Document 2jYvXdngo37yJm9Qqgzn99vjg

FILE NAME: Union Carbide (UC) DATE: 1979 May DOC#: UC099 DOCUMENT DESCRIPTION: Minutes - Initial Strategic Planning Meeting Asbestos Business, May 2,3 & 4, 1979 STRATEGIC PLANNING - ASBESTOS BUSINESS R EC O R D OF INITLA.L M E E T IN G S H ELD ON ~ MAY 2, 3, 4, 1979 UCC 003833 Industry D efinition C alid ria asb esto s is sold in the U .S. , Japanese and E uropean m a rk e ts. In som e ap p licatio n s it com petes w ith o th er a sb e sto s p ro d u cts and in o th er a p p lic a tio n s it c o m p e te s w ith o th e r a s b e s to s and n o n -a s b e s to s p ro d u c ts . T his g en eralizatio n form s the basis for the following industry definition: T hose e n te rp ris e s engaged in the w orldw ide p roduction of sh o rt fib er asbestos and/or viscosity control agents. B usiness D efinition The m ining, m illing, chem ical trea tm e n t and w orldw ide m arketing of high quality sh o rt fib er asbestos. Industry C ategorization 1. T h e m a r k e t in w h ich UCC h ig h q u a lity s h o r t f ib e r a s b e s to s com petes w ith other sh o rt fiber asb esto s. The com petitive sources are: (a) C a lifo rn ia a s b e s to s , s im ila r to UCC a s b e s to s , and p ro d u ced by A tla s; and (b) C an ad ian s h o r t fib e r a s b e s to s p ro d u c e d in th e re c o v e ry of long fib er asb esto s. The C anadian ind u stry re g a rd s sh o rt fiber as a by-product and not all of it is cu rren tly recovered. . . 2. T he m a rk e t in w hich UCC high quality sh o rt fiber asbestos com petes w ith other sh o rt fib er asbestos and non-asbestos products as viscosity control agents. -1 UCC 003834 INDUSTRY PROFILE T IM E F R A M E : 10 YEARS INDUSTRY ASSESSMENT CRITICAL ITEM X J 1. VOLUME GROWTH 2. POTENTIAL FOR UNFORECAST VOL. GROWTH DECLINE . X J 3. VULNERABILITY TO SUBSTITUTION/OBSOLESCENCE X \/ 4. COMPETITOR: NO. "1 : DIVERSITY] PROSPECTS FOR VOLUME GROWTH X EARNINGS QUALITY HIGH MODERATE LOW X </ X yx y X y X y 1 J 5. PRICING RESPONSE TO OVERCAPACITY 6. INDUSTRY OR MARKET INDUCED CYCLICALITY 7. PRODUCT LINE BREADTH yx yx y . X 8. A. SHARE DISTRIBUTION] B. SHARE STABILITY J 9. RATE OF CHANGE OF TECHNOLOGY X 10. BASIS OF PRODUCT COMPETITION VX X y x y x / l l . CUSTOMER: NO7] yx : Mix] 12. RESOURCE AVAILABILITY yx V 13. GOVERNMENT INTERVENTION X y 14. BARRIERS TO ENTRY yx ___ _______ _____ _______ , . n . ____ trr___- ___ _______ ________ ____ ,,. ____ *____ .. -------- -....----- _ . -- UCC 003835 Industry P rofile T h e tim e fr a m e fo r th e in d u s tr y e v a lu a tio n w as s e t a t 10 y e a r s on th e b a s is th a t th re e to five y e a rs w ill e la p se b efo re the h e a lth p ro b le m is fully developed and th e re a fte r enough tim e w ill be re q u ire d to co n sid er an expansion and its consequences. Ite m 1. Volum e grow th in the asb esto s ) applications is estim ated at 3% p e r y e a r o v e r the ev a lu a tio n tim e f r a m e , w hile the gro w th r a te of n o n a s b e s to s (X) a p p lic a tio n s is e s tim a te d a t 8-10% p e r y e a r . Item 2. The potential for u n fo recasted grow th or decline is c o n sid ere d in the context th a t health and governm ent reg u latio n s are co n sid ered in special ite m s. On this b asis the other p ro sp ects for unfo recasted grow th or decline in e ith e r category is not considered high. Item 3. V u ln erab ility to .Substitution. M uch e ffo rt has been expended to develop a substitute for asbestos in both categ o ries, but asbestos is still p re fe rre d . Item 4. C om petition m ix and num ber. The com petitors are: A sbestos C ategory C a ry r Canadian J ohns -M anville A tlas (C alifornia) B ell N on-A sbestos C ategory N ational Lead Cab ot De Gussa B ak er C a ste r Oil W acker (Europe) -2- UCC 003836 A fav o rab le ra tin g is b ased on few co m p e tito rs who exhibit d iscip lin e in the m a rk e tp la ce and in som