen. Tunney and Sen. Wendell H. Ford (D.-Ky.)—or the subcommittee staff. MCA had submitted copies of the Snell report to the subcommit tee months ago and presented the study's findings at a House hearing on toxic substances. D
FDA indecision on additive criticized The General Accounting Office has charged that the Food & Drug Administration is exposing the public to unnecessary risks by permitting the continued use of Red No. 2, a food color additive. And GAO recommends that the Secretary of Health, Education & Welfare direct the FDA Commis sioner to either establish the safety of the additive or prevent its use in food, drugs, and cosmetics. Red No. 2, according to GAO, has been shown to cause cancer, fetal deaths, and chromosome changes in test animals. Generically known as amaranth, the dye is used to improve the appearance of a number of items, including hot dogs, ice cream, and candies. In 1973 about 1.1 million lb, valued at $2.9 million, were sold in the U.S. Under 1960 amendments to the
Food, Drug & Cosmetic Act, con tinued use of commercial color additives was permitted until their safety could be reviewed and regu lations issued for their use. All reviews were to be completed by January 1963. Extensions were to be permitted only for completing scientific investigations of a sub stance's safety. However, GAO points out, a final determination on Red No. 2's safety has been delayed 14 times in the past 12 years at the requests of manufacturers or industry asso ciations. In some cases, GAO says, these requests did not say what in vestigations were being conducted or when they would be completed. These delays, GAO says, oc curred in spite of FDA's concern about the safety of the additive. In July 1972, FDA published a pro posal that would have reduced substantially human exposure to the additive. But as of September 1975, this proposal still had not been acted on. FDA now says, in response to GAO's findings, that its evaluation of existing data in dicates that Red No. 2 poses no risk to consumers and that there is no evidence that it causes cancer in humans or poses a risk to de veloping babies. But FDA still has not made any move to officially recognize Red No. 2 as safe. FDA agrees with GAO that a final determination should be made whether the additive should be listed permanently as an acceptable food color additive. To this end, it has referred all data on the additive to a newly formed toxicology ad visory committee that will begin an independent evaluation of the data Nov. 21. FDA, by law, must report in writing to the House and Senate Government Operations Commit tees on what actions it has taken in response to the GAO recommenda tion no later than January 1976. D
FMC wants to sell its fiber operations FMC's agony in synthetic fibers, principally rayon, may be coming to an end. After several years of at tempting to stimulate performance in this area with a mixture of prun ing and new investment, the com pany finally has decided to try to sell the business. In the company's otherwise favorable third-quarter earnings report last week, chairman Robert H. Malott put fibers up for sale. "As part of FMC's program to re deploy capital to those operations
of the company having the highest growth potential for FMC, the com pany intends to explore the possi bility of selling its fiber division. Although the company will consider offers and will be contacting pro spective buyers, there are no nego tiations now in progress. It is our objective to sell the division as an operating unit to a purchaser who will continue the division's opera tions and maintain its employee and customer relations." FMC's fibers history has been one of a brief success and a subsequent long decline. After acquiring in 1963 American Viscose, the domi nant U.S. rayon producer, FMC cashed in handsomely for four years. The new division's cash flow fully repaid the initial investment dur ing this period. But beginning in 1968, fibers per formance began to deteriorate. Re turns declined to very low levels and then sank into the red in 1974. That year, fibers lost $17.2 million after taxes on sales of $317 million (15% of the company's total sales of $2.07 billion). This year, fiber sales are down about one third to $152 mil lion through three quarters, yield ing an after-tax loss of $4.8 million. The major headache in FMC's fibers operation is rayon. FMC dominates rayon staple, the princi pal remaining product form with over half the industry's capacity. Al though rayon staple shipments have risen steadily in recent months, this fiber is still far worse off than most other fibers. Rayon staple ship ments now are only half their vol ume of early 1974. Besides rayon staple, FMC pro duces small amounts of rayon tire cord, polyester filament and staple, cellulose acetate filament, and vinyon staple. Book value of FMC's total fibers operations was about $120 million as of September. α
Joint environment project going well Cooperation between the U.S. and the U.S.S.R. in environmental pro tection has "produced dramatic re sults and promises to produce even more" since the cooperation began in May 1972. So said Environmen tal Protection Agency Administra tor Russell E. Train at the opening of the fourth annual meeting of the U.S.-U.S.S.R. Joint Committee on Cooperation in the Field of Envi ronmental Protection last week in Washington, D.C. Train and academician Yuri A. Izrael, head of the HydrometeoroloNov. 3, 1975C&EN
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