Document 5b5M4ogBxnJRkMxDEbBoVGexz

\ \ u POLYVINYL CHLORIDE And BFGoodrich's Role in the Industry Introduction Polyvinyl chloride is a versatile plastic whose market potential is growing steadily in size and diversity. It was The BFGoodrich Company that introduced PVC as a commercial product, and BFG has been the leader in its development ever since. Now Goodrich has made polyvinyl chloride the centerpiece of its growth strategy as a chemicals-oriented company--and BFG is dedicated to consolidating its premier position and to leading PVC to new levels of acceptance and use. Demand for this material is forecasted to be 10 billion pounds by the end of the '80s. Growth will come not only in established PVC markets but also from improved technology and new applications that will broaden its markets. In addition, the energy cost advantage of PVC will help it penetrate markets held by many competing materials. The '80s, thus far, have been turbulent for the PVC industry. Many markets are suffering under generally poor economic conditions. Several companies have implemented corporate strategies that are significantly restructuring the industry. As these changes take place, Goodrich believes it is important to review significant aspects of the industry, including its long-term growth prospects. That is the purpose of this paper. &FG38871 25176001 2 25176002 The Genesis of PVC The commercial development of polyvinyl chloride spans half a century. Dr. Waldo L. Semon, who is known as the father of PVC, joined the Goodrich laboratories in 1926 for the purpose of developing a new adhesive for rubber-lined tanks. His work led him to vinyl chloride, an organic chemical. Vinyl chloride is a monomer, a small molecule that can be converted to a larger molecule by the application of heat, pressure and catalysts. This process, known as polymerization, converts vinyl chloride to the polymer polyvinyl chloride. Before Dr. Semon's work, PVC was an intractable material with no apparent use. The Goodrich scientist discovered that PVC could be plasticized to produce a material that was flexible and elastic, chemically nonreactive and quite resistant to ordinary solvents. * Thus, polyvinyl chloride was born as a useful material. It was at first thought of as a rubber substitute, but the high molecular weight of the new plastic clearly gave it additional potential. A search for stable and economical methods of polymerizing vinyl chloride was begun, and by the early '30s a product development program was under way at BFGoodrich. Auto shock-absorber seals were the first product of this effort. Later, the trademark Koroseal, signifying "sealant from corrosion," was adopted for the gradually increasing range of products. Soon PVC was being used to insulate Bp038872 -3- electrical wire and to coat materials for raincoats and shower curtains. These products were the basis for a new business. Work proceeded through the '30s on developing a better and cheaper source of vinyl chloride, on improving the polymerization process and on finding better additives to make the polymer flexible. The process developed--and used for many years--involved the catalytic reaction of acetylene with hydrogen chloride to produce vinyl chloride monomer (VCM). This monomer was then converted to a polymer by applying pressure in glass-lined pressure vessels designed specifically for this purpose. After extensive testing, dioctyl phthalate proved to be the best general-purpose plasticizer for producing flexible PVC. A practical production process for converting monomer to PVC was now available to support the growing popularity of PVC in the marketplace. Goodrich built the first commercial PVC plants in Buffalo, N.Y., in 1940 and in Louisville, Ky., in 1942. BFG's Chemical Division, created in 1941, began selling PVC resins and compounds under the, trademark Geon. During World War II, the entire production of Geon resins and compounds went to the armed forces. Union Carbide, the other U.S. company that was developing and producing polyvinyl chloride, also supplied the war effort. Birth of an Industry After the war, development programs significantly broadened product applications for PVC. Other companies BFG38873 25176003 4 recognized PVC's potential, and by 1950, Uniroyal, Goodyear and Monsanto had joined Goodrich and Union Carbide as major producers. Today, only Goodrich remains among the domestic leaders of a greatly expanded industry. PVC INDUSTRY LEADERS - U.S. MARKET SHARE 1950 BFGoodrich Union Carbide Uniroyal Goodyear Monsanto 41 6 6 4 1982 (estimated) BFGoodrich Tenneco Shintech DuPont Georgia Pacific Borden Occidental 22% 12 9 9 9 9 8 These new competitors entered the industry because of a series of developments. Goodrich came up with a hard, tough, rigid PVC in 1951 that could be processed into final products in a variety of ways, including extrusion and molding. Further development gave the material the necessary impact resistance that provided entry into the construction industry. Because the material was light and easily handled, chemically inert, durable and did not conduct electricity, construction became a major PVC market. Today, with pipe representing 40 percent of all end use, rigid vinyl