e cases the geographic locations im pose freig h t ch arg es which a re lim iting. A lso, UCC sh o rt fiber is of higher quality than other sh o rt fiber asbestos products. Ite m 5. P ric in g resp o n se to over cap acity . In both c a te g o rie s, p ro d u cers re d u c e cap a city in p e rio d s of low dem ands. Item 6. C yclicality. M oderate cyclicality is reduced by construction in d u stry cycles. A consistent strik e p attern in Canadian operations has w orked in U C C 's favor. When the m a rk e t expands production in c re a s e s to accom m odate the expansion. Item 7. P ro d u c t Line B read th . In the a s b e s to s c a te g o ry th e re is only one p ro d u ct - - s h o rt fib e r a sb e sto s and UCC enjoys a q u ality edge. In the n o n -asb esto s categ o ry UCC sh o rt fib er com petes w ith silica and organic treated products. Item 8. M ark et D istrib u tio n /S h are S tability. The m a rk e t d istrib u tio n in the asb esto s category is: U .S7 . Tons % Total UCC 24,600 19 J ohns -M anville 33,000 25 C ary 46,000 35 A tlas 27,400 21 T otal 131.000 100 JA P A N Tons %Share 7,400 15 15,000 35 22,600 50 0 0 45.000 100 ____ T O T A L Tons %Share 32,000 18 48,000 27 68,600 39 27,400 16 176, 000 100 -3UCC 003837 In the n o n -a sb e sto s categ o ry m a rk e t d istrib u tio n is; U .S. A. M arket Share, % Japan E u ro p e T o tal UCC D eGussa Cabot N ational Lead Baker 15 25 19 15 25 70 70 40 45 2 5 40 10 2 3 3 5 1 3 2 In both categ o ries the in d u stries a re m a tu re and m a rk e t sh are is stable. Item 9. R ate of Technology Change. The level of tech n ical effo rt in the asb esto s categ o ry is low. Any in c re a s e in e ffo rt is lik ely to be to im prove the quality of com petitive product and hence unfav o rab le. The lev el of technical effort in the non-asbestos category is higher and asbestos is still used. ' Item 10. B asis of C om petition. P ric in g is the dow nw ard facto r. A sbestos offers som e advantages. This is a m in o r facto r in the asbestos category and m o re im p o rtan t in the n o n -asb esto s categ o ry . Item 11. C u sto m e r m ix and n u m b er is c o n sid e re d fav o rab le. (See ite m 4 .) Ite m 12. R e c o u rs e A v ailab ility . S h o rt fib e r a sb e sto s is plen tifu l. C om petitive products in the n o n -asb esto s category a re plentiful. Ite m 13. G o v ern m en t In te rv e n tio n . G e n e ra lly , a s b e s to s Is re c e iv in g m uch unfavorable attention and governm ent regulation of its use is a negative fa c to r in a .c u sto m e r co n sid era tio n , som ew hat le s s so in the n o n - a s b e s t o s categ o ry than in the asbestos category. - 4 - UCC 003838 Item 14. B a r r ie r s to E n try . C o n sid e re d high b eca u se of a s b e s to s reg u latio n and som e u n certain ty reg ard in g the fu tu re. In the n o n -asb esto s categ o ry the technical com petence and high capital investm ent for com petitive products are b a rrie rs . Item 15. C u sto m er Value Added C om ponent. R ated low in the asb esto s categ o ry and m o d erate in the n o n -asb esto s categ o ry . Item 16. N ot ap p licab le. Item 17. G overnm ent M andated D eclines. In view of all the attention focused on the h ealth facto r concerning a sb e sto s, the p o ssib ility of governm ent action m u st be reco g n ized . The p re s s u re is m o re lik ely to be in the asb esto s ra th e r than the non -asb esto s categ o ry because in the la tte r categ o ry asb esto s is handled w ell and is w ell encap su lated in the final product. Item 18- A ctiv ist Influence. The influence of ac tiv ists in a highly visible co n tro v ersy cannot be discounted and it w ill be unfavorable. T heir attention w ill be d irected tow ard the asb esto s ra th e r than the non-asbestos category. Item 19. T h ird P a rty L iab ility. UCC w as not involved in the type of a sb e sto s ap p licatio n s now su