DUPONT: TECHNOLOGY MAY SLASH POLYESTER FIBER COSTS BY 2000
Byline: Stuart Chirls
WASHINGTON — DuPont’s top executive said Wednesday that the chemical and fiber giant is developing new technology that could cut the cost of making polyester fiber by 15 to 20 percent by the year 2000.
“In the process of integrating our polyester business, we are looking at new technologies for making the intermediates, or raw materials, in polyester that could reduce substantially the cost of manufacturing in the coming years,” said John Krol, president and chief executive officer.
While Krol did not say how such reduced costs would eventually translate to the actual price of polyester, he said, “It could revitalize the whole polyester business.”
His comments came during DuPont’s annual press briefing at the National Press Club here.
The production efficiencies are the result of DuPont’s massive investment in research and development that has totaled some $1 billion a year for the past five years. “We will continue to invest in our R&D,” Krol said, “because we see it as a key to the future growth of this company.” DuPont’s investment in polyester alone has jumped 40 percent in the past several years, he added. He wouldn’t disclose the exact dollar amount.
The investment is part of a wide-ranging integration and asset-utilization program that ties together DuPont’s vast research, development and manufacturing facilities under the polyester umbrella, which will have applications for a variety of end uses, including a rapidly growing market for polyester resins used in soft drink bottles.
DuPont already has brought technology on line that has increased the speed at which Dacron polyester yarn can be spun, and Krol expects the new raw materials technology to be incorporated into the production process “within the next few years.”
“We want to leverage our strengths, which include technology and product development,” he said, noting that DuPont has been awarded 2,000 patents since 1991.
The growth of DuPont’s fiber segment has come under close scrutiny as the company looks to expand market share and enhance shareholder value. The company has closed plants and laid off thousands of workers, mostly in nylon, over the past 3 1/2 years and is in the midst of a restructuring that will slash nearly 3,000 more jobs by 1999.
Currently, both the nylon and polyester segments are lagging Krol’s overall target annual growth rate of 8 percent. Nylon is growing at about 6 percent a year, while polyester is at 4 percent, Krol said. Lycra spandex is a bright spot in fibers, with volume showing a robust 10 percent growth per annum. Krol said no new layoffs were planned for ’97.
Krol also sees fibers’ growth being spurred by the North American Free Trade Agreement as well as the development of production and joint ventures in markets around the world.
“Our strategies for growth are very clear,” Krol said. “We are committed to a global presence, in particular to pursuing opportunities for new business in high-growth emerging markets, where historically we have not had a presence.”
Overall, DuPont is investing $300 million to $400 million annually in capital spending in Europe, a market which accounts for 25 percent of DuPont’s sales and earnings. “A reduction of $500 million in fixed costs over the past three years has helped our transformation there. Even though the European region isn’t growing rapidly, we have.”
In central and eastern Europe, DuPont’s total sales jumped 30 percent in 1996, while volume in Russia and the former Soviet Union soared 70 percent compared with the previous year. “As eastern European countries move from military-based to market-driven economies, we expect even more opportunity. We expect to double our business in central and eastern Europe, the Mideast and Africa from around $650 million today to $1.4 billion in 2000.”
Asia is another key component to DuPont’s long-term growth. “We are experiencing growth in Asia in excess of 20 percent per year, excluding Japan,”said Krol. “In China, sales grew 40 percent in 1996; in 1997 we want to grow at least 25 to 30 percent.”
Krol said that joint ventures will also serve to advance DuPont’s long-range plans. Specifically in fibers, the company has joined with German fiber maker BASF in a nylon facility in China and is building a textile nylon plant with a Brazilian group in Sao Paulo.
Krol emphasized that free trade was essential to sustainable growth and called for less government intervention worldwide. “Exports remain critical to our growth in the U.S.,” he said. “About 25 percent of our U.S. work force can tie their jobs directly to exports. Government around the world have a role to play in creating optimum conditions and more favorable environments for trade. We need their help; we can’t do it all ourselves.”
Krol also voiced support for trade policies that favor global business, such as NAFTA and GATT. “For us, NAFTA has worked very well. DuPont’s objective is to help develop a cut-and-sew industry in Mexico for garments using DuPont fibers, to recapture business lost to Asia. We are seeing garment production coming back to this hemisphere. We’re supportive of the Clinton Administration’s efforts to go beyond NAFTA to a Free Trade of the Americas.”
While the U.S. must continue to seek tariff reductions under the World Trade Organization and other regional agreements, Krol said, nontariff barriers still present the greatest obstacle to DuPont and other global chemical producers.
“Restrictions on investment, export requirements, registration of chemicals and other rules are just a few examples,” Krol said. ‘The region of greatest concern is Asia-Pacific, where in some countries, we have the right to manufacture there but still don’t have the right to sell into that country products we make elsewhere.”