accounts for more than half of the general-purpose PVC business. PVC is also being used for siding, window frames, gutters, trim, paneling, ceilings and floor coverings. BFG38874 5 Although water piping of many kinds became the most significant new use for the versatile plastic, PVC was not quite versatile enough to handle the entire piping assignment. It could not stand up to hot-water use, because heat softened it. So Goodrich experimented further, and in 1960 the company developed the first chlorinated PVC. This specialty plastic could be formulated to withstand temperatures as high as 130 degrees Celsius without softening, and thus made PVC piping suitable for hot-water applications. Goodrich was responsible for a number of other innovations in subsequent years. The company focused on improving the characteristics of the basic resins as well as on compounding resins with various additives to give the plastic more versatility. In 1970, for example, BFG was first to commercialize PVC powder coating, which was sprayed to coat such products as metal dishwasher racks. Goodrich introduced the first low-smoke rigid PVC compound in 1976. Four years later the company introduced Geon 30 resin, which represented a significant improvement in PVC resin quality. Geon 30 resin, which costs no more than the resin it replaced, produces a more uniform product, because its particles absorb plasticizer evenly throughout. How PVC Is Made Polyvinyl chloride is produced in three basic steps. First, ethylene, obtained by thermally cracking gas oils, ethane or propane at high temperature, is combined with BFG38875 . .2517p05 6 chlorine derived from common salt by electrolysis, to produce ethylene dichloride (EDC). EDC is then cracked to produce vinyl chloride monomer (VCM). In the early days, VCM was produced from acetylene and hydrogen chloride. In the '50s, Goodrich discovered a commercial method for cracking ethylene dichloride to produce VCM and hydrogen chloride. The company then developed a cost-effective process that combined the HC1, which had been derived from cracking, with acetylene, to produce a portion of the monomer. Then, in 1962, the company perfected the first fluid-bed oxychlorination process to produce VCM. By making ethylene dichloride from ethylene, hydrogen chloride and air or oxygen, it was possible to use only ethylene and to eliminate the more expensive acetylene. This cheaper method i of producing ethylene dichloride and VCM has been licensed to other companies; currently, the Goodrich process accounts for about 30 percent of production worldwide. The final step in production of PVC is the transformation of VCM into the polymer, or polymerization. The vinyl chloride monomer is a gas at room temperatures, so it must be maintained under pressure. The polymerization process, which takes place over a period of several hours, involves mixing the vinyl chloride with water, catalysts and other chemicals and heating it in a reactor under pressure and agitation to produce particles of solid polymer, PVC. In the polymerization stage, there are four manufacturing methods: 25176006 BFG38876 7 1. Suspension, which produces general-purpose PVC resin particles of 100 to 160 microns (about the consistency of sugar). This process represents 83 percent of total U.S. production. 2. Dispersion, which produces particles of less than a micron in size (that is, as fine as flour). It is typically used for liquid and spray applications and represents about 8 percent of production. 3. Mass, a process that is similar to suspension, but uses no water, produces both general-purpose and specialty resins and totals 7 percent of production. 4. Solution, which produces PVC in a solvent and is used in applications where a solvent is required, such as in adhesives or coatings, represents only 2 i percent of total production. Important characteristics of the polymer include particle size and porosity, which determines the ability of the particle to absorb additives. PVC properties change with molecular weight; high-molecular-weight polymers are stronger and more chemical- and heat-resistant, but harder to process. Lowering the molecular weight eases processing at the expense of some other characteristics. Producers sell polyvinyl chloride as resins or as compounds. In a compound, various additives govern the way the plastic can be processed and the nature of its final form. Heat stabilizers are added, and other possible ingredients include lubricants, plasticizers for flexibility, BFG38877 8 pigments, impact modifiers, fillers, fire retardants and fungicides. The resin-and-additive mixture is fed directly into final product manufacturing as a powder or is milled into sheet form and diced into 1/8-inch cubes for shipping or storage. The application of pressure and heat transforms the cubes back into the proper consistency for final conversion to a finished product. End products can be manufactured from polyvinyl chloride in a variety of ways. They include: Extrusion, in which the plastic is forced through a die to create piping or any of a great variety of other continuous shapes. Compression molding, primarily to make phonograph records. Blow molding, to convert extruded tubes into bottles. Injection molding, in which the molten plastic is forced under pressure into a mold and then cooled to produce parts of varying complexity, shape and texture. Calendaring, or milling the PVC into very thin sheets. Powder coating to cover other materials with vinyl. Liquid processing, involving coating, spraying, dipping and rotational casting. The wide choice of material characteristics combine with a broad range of manufacturing and application choices to make polyvinyl chloride an extremely versatile material. 