b ject to heavy th ird p a rty lia b ility actio n . UCC has been nam ed in a num ber of actions but so fa r has been excused once n o n -p a rtic ip a tio n is reco g n ized . A ll of th is .activ ity re la te s to the a sb esto s category. - 5 - UCC 003839 UCC PRESENT COMPETITIVE POSITION PROFILE C R IT IC A L ITEM ---- 1. MARKET SHARE IA. CHANGE 2. PRICE LEADERSHIP 3. PROTECTED POSITION N.A. ===- 4. PRODUCT LINE BREADTH 5. BRAND NAME N. A. 6. BREADTH/CUSTOMER BASE 7. TOTAL COST POSITION 8. SPECIAL BUSINESS RELATIONSHIPS 9. CAPACITY & LOCATION OF PRODUCTION FACILITIES 10. DEGREE OF BACKWARD/FORWARD INTEGRATION FORW ARD N. A . BACKWARD N. A 11. TECHNOLOGY POSITION AND 12. MANAGEMENT RISK TAKING 13. MANAGEMENT RESPONSIVENESS TO EXTERNAL ENVIRONMENT LEADING STRONG FAIR WEAK UCC 003840 UCC C om petitive P o sitio n P ro file Ite m s 1, I A . M a r k e t s h a r e an d M a r k e t C h an g e ( p r in c ip a lly U. S. A . ). R ated stro n g in the asb esto s categ o ry b ecau se of a quality p ro d u ct. F a ir in the n o n -asb esto s because com petition products do not have a strong health factor as does asbestos. Item 2. P ric e L eadership. UCC is independent in the asb esto s category and can e x e rc iz e le a d e rs h ip . In the n o n -a s b e s to s c a te g o ry UCC m u s t o ffer a p rice advantage to the custom er to offset the health facto r. Item 3. Not applicable. Item 4. P ro d u c t Line B read th . In both c a te g o rie s o ffers p ro d u cts to serve a diverse num ber of applications and custom ers. Item 5. Not applicable. Item 6. B read th of C u sto m er B ase. In the asb esto s categ o ry , UCC serv es m any custom ers for m any uses but Johns-M anville has the sam e capability . In the n o n -asb esto s category, UCC m atches ev ery u se of com petitive products plus som e th at com petitive products cannot serv e. Item 7. T otal C ost P osition. Leading in the n o n -asb esto s category because UCC has position in o re and good co ats, w h ereas co m p etito rs p u rch ase in te rm e d ia te and are, in effect, c o n v e rte rs . In the a sb e sto s c a te g o ry , U C C 'a position is fa ir b ecau se co m p etitiv e sh o rt fib e r asb esto s is regarded as a by-product. - 6UCC 003841 Item 8. S pecial B u sin ess R elationship. R ated strong in the non a s b e s to s c a te g o r y b e c a u s e W. R . G r a c e is a good a g e n t w ith a c c e s s to m any m a rk e ts. R ated w eak in the a sb esto s a re a because UCC has no special business relationship. Ite m 11- T e c h n o lo g y P o s itio n . R a te d v e r y s tr o n g in b o th c a te g o r ie s . UCC b u sin ess was developed through stro n g technical position and is m aintained by good technical serv ice . Ite m 12. M anagem ent R isk T aking. R ated stro n g in the n o n -a s b e s to s c ateg o ry b ecau se the ch em ical tre a tm e n t fa c ility w as expanded to m eet a grow ing m a rk e t. R ated fa ir in the asb esto s categ o ry because the plant has not been expanded to m e e t peak dem and. Ite m 13. M anagem ent R esp o n siv en ess to E x te rn a l E n v iro n m en t. R ated stro n g in both categ o ries on the b asis of resp o n se to the health facto rs and liability. Item 14. R eso u rce Sufficiency. R ated lead in g /stro n g in the non asbestos category because of ore position w hereas com petitors are dependent upon other su p p liers. R ated strong in the asbestos category b ecau se-th e o re dep o sit is la rg e and low co st. C om petitors have sim ila r p o s itio n s. Ite m 15. P ro d u c t Q uality. R ated lead in g in both c a te g o rie s b eca u se of te ch n ica l ap p ro ach to p ro d u ct q u ality . -7UCC 003842 Item 16. C u sto m e r S e rv ic e /R e lia b le S u p p lier. R ated leading in both c a te g o rie s . The asb esto s b u sin ess has been built on technology and custom er service. ' Ite m 17. H ealth F a c to r. W hile the h