Document Gmp59xa148qEoRLXj0J1eg9ON

MEMO TO D- R- Di-H_____ M. E. Gibbs J. F. Herber A. J. Lauck M. V. Merchant D. R. Miller H. Munch L. R. Stark Q. E. Thompson Re: Research Review 2/23/73 As promised in our meeting this morning, attached is some additional data for your use. W. R. Richard 2/16/73 r ' FROM C -- 92 1 DSW 283776 STLCOPCB4065195 FUNCTIONAL PRODUCT GROUPS Specialty