BUSINESS
Ethyl Chemicals Chief Lays New Course For Supply, Marketing Activities • E. Gary Cook, chemicals group president, wants sales and R&D to concentrate on customer markets Marc S. Reisch, C&EN Northeast News Bureau thyl's new chemicals group president, E. Gary Cook, plans to rock the boat at Ethyl Corp.—but gently. Ethyl has long pursued a course to diversify out of lead antiknock fuel additives. And now that it has diversified successfully, Cook, a former chief of corporate planning for Du Pont who joined Ethyl in January, wants to take the company on a more market-oriented approach to sales, production, and R&D. To rock the boat and position Ethyl's chemical businesses to take advantage of an economic recovery, Cook has devised a two-pronged attack—redefine Ethyl's chemical supply and marketing organization, on the one hand, and promote a more market-oriented approach to its R&D organization, on the other hand. Cook says, "All boats rise when the water goes up, but I would like to be in the top bunk," referring to the cost advantage he hopes to achieve relative to competitors when the economy recovers. Cook wants to integrate supply chain functions from the moment Ethyl orders raw materials for its products to the point at which it receives payment for products from customers. The effort involves getting the people who order and inventory raw materials and those who manufacture or ship or invoice products, not only to do their individual jobs well, but also to work well together. The effect, says Cook, will be "a significant reduction in working capital simply because we are going to take a lot of time out of the system. That also means [we] do not have to keep as
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Cook: firm is pushing into new areas many things in place to cover dead time in the supply chain." Much of the effort, he says, will depend on satisfying customer needs, and he wants business teams of marketing, R&D, manufacturing, communications, purchasing, and finance personnel to focus on satisfying the demand. Ethyl and its new chemicals group president are now focusing on integrated oc-olefin production for a host of uses, such as for surfactants, engine lubricant additives, and cosmetics, as well as for 1-hexene and 1-octene comonomers for linear low-density polyethylene. Such production also results in aluminum alkyl catalysts for polyolefins, bromine flame retardants for plastic resins, zeolite-A laundry detergent builders, and electronic-grade polysilicon. Chemical sales from these and other products (including some lead) were $1.5 billion in
1991, and total revenues, including those from its life insurance subsidiary, totaled $2.6 trillion in 1991. "We have good market positions and solid core technologies to build on," says Cook. "I'm very optimistic." Analysts who follow the company are optimistic, too, about Ethyl's potential for chemical sales growth and its recovery in chemical operating profits once the recession is over. Although these analysts admit they do not know much about Cook, they expect he will continue on a course that has served the company well—centering on business opportunities that do not include lead. Whereas Ethyl's moves to step away from lead fuel additives have yet to be completed, the handwriting is on the wall. The last lead additives will have to be out of U.S. gasoline by 1995. Europe, which is now the largest market for lead antiknock compounds, will use less of these compounds as legislation there limits and eventually bans them for the same reasons they have been phased out in the U.S.—their potential as a health hazard. However, Ethyl now has a diverse product line that does not depend on lead. And to further its efforts to get the lead out, "it is always good to bring in new blood," says S. G. Warburg & Co/s chemical industry analyst Anantha Raman. "[Ethyl's] chemicals business is at a critical juncture now," he adds, because the company is bringing on production capacity "at a challenging time" both for the chemical industry and world economies. Within the past month, for example, Ethyl has brought on stream a 400 million-lb-per-year linear a-olefin plant at Feluy, Belgium, which cost more than $100 million to construct (C&EN, Aug. 3, page 15). Harvey Stober, analyst and first vice president at Dean Witter Reynolds, notes that the heavy expenses in building the Belgium plant should all now be behind and should not drag Ethyl's earnings down next year. The comAUGUST 17,1992 C&EN
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BUSINESS pany's chemical earnings will recover in 1993 along with European and U.S. world economies, and so he believes Ethyl is a good investment. However, Jonathan Sherman, an investment analyst with Chicago credit rating agency Duff & Phelps, cautions that a-olefins producers have too much capacity, and that that will adversely affect prices for about the next year. Both Shell and Chevron are major a-olefins producers. In addition to prices perhaps dipping, Ethyl has had some problems of its own, stemming from a fire at its a-olefins production unit in Houston this spring. The startup of the Belgium plant will "help get us over any tightness of supply because of that [fire]/, says Cook. He also points out the advantage of running a plant in Europe is that it will convince continental customers that Ethyl is a local supplier. Cook sees opportunities for the company to expand its product lines. In a-olefins, Ethyl hopes at last to see the "eternally imminent explosion" in the
use of poly(a-olefins), or PAOs, that are used in synthetic engine lubricants such as Mobil Oil Corp.'s Mobil 1. In the meantime, PAOs are making headway in the cosmetics market, where they are replacing base oils in products such as Richardson-Vicks' Oil of Olay. Another growth area, says Cook, is the polyimide foam business. He is projecting 30% a year sales growth for thermal and acoustical fire resistant foam. Its principal customers now are the U.S. Navy and some foreign countries' navies. Although that product line admittedly starts from a small base, other product lines, such as the 1-hexene and 1-octene comonomers, likely will grow "well in excess of inflation," as production of linear low-density polyethylene grows in Europe and the Far East. The polycrystalline silicon business is still another area Ethyl expects will grow well once the electronics industry recovers from the recession. The granular products Ethyl supplies are easier for semiconductor manufacturers to process than silicon rod. Cook says polycrystal-
line silicone "is a good opportunity for us.... We've got the low metals content and high purity people are asking for." Although analysts say the company's polysilicon plant is now running at the break-even point, Cook thinks "it is going to be hard to get people to switch products in the middle of a recession." Among other opportunities, Cook says bromine flame retardants aimed at engineering plastics will provide "some new product innovations for us." Even though opportunities may abound, the recession has forced the company to draw back and reassess its goals in some cases. Ethyl has recently discontinued its advanced polymers and composites businesses. Cook says Ethyl was not convinced its products were improvements or competitive enough to wait for the market to develop until it could make a decent return on its investment. He adds that the decision to phase out of these businesses was made before he started his job at Ethyl, but "I certainly verify it and validate it." Another disappointment is the com-
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