e a lth fa c to r is a s e r io u s issu e in the asb esto s category, it is not a com petitive facto r since all su p p lie rs would be affected by any a d v e rse developm ent. In the n on asb esto s categ o ry the p o ssib ility of asb esto s being discontinued in favor of n o n -asb esto s products cannot be d ism issed . - 8UCC 003843 Key C om petitive F acto rs A sbestos Cat egory M arket Share X P roduct Line B read th X B readth of C ustom er B ase X Total C ost Position X Technology P osition X P ro d u ct Q uality X C ustom er Service/D ependable Suppliers X Health. F a c to r N on-A sbestos , C ategory X X X X X X -9UCC 003844 A ssessm en t of P rin cip al C om petitors R elative to Key C om petitive F acto rs A sbestos C ategory M arket Share P ro d u ct Line B readth B readth C ustom er B ase Total Cost Position T echnical P osition P ro d u ct Q uality C ustom er Service/D ependable S u p p lie r O verall Rank UCC Strong S tro n g S tro n g F air L eading/ Strong L ea d in g L ea d in g L ea d in g / Strong 1 C arey S tro n g S tro n g / F air Strong S tro n g W eak S tro n g / F air W eak S tro n g / F air 3 J ohns - M anville Strong S tro n g S tro n g L e a d in g / S tro n g S tro n g F air S tro n g S tro n g 2 A tlas S tro n g Weak W eak F air W eak Strong W eak F air/ We ak 4 N on-A sbestos C ategory P ro d u ct Line B readth B readth of C ustom er Base Total C ost Position Technical P osition P roduct Q uality H ealth F acto r O verall Rank UCC S tro n g L ea d in g N atl. Lead F air/ W eak F air L e a d in g L eading/ S tro n g L ea d in g S tro n g Strong. S tro n g W eak Strong/^-) F air S tro n g S tro n g / F air 2 2 Cabot DeGussa F air F air Strong Strong Baker F air/ Weak F air Strong Strong Strong Strong Strong F air Strong S tro n g Strong Strong Strong S tro n g S tFr oa inrg6/ Strong S tro n g / F air 1 2 2 (^The health facto r w as w eighted at 4 to 1 a g a in st other facto rs in the o v erall rating for UCC. - 10UCC 003845 CO M PETITIV E POSITION LEADING PROSPECTS FOR LONG-1 ERM INDUSTRY GROWTH AND EARNINGS Q U A LITY ____ HIGH MODERATE 1 LOW m ccB UCC 003846 I STRONG ; I FAIR CABOT ( N A T . L E i ,,D 1 TTCC T DEGUSSA BAKER (J.M.) ,r A - P B Y I------------- fA T LAS) WEAK { ) ASBESTOS CATEGORY NON-ASBESTOS CATEGORY Key External Assum ptions Volum e Growth 1. 3% p e r y e a r f o r a s b e s to s c a te g o r y 2. 8% p e r y e a r fo r n o n -a s b e s to s c a te g o ry Government 1. T h e re is no change in d e p le tio n a llo w a n c e . 2. T h ir d p a r ty lia b ility due to p r i o r e x p o s u r e is $________ d u rin g the plan p erio d . 3. T h ird p arty liab ility due to p re s e n t and fu tu re ex p o su re is m inim al. 4. T h ere are no w idespread laws o r m andatory substitutions. 5. T h e OSHA T L V is no m o r e r e s t r i c t i v e th a n 1. 0 f ib e r p e r CC TWA 6. O th er re g u la tio n s (E PA . MSHA, e tc .) a r e no t s u b s ta n tia lly m o re strin g en t than at presen t. 7. T h ere is no im p act due to " re tro a c tiv e " leg islatio n . 1,, T h e r e is no n ew m a jo r e x p lo ita tio n o f th e C o a lin g a d e p o sit 2 . T h e R u s s ia n s do n o t e n te r th e a s b e s to s c a te g o r y m a r k e t w ith a __ sh o rt fib er product.. 3. T hat co m p etito rs do n o t red u ce the p ric e of th e ir p ro d u ct in the non-asbestos category m arket. 4. T h at other sh o rt fiber p ro d u cers do not in c re a se th e ir m arketing e f f o r t in. th e a s b e s to s c a te g o r y m a r k e t. - 12UCC 003847 C ustom ers 1. T h e re is no sig n ifican t unexpected im p a c t on the a s b e s to s categ o ry m a rk e t due to c u sto m er re a c tio n to the h ealth fa c to r. 2. T hat the apprehension of cu sto m e rs in the n o n -asb esto s categ o ry stabilize for 2-3 y e a rs, then gradually decline. T ec h n o lo g y 1. R e s e a r c h w ill n o t show a s b e s to s to be m o re h a z a rd o u s th a n c u rre n t thinking, or that "C alid ria" asb esto s is m o re hazardous than other short fiber asbestos. 