2517GOOS BFG38878 9 PVC SALES BY MAJOR MARKETS-1981 Source: SPI Major Market Survey BFG38879 10 The Marketplace and the Outlook The uses of PVC range from commodity to specialty applications. About 55 percent of the end products are made of rigid vinyls; the rest use flexible types. The construction market uses just over half of all the PVC produced in the United States. PVC piping systems represent 40 percent of total PVC sales to this market. PVC pipe is used in various water supply, agricultural irrigation, chemical processing, drainage and sewer system, electrical conduit and telephone duct applications. The construction industry uses another 6 percent of PVC production for siding, window sash, gutters, interior moldings, trim and other uses. Flooring represents another 5 percent of the PVC used in the construction market. The electrical and electronics market uses 10 percent of all PVC production in such applications as home and industrial appliances and wire and cable insulation. Uses in the consumer and institutional market total 8 percent and include plastic tableware and kitchenware, health-care and medical products, sporting goods and toys. Packaging, such as meat wrap and bottles, represents another 8 percent of the total. The transportation industry uses 3 percent of total PVC production in such applications as recreational-vehicle parts and auto parts. The furniture and furnishings market, representing another 3 percent of total PVC sales, includes rigid and 25176010 'V 1 BFG38880 11 flexible furniture and furniture parts, wallcoverings and upholstery. The growth rate for PVC has varied over the past three decades, showing a 12 percent increase in the '50s, 12.7 percent in the '60s and 8.5 percent in the '70s. A 6 percent annual growth rate starting in 1983 is expected to boost PVC sales in the United States to 10 billion pounds a year by the end of this decade. PVC is expected to increase penetration of current markets and win a place in new markets, because of its ability to be transformed into a wide range of products--from soft toys to durable, rigid pipe--and its potential for many new applications. Within each of its primary market categories, some PVC products can be expected to grow at about the same rate as the gross national product, but others will grow faster and thus increase total penetration. Custom-injection-molding applications represent a high-growth area for BFG. Improvements in the quality of special compounds, combined with increasing cost advantages, have made PVC competitive for custom injection molding such products as television cabinet backs, typewriter bases and appliance housings. In 1981, Goodrich introduced a resin with such high purity and good flow characteristics that it is the only material from which microscopically grooved videodiscs can be molded. While new specialty applications, such as videodiscs, offer enhanced profit and growth opportunities, many existing BFG38881 .. -**' a- - .12 commodity products also show surprising growth prospects, pvc pipe, for instance, might be thought to be limited to a growth rate paralleling the construction industry. However, prospects are substantially better than that--sales of PVC pipe are expected to double by 1988. PVC pipe is continuing to replace pipe made of cast iron, steel, clay tile, copper and acrylonitrile-butadiene-styrene (ABS). Similarly, vinyl continues to gain on aluminum used for house siding. In basic characteristics, vinyl is superior. It is half the weight of aluminum--which means lower transportation and handling costs--and it meets strength requirements, while resisting minor impacts in handling. Once installed, it is a better thermal and noise insulator and does not chip or fade. Another reason PVC has grown to 8.5 percent of the siding market is that it is much less enerqy intensive than aluminum. Producing aluminum requires more than three times the energy necessary to produce PVC. Most aluminum siding manufacturers, in fact, have entered the PVC siding business, shifting their aluminum production into other applications. PVC siding is expected to grow at 15-20 percent a year over the next five years. Moreover, as the costs of hydrocarbon feedstocks rise over the years, polyvinyl chloride's cost advantage will become greater compared with other materials having higher hydrocarbon content. 