BUSI NESS INSIGHTS
Formosa Fails To Learn Taiwanese company is PAYING THE PRICE for numerous fires that have occurred at its main site JEAN-FRANÇOIS TREMBLAY, C&EN HONG KONG
that safety management was a problem within the group. In Octoexpensive, try having an accident.” It’s a saying that originated in ber 2005, a forklift at a Formosa olefins production unit in Texas the airline industry, but it also applies to the chemical industry. For hit a valve, resulting in an explosion and fires that burned for five some reason, Taiwan’s Formosa Plastics Group has so far failed to days. Rebuilding the plant took five months. In April 2004, an exheed the adage’s advice. plosion at a plant in Illinois killed four employees. Those accidents In the 12 months leading up to July 2011, no fewer than seven mashould have served as a wake-up call to Formosa. jor fires broke out at Formosa’s main chemical complex, in Mailiao, Following the July fires in Taiwan, both the chairman of ForTaiwan. The latest two accidents, in July, took place four days apart. mosa Petrochemical, Wilfred Wang, and the unit’s president, C. Y. The cost of the accidents to Su, stepped down. Formosa PetFormosa keeps on rising. Tairochemical assumed particular wan’s government has ordered blame for the accidents because the company to inspect all of the four of the fires happened at its pipe work in the vast complex facilities. and to conduct repairs where The new chairman of Formosa necessary. The effort will cost Petrochemical is Bao-lang Chen, $400 million, Formosa estiwho had previously served in semates, and will entail the temponior positions within the Taiwanrary closure of several facilities. ese-government-owned refiner It will be a complicated and CPC. At a press conference soon distracting undertaking that will after he joined Formosa in Sepinclude having to locate and hire tember, Chen said the managemany skilled welders and techniment of Formosa Petrochemical cal experts from abroad. had in the past not given proper The highly integrated Mailiao consideration to industrial safety. Formosa companies have invested well over $20 billion at complex has been a source of Mailiao in oil refineries, power plants, chemical production faciliHe vowed to change that. strong profits for Formosa. ties, and related infrastructure. The site is the main engine of revBut it will take more than promenue generation and profit for a family of companies that together ises to convince the public that were the world’s sixth-largest chemical maker in C&EN’s latest Formosa has seen the light when it comes to safety. The group will Global Top 50 ranking (C&EN, July 25, page 12). Plant closures at have to avoid spectacular accidents for at least a decade before it can the site are proving costly. hope to improve its now tarnished image. If Formosa fails to amelioIn its latest quarterly financial results announcement, Formosa rate its safety record, it will face difficulties expanding its operations Petrochemical, one of the core companies of the Formosa group, both in Taiwan and in other countries. As it is, numerous protests reported a loss of $47 million for the three months ending Sept. 30, against Formosa have taken place in Taiwan in the past few months. largely because it had to close plants in Mailiao. This differs greatly Changing the safety culture at Formosa will be hard, but there from a pretax profit of $346 million in the previous quarter. are precedents among Taiwanese companies. China Airlines, The Formosa group will be hit financially in other ways. The cost Taiwan’s flagship carrier, was once one of the world’s least safe of insuring facilities at Mailiao will increase. And financing Formosa airlines. Between 1986 and 2002, eight of the company’s airplanes companies may cost more. Following the accident, Taiwan Ratings crashed in accidents that killed hundreds of people. This record lowered the credit outlook for the group, citing diminprompted China Airlines to fundamentally reform its ished cash flow stemming from work stoppages. The safety culture, and it has not suffered another crash in agency added that Formosa may face new difficulties the past nine years. What is most complying with the demands of Taiwanese regulators. At the rate things have been going, it will be an What is most puzzling about how Formosa neglected puzzling is achievement for Formosa to avoid an accident at that Formosa Mailiao for even nine months. The group has no choice to maintain its Mailiao facilities is that the company had fought so hard to convince the Taiwanese public but to confront its safety lapses. In the past, Formosa’s had fought that the site would be problem-free. It took Formosa accidents cost it a lot of money. The Taiwanese public’s so hard to 13 years of hard lobbying to obtain authorization from patience is now worn so thin that future accidents convince the Taiwan to start building the complex in 1994. Fed up could cost the firm its position at the top of the global Taiwanese with the industrial accidents that plagued the island’s chemical industry. chemical industry, many Taiwanese residents had fero- public that the site would be Views expressed on this page are those of the author ciously opposed construction of the complex. And in recent years, it’s not like Formosa had no hint problem-free. and not necessarily those of ACS. FORMOSA P L AST ICS
THERE’S AN OLD SAYING that goes, “If you think that safety is
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