DUPONT FINDS NEW METHOD FOR POLYESTER MANUFACTURE
Byline: Stuart Chirls
NEW YORK — A top DuPont executive said Friday that the company has developed a new process for manufacturing polyester that “could change the way we do business.” The surprising news came during a media briefing by new DuPont president and chief executive officer John A. Krol, who succeeded Edgar Woolard Jr. as ceo earlier this month. (For news on another DuPont fiber, Lycra spandex, see page 6.)
Krol provided no details on the process. Afterward, Dr. Joseph Miller, senior vice president, research and development, said that DuPont had filed for patents on the process and that testing was under way at a DuPont plant. When asked to identify the plant, Miller conceded that the firm actually was still constructing a test center.
“We expect rapid approval of the patent,” Miller noted, but he said DuPont had no timetable for putting the new process into full-scale production. Miller also gave few details of the process, but quoted a DuPont scientist as saying that it was “the single most exciting thing he had worked on in 25 years.”
Ironically, the revelation comes amid recurring market rumors that DuPont would sell its Dacron polyester business, which had been hurt by the rising cost of raw materials and a soft market for polyester fibers. Krol, a veteran of DuPont fibers, flatly denied there were any such plans. “We’ll keep concentrating on what we do best, including polyester, and keep on building competitive advantage by doing it better and faster,” he said.
Krol, riding a wave of momentum after DuPont announced record earnings for the second consecutive year last week, laid out confident goals for the chemical and fiber producer. “We are committed to providing shareholders with a minimum of 15 percent total return on their investment, that is, a combination of dividends and capital appreciation,” he said. “To support that, we need to average at least 10 percent annual earnings growth.”
The 15 percent represents an average of the returns for the past five years, a DuPont spokeswoman said. Shareholder return grew to 29 and 20 percent for 1995 and 1994, up from 6 percent in 1993 and 5 percent in 1992. Return was a hefty 32 percent in 1991.
The 10 percent earnings growth is modest compared with 1995, when earnings excluding nonrecurring items rocketed 43 percent against the previous year.
Krol, who has spent 32 years at DuPont, said key factors in achieving these goals were the development of innovative products, moving into new markets, many of them overseas, and a steady rise in productivity.
New products that should help fuel growth, he said, include two new Lycra spandex processes; an anti-hypertension drug, Cozaar, developed in partnership with Merck Pharmaceutical, and powerful new crop-protection chemicals.
With the domestic economy lagging at a 2 to 3 percent annual growth rate, DuPont has increasingly looked to overseas markets to support its strategic plans. “We have 20 joint ventures in the Asia-Pacific region — eight in China alone,” Krol noted, “as well as a number of joint ventures in South America. The key reality is that no one company can do it all anymore, and I think these kinds of alliances that combine different strengths are the wave of the future.”
According to Krol, DuPont’s total business in South America was up 15 percent in 1995, while results in the Asia-Pacific region rose 25 percent. “There’s a lot of money developing in those and other areas,” he said.
Despite the lackluster U.S. economy and increased debt from the Seagram stock buyback, Krol said DuPont has no plans to lay off workers, but seemed to leave the door open to the possibility. “We are looking for productivity gains of 6 percent a year,” he asserted. “Within reason, how the businesses achieve their goals will increasingly be up to them. However, businesses growing in the 2 to 3 percent range will have to focus on reducing costs.”
As an example, DuPont recently shut its Initiatives Inc. private label apparel manufacturing venture after just 16 months of operation. “We kept it on a short leash,” Krol said. “It didn’t hit its numbers, and we didn’t want to keep pouring money down a rathole. We hoped it could be a catalyst for bringing manufacturing back to the region, but maybe that wasn’t the right thrust. That doesn’t mean you can’t do it some other way.”