2S17S012 BFG38882 13 ENERGY COST (dollars per 100 square feet) Aluminum Siding Vinyl Siding 1981 $15.00 8.00 1985 $27.00 13.00 1990 $48.00 23.00 Competition The PVC industry today is undergoing a period of restructuring. Several large companies, such as Diamond Shamrock, Stauffer and Firestone, have exited the PVC business. Likewise, many small manufacturers of PVC end products who had integrated backward, finding it easy to obtain the basic technology, have fallen by the wayside. The trend today is toward suppliers committed to PVC as a separate business. These suppliers can provide economies of scale and a wide variety of products, while supporting the research and marketing operations necessary to compete within the PVC industry and against other industries. Additionally, productive capacity is going through a transitional period that should result in a more competitive environment. Larger, more efficient reactors are being built, and smaller ones are being shut down or switched to more appropriate specialty uses. This should help the industry become more cost-effective in penetrating new markets. As the PVC industry has developed over the decades, there has been a trend by resin manufacturers away from producing finished products and toward supplying basic materials to BFG38883 14 manufacturers who fabricate and sell finished products. This has been especially true in the large, general-purpose markets for rigid PVC, such as pipe; the flexible PVC market is more fragmented and still has several companies producing final products from the materials supplied by their corporate parents. There also are many independent wholesalers and compounders serving as intermediaries between the basic PVC producers and the manufacturers of consumer and industrial products. BFG's strategy is to be a supplier of PVC resins and compounds only. As these changes take place, there will be increasing demand for more sophisticated marketing approaches. Marketing in the industry ranges widely in quality and concept. It runs from companies with a few salespeople, essentially taking orders for what amounts to a by-product of larger lines of business, to modern marketing organizations focused on product sales and development. As competition intensifies, specialty marketing will have to be upgraded. BFGoodrich demonstrates its commitment to the business through the direction its marketing organization is taking. Commensurate with its leading production position, the company has by far the largest sales organization in the industry. Its strength lies not so much in numbers, however, as in its conceptual approach to the business and in the depth of resources it applies to the task of maintaining its leadership role. 15 The marketing organization is the focal point within Goodrich--not only for selling product but also for finding new applications and developing new products. The research and development organization has responsibility for improving both process and products, but innovation has dimensions that go beyond technical considerations. Ideas can come from customers asking for new materials or characteristics, as well as from marketing people who spot potential new applications in either traditional or untapped markets. And customers often require Goodrich engineering assistance to assure smooth introduction of new products. Marketing is what brings this process together, and Goodrich's approach is based on a team concept. In support of the core field sales force of about 50, who work through seven regional offices, teams are formed for each product or product line. A product manager in marketing heads each team, which i can include not only customer support specialists but also representatives of Goodrich manufacturing and researchand-development organizations. The team is tailored to the demands of the product situation. This approach to the marketing and sale of PVC is more structured and comprehensive than that of most PVC suppliers, and it exemplifies a commitment to the PVC business that will set an example for other companies and upgrade the competitive environment of the industry. BpG3888s 16 Recent Changes In the Industry Since 1979, polyvinyl chloride producers have been going through a transition that has contributed to a larger and even more competitive industry. The industry consisted of only five companies after World War II. The number has now grown to 19. Today's list of competitors reflects a shift from companies with primary ties to the tire and rubber industry to a diverse group that includes large oil companies and small regional PVC producers. Increasingly, companies are redefining their roles in the industry, as seen by the following list of developments: RECENT EVENTS AIR PRODUCTS - Calvert City, Ky., plant shut down temporarily in March 1982. (210 million lbs. per year) DIAMOND SHAMROCK - Sale of Deer Park,' Texas, large-polymerizer facility to BEG on January 1, 1982. (260 million lbs.) - Shutdown of Delaware City, Del., plant in March 1982. Sold to Ethyl in April. (150 million lbs.) FORMOSA PLASTICS - Purchased ICI vinyl chloride monomer plant in Baton Rouge at the end of 1980. (275 million lbs.) - Purchased Delaware City, Del., plant from Stauffer Chemical in May 1981. Shut plant down from March to July 1982. (250 million lbs.) - Start-up of Pt. Comfort, Texas, plant delayed from April 1982 until October. (475 million lbs.) GENERAL TIRE/PANTASOTE - Pt. Pleasant, W.Va., plant shut down in March 1982. (90 million lbs.) GREAT AMERICAN - Shut down Fitchburg, Mass., plant