2- T h ere w ill be no m ajo r break th ro u g h reg ard in g the developm ent of substitutes for sho rt fiber asbestos or im proved perform ance non-asbestos viscosity control agents. - 13UCC 003848 G eneric S trategy D evelopm ent A sim p lifie d cap acity flow sh e e t s e rv e s to illu s tra te the c a p a b ilitie s of the p re se n t m ill: Head End C apacity . 60,000 Tpy C hem ical T reatm ent C ircu it C apacity 1,800 Tpy Short F iber C ircuit C apacity 33,000 Tpy C u rren tly , the product sold in the n o n -asb esto s categ o ry co n sists of approxim ately 1,400 Tpy w hich is p ro c e sse d through the chem ical tr e a t m ent c irc u it plus approxim ately 900 Tpy of product which is p ro c e sse d through the sh o rt fiber c irc u it. At the p re se n t tim e the chem ical trea tm e n t c irc u it has about 400 Tpy excess capacity and the sh o rt fiber c irc u it n early at capacity. In considering generic strateg y developm ent, it was recognized that asb esto s w ill be su b ject to in ten se sc ru tin y fro m a health view point over the next 3 to 5 y e a rs. It is anticipated that early in this period the p re se n t atm o sp h ere w ill give way and an ob jectiv e an aly sis w ill d eterm in e the use of asb esto s in the future. . -14UCC 003849 The recom m ended generic strateg ies are: 1. H e s ita tio n . T h is is r e g a r d e d a s a b a s e c a s e in w h ich s a le s in bo th the asbestos and n o n-asbestos categ o ries expand at the p ro jected grow th ra te s to the lev el of p re se n t p la n t c a p a c itie s. T h e re a fte r, the b u sin ess would o p erate at cap acity and p roduct m ix in both c a te g o rie s would be optim ized. 2. M ark et P en etra tio n - A. T h ere a p p e a rs to be an opportunity to in c re a se sa le s in the asb esto s categ o ry d ra m a tic a lly . In o rd e r to take advantage of the opportunity the capacity of the sh o rt fib er c irc u it m u st be in c r e a s e d by about 25, 000 tp y a t an e s tim a te d c o s t of $6 m illio n . In c re a se d tech n ical support would be re q u ire d to se rv e the enlarged m a rk e t. It is probable th at p ric e red u ctio n s would be re q u ire d to achieve the objective. The expansion would be sta rte d as soon as p o s s ib le (o b v io u sly b e fo re th e h e a lth i s s u e is re s o lv e.d ) and be \ a v a ila b le fo r o p e r a tio n on J a n u a r y 1, 1981. S a le s of p r o d u c t in th e n o n -asb esto s categ o ry would grow to the cap acity lim itatio n as in the hesitation case. 3. M ark et P en etratio n - B. The capacity of the chem ical treatm en t c irc u it would be in c re a se d to 3 ,600 tpy to accom m odate a m a rk e t w h ic h is g ro w in g a t 8% p e r y e a r . P r e s e n t c a p a c ity w ill be lim itin g a t the end of 1982 and th e re fo re p ro d u ctio n fro m the expanded c irc u it sh o u ld be a v a ila b le in J a n u a r y 1,. 1983. T h e s h o r t f ib e r c i r c u it j 3 c u rre n tly at capacity and in balance w ith sa le s. T herefo re sales of -1 5 ` UCC 003850 s h o r t fib e r c irc u it p ro d u c t to the a s b e s to s c a te g o ry b u s in e s s would, d e c re a se each y ear by the am ount th a t th is p ro d u ct is d iv e rte d to the m ore profitable non-asbestos category m arket. A bandonm ent. The ratio n ale for this stra te g y is that the health issu e w ill be overw helm ing and have a se rio u s ad v erse effect on Union C a rb id e 's im age. In such an en v iro n m en t the re tu rn to UCC m ay not be enough to ju stify the effo rt and the r is k . T h ere a re p a rtie s who m ay be in te re ste d in p u rch asin g the a s s e ts of a high quality b u sin ess w ith unique technology and an excellent ore re se rv e . . -16UCC 003851