in June 1982. (55 million lbs.) 17 OCCIDENTAL - Purchased Firestone's PVC operations, quadrupling capacity, September 1980. (total current capacity 790 million lbs.) - Perryville, Md., dispersion capacity shut down in April 1982. Perryville suspension plant mothballed in June 1982. (60 and 200 million lbs., respectively) STAUFFER - Exited business, with Long Beach, Calif., plant scrapped in April 1982. (140 million lbs.) TALLEYRAND - Shut down plant in January 1982. lbs. ) (75 million These and other moves have not only shut down some older and less efficient capacity; they have also brought significant new corporate strength to the industry. Occidental is one example, and Formosa Plastics of Taiwan and Shintech of Japan are new and expanding competitors for which PVC represents a large share of total corporate investments. The acquisition of Conoco by DuPont in 1981 also brought the i strength and expertise of America's largest chemical company to the PVC marketplace. BFGoodrich has sustained its leading market position through significant expansion and modernization of existing facilities. In addition, Goodrich acquired a PVC plant in Louisiana from Goodyear in 1979 and purchased VCM and PVC plants in Texas from Diamond Shamrock in early 1982. Today, with 14 strategically located plants in North America, and the broadest product line, Goodrich is able to supply a highly diversified customer base. FG38887 Arj/tf-"iJ/L| 1 r* PV * '~1 -t~- i 18 International Outlook Non-U.S. PVC producers currently export very little resin to the U.S. This is due, in part, to cost factors; Europe aiyjf ** Japan, for instance, face high feedstock costs, and chlorine is expensive in the Middle East. Canada and Mexico, however, have large feedstock reserve priced below world market levels. Goodrich has strong positions in both countries. The company owns two PVC plants in Canada (representing 50 percent of the Canadian market) and a 35-percent share in a joint venture, Policyd, in Mexico (which has 50 percent of the Mexican market). Because of the availability of plentiful and inexpensive feedstocks, imports from the Middle East could potentially become significant. But, since the U.S. PVC business is so competitive, this is not expected to occur in this decade. Moreover, high conversion, operating, shipping and other costs offset potential feedstock advantages. Large, well financed European producers may choose to enter the U.S. market, and, with the aid of government policies that are more accommodating than U.S. laws, could establish an important presence in this country. Capacity and Diversity As shifts have taken place in the composition of the industry, increases in plant capacity also have been under way. This is adding to the competitive environment as well as providing the capability to handle anticipated growth over the 517018 BFG38888 19 coming decade. The following table reflects the 1982 production capacity of the industry. It should be noted that some portion of the total effective PVC capacity listed in the table is not currently operating. TOTAL U.S. PVC EFFECTIVE CAPACITY (MILLION LB/YR) PRODUCER Air Products Borden Chemical Certain-Teed DuPont Diamond Shamrock Ethyl Corp. Formosa Plastics General Tire Georgia Pacific BFGoodrich Goodyear Great American Keysor Corp. Occidental Chemical Pantasote Shintech Stauffer Talleyrand Tenneco, Inc. Union Carbide Total Capacity 1981 360 540 220 715 650 180 250 175 700 1440' 110 85 66 790 ' 100 625 265 50 975 175 8471 1982 200 540 220 715 250 280 200 140 700 1690 110 45 66 645 60 730 35 - 975 175 7776 1983 (Est.) 150 690 220 715 200 330 785 130 700 1720 110 - 66 530 50 730 - - 975 175 8276 Capacity alone, of course, does not define the pattern of competition within the industry. Diversity and flexibility can be equally important factors. A decade ago, reactors averaged from 3,500 to 5,000 gallons in capacity. By 1982, new reactors were being built in the 20,000- to 35,000-gallon category. While these large S170I9 BFG38889 20 new reactors offered significant economies in products involving extended production runs, they were uneconomical for shorter runs and were not able to meet the performance requirements of some applications. Currently, many very small reactors are being shut down because of their high operating costs, and the industry is moving toward a balance of reactor types and sizes that achieves the economies of scale necessary for some products and the adaptability required for others. Goodrich, with half of its capacity in general-purpose and half in specialty PVC, offers the broadest lines of resins and compounds while maintaining efficiencies of scale in high-volume production of commodity products. The following table shows how the top eight producers have chosen to balance their production capacity, with large reactors being defined as over 15,000 gallons: TOP EIGHT NORTH AMERICAN PVC PRODUCERS North American Capacity* 1982 Percent, large reactors Number of plants BFGoodrich Tenneco Occidental Shintech Formosa DuPont Georgia Pacific Borden 1,970 975 790 730 785 715 700 540 48 77 29 100 61 100 100 0 11 3 4 1 2 2 1 2 * Equals all existing capacity, including that of non-operating plants. ZS17CCZ0 BFG38890 21 Backward integration into raw material production is another factor influencing the cost and reliability of the manufacturing process, and several of the larger companies have become more complex, adding major production phases within their own organizations. Only BFGoodrich produces chlorine, ethylene and vinyl chloride, and thus is integrated throughout the production process. Integration is a valuable factor in the PVC business, because it assures adequate supplies throughout the production cycle and offers cost advantages. Research and Development Business conditions, of course, will be an important factor in determining the growth rate for PVC. It will be innovation, however, that assures a rate of growth well above that of the GNP. Research laboratories have been a vital factor in creating the industry and in carrying it to its present point. Much has been accomplished, but much also remains to be learned about the basic nature of the PVC polymer, better ways of producing it and new ways to use it. Companies like BFGoodrich, DuPont, Occidental and Borden maintain laboratories and conduct research oriented toward the production processes and product lines that fit their corporate strategies. Goodrich conducts basic research at Brecksville, Ohio. At Avon Lake, Ohio, the company concentrates on process and application development. BFG38891 22 Today's emphasis on research reflects the early pioneering tradition that Goodrich established in 1944 when it set up the Chemical Division's own research and development organization. Until the early-'70s, most of BFG's researchand-development effort was directed toward product (rather than process) development. In the mid-'70s, however, innovations in environmental control as well as improvements in efficiency and economy, including energy conservation, were the result of concentration on the production process. More recently, R&D has shifted again toward more productapplication development. Just as Goodrich has balanced its proportions of large and small reactors to optimize quality and efficiency, the company has devoted R&D activities proportionately among its numerous PVC types and grades to maintain leadership as a complete supplier. Overall, technology development has enabled Goodrich to operate plants that are believed to have the highest reactor productivity in the industry. Also, Goodrich's VCM and PVC technologies are licensed widely around the world. Safety and the Environment Perhaps the most impressive demonstration of BFGoodrich research-and-development capabilities came in 1974 after PVC production workers were found to have higher than average susceptibility to angiosarcoma, a rare form of liver cancer. Goodrich quickly established task forces to eliminate the risk BFG38892 23 of vinyl chloride exposure, which was causing the problem. Altogether, 135 scientists worked to find the solution. By 1976, after committing $42 million to the effort, Goodrich had developed a "clean reactor" technology, which reduced worker exposure to vinyl chloride to levels actually below those considered safe. Goodrich was the first company to be able to meet the new environmental regulations, and the company licensed its technology to others in the industry to help them meet exposure standards. Strict controls remain in force, with continuous monitoring of worker exposure, atmospheric emissions and both liquid and solid wastes. This process is tightly regulated by a variety of federal, state and local agencies. More recently, two new issues have generated unfavorable publicity about PVC. The first issue concerns the flammability of PVC; critics claim that PVC gives off deadly amounts of hydrogen chloride as it burns. The second issue involves PVC pipe used for potable water applications; critics claim that toxic materials leach from PVC pipe into drinking water. Both claims are false. A large part of the anti-PVC campaign is being orchestrated by metal pipe and conduit manufacturers, who have witnessed PVC's penetration of their key markets. Plumbers' unions are also on the attack, because PVC piping can be installed easily by the do-it-yourselfer. BpG38893 <-17S033 24 Goodrich and others in the PVC industry are conveying to the public, news media and legislators these facts about PVC and fire: Unlike other construction materials, such as wood, PVC has a high ignition temperature and will burn only while an external flame source is present. While all organic materials produce deadly carbon monoxide when they burn, a Harvard University study has shown that the levels of hydrogen chloride generated when PVC burns are not high enough to be harmful in a typical fire. Another significant fact is that PVC does not conduct electricity and therefore cannot start a fire; metal can. The MGM Grand Hotel fire of 1980, in fact, was started by an electrical short in metal conduit. In potable water applications, metal pipe leaches potentially toxic materials such as cadmium, chromium, copper and lead. There is no evidence that PVC pipe leaches harmful amounts of toxic materials. Goodrich believes that providing the facts about PVC to legislators, building code officials, fire fighters and the general public will prevent the PVC industry from losing market opportunities. PVC's Pivotal Role for BFGoodrich Chemicals are the central force in BFGoodrich's corporate plan for increased sales and profitability, and PVC has the pivotal role for Goodrich chemicals. Goodrich's corporate strategy, initiated in 1976, calls for a realignment in which ?,5I702-1 BFG38894 25 the tire business retains a major role, but chemicals become the leading line of business. The strategy is based on a careful assessment Of market potentials, and the choice of polyvinyl chloride to spearhead the shift toward chemical markets reflects anticipated above-average growth in the PVC marketplace. The strength of Goodrich management's commitment to this plan can be measured in various ways. By the end of 1981, for example, 51 percent of the corporation's assets were in the Chemical Group, compared with 37 percent at the end of 1980. During 1981, 95 percent of all capital expenditures were devoted to PVC and its precursors--chlorine, EDC and VCM. A separate division, headed by a Chemical Group senior vice president, has been organized to manage the growth of the PVC business. Goodrich's confidence in the futgre of PVC is bolstered by the fact that the product has long been profitable for the company, except during the difficult current period of poor market conditions and reduced production rates. Goodrich believes that the key factors in maintaining PVC profitability are: Management commitment, including the willingness to devote substantial resources to research and expansion. Marketing strength and knowledge. 2517C025 BFG38895 26 Advanced technology (both product and process). Competitive, cost-effective manufacturing. The Goodrich strategy is to maintain profitability in general-purpose PVC lines by taking advantage of its low-cost position. At the same time, the company will build on a favorable position in higher-profit specialty PVC. The specialty area is complex, requiring technological expertise, flexibility in plant operations and broad distribution capabilities. Goodrich's increased concentration on specialty PVC is illustrated by this list of new products introduced in 1981: NEW SPECIALTY PRODUCTS INTRODUCED IN 1981 Product Type Applications Geon 138 Geon 130 Geon 173 Geon 143 Dispersion copolymer Dispersion resin Dispersion resin Specialty mass resin Geon 87241 & 87322 Custom injection molding compounds Geon 87300 Geon 26FG Custom injection molding compound Film-grade resin 2517CS Carpet backing Clear wearlayer on resilient flooring Clear wearlayer on resilient flooring Powder rotational casting (automotive, toys, consumer products) U.L. listed for electrical and appliance applications FDA approved for medical applications Packaging BFG38896 27 A.V., In addition, BFGoodrich recently introduced two new specialty lines of chlorinated PVC compounds and low-combustibility compounds (both PVC and CPVC) designed for a wide range of market and product applications. Both are sold under the trademark TempRite. Goodrich forecasts a total annual PVC market of 10 billion pounds by the end of the decade. This is based on an expected growth rate of more than 6 percent annually. Demand is expected to pick up gradually in 1982 and push industry operating rates from the year-end 1981 levels of 55-60 percent to an average of about 70-75 percent. Capacity utilization is forecast to rise to 80 percent in 1983, the threshold of a better era for the entire industry. These forecasts do not include some market potentials that appear solid but are still in the developing stage. Examples are listed in the following.table, with potential sales for 1985. If these expectations are fulfilled, the anticipated growth rate will be substantially enhanced. J ? 28 NEW GROWTH OPPORTUNITIES FOR PVC (Millions of Lbs.) Application____________ Custom Injection Molding Siding for New Homes Windows, Shutters, Etc. Gutters and Downspouts Flooring Bottles Wide Sheet Other Replacing Market Potential _________1985 ABS, Engineering Plastics, Metals 180 Aluminum, Wood 70 Aluminum, Wood 150 Aluminum 35 Asbestos Felt 50 Glass, Metal, Other Plastics 240 ABS, Acrylic, Polystyrene 25 Total 150 900 To achieve a 1986 polyvinyl chloride sales goal of nearly $2 billion, BFGoodrich plants are uridergoing capacity increases that will maintain the integrated nature of the production process and provide for additional production as required by market conditions. During 1981, a major new plant producing chlorine, caustic soda and ethylene dichloride was started up in Convent, La. A major modernization of vinyl chloride monomer capacity has been completed at Calvert City, Ky. At the Pedricktown, N.J., plant, 200 million pounds of suspension resin capacity were added late in 1981. Also at Pedricktown, a 25 percent capacity expansion for dispersion resins will be completed by the end of 1983. 25176038 At Avon Lake, Ohio, production BFG38898 29 of dispersion resin recently was increased by 70 percent; suspension resin capacity was increased by almost 40 percent. The total increase in capacity at Avon Lake was more than 100 million pounds. During 1982, Goodrich acquired two plants in Texas from Diamond Shamrock--a one-billion-pound-per-year VCM plant at La Porte, and a 260-million-pound-per-year PVC facility at Deer Park. The map on the final page shows the geographic spread of the company's three feedstock plants and 11 polyvinyl chloride plants in the United States. It also shows the two Goodrich plants in Canada, where the company has a 50 percent share of the PVC market, and two plants in Mexico, where BEG has a minority interest in Policyd, which has a 50 percent share of the Mexican PVC market. Goodrich also has a 35 percent market share in Australia. Summary The PVC industry is relatively new and has changed radically in the last 30 years. Construction, the market for more than half of all PVC used today, did not exist as a market for PVC 30 years ago, when raincoats and shower curtains were primary applications for the material. Now the second-largest-selling plastic in the world, PVC has succeeded in penetrating a diverse range of markets. The PVC industry is still cyclical, however, because of substantial sales to the construction industry, which is BFG38899 V(w.iSrVG 023 30 sensitive to general business conditions. PVC's cyclicality is expected to be reduced as new PVC materials are developed to meet emerging marketplace applications. Today, BFGoodrich serves as the model for the successful PVC producer. BEG maintains a careful balance of commodity and specialty PVC capacity and produces a wide range of product grades and types. This allows the company to participate in all market segments. Additionally, in an increasingly competitive industry, Goodrich has the sales and marketing capabilities and research-and-development expertise necessary to take full advantage of current and future market opportunities. October 1982 2517CC00 BFG38900 AVON LAKE, OHIO A 250-acre tract is the site o the Avon Lake Technical Center and the Avon Lake General Chemical Plant. The Technical Center is situated on 26 acres, while the General Chemical Plant occupies approximately 100 acres. Also located on this site is a distribution center with four acres of floor space. While the Technical Center is primarily involved with new product development and testing, two products are manufactured there. It started operations in 1946, drawing most of its personnel from the Akron Chemical Plant. Since then, several major expansions have increased the size of the Technical Center to 13 major buildings. In 1980, the Technical Center absorbed the functions and personnel from the Independence (Ohio) Technical Center, making it the Chemical Group's primary research and development facility. In 1948, ground was broken for the General Chemical Plant, and the following year the plant began producing plasticizers (additives used in chemical and plastics-making processes). In 1951, the plant started production of polyvinyl chloride (PVC), which is trademarked Geon vinyls. Ten years later production of Estane began at the plant. From 1966 to 1968 there was extensive expansion of several production areas, and in 1974 the distribution center opened. PRODUCTS MANUFACTURED Technical Center Hydrin Cure-rite 18 General Chemical Plant Geon Pearl Resin Geon Paste Resin Geon PVC Compound Geon and Hycar Vinyl and Acrylic Latexes Estane Rjlyurethane Carboset Resins Good-rite Olefin Antioxidants Good-rite K-700 PHYSICAL DATA Start-up Date Acres of Land Total Employees 1946 (Technical Center) 1949 (General Chemical Plant) 250 568 (Technical Center) 663 (General Chemical Plant) n a r-s /, rh _ / T /, BpG38903 / PROFILES OF U.S. FACILITIES AKRON, OHIO Akron Chemical, situated about two miles south of the World Headquarters 3uilding, was the first BFG chemical plant. Construction on the site dates back to the turn of the century when it was built by the Diamond Rubber Company. BFG acquired the property in 1912 when it bought the Diamond interests. At first, BFG used the plant to wash and store crude rubber, but through the years it developed into a more valuable asset. In 1924 the plant began manufacturing a product called AgeRite Resin-D (ARD), an age-resister for rubber compounding. ARD is still manufactured at Akron Chemical and is the major antioxidant used in BFGoodrich tires. In the late 1930's, BFG used the plant for intensive research in synthetic rubber. Development of polyvinyl chloride (PVC) also took place there. By 1939, the plant was producing commercially two kinds of rubber, a general purpose rubber later used in tires and a special oil-resisting rubber later known as Hycar. Synthetic rubber facilities were expanded and this plant served as the model for government-operated plants during World War II. New facilities have been added steadily through the years due to the increased demand for Hycar, rubber chemicals and other specialty chemicals. PRODUCTS MANUFACTURED Rubber Antioxidants Hycar Nitrile Latex Good-rite Vinyl Pyridine Latex Cure-rite 18 Hycar Reactive Liquid Polymers PHYSICAL DATA Start-up Date Acres of Land Total Employees 1912 (RubberMills) 1924 (Chemical Operations) 56 314 nn/. Qn/n BFG38902 CA -a o o Hi 31 BF GOODRICH PVC PLANTS Map includes plants at Calvert City, Ky., Convent, La., and La Porte, Texas, which produce chlorine, ethylene dichloride and vinyl chloride monomer--the precursors of PVC. BFG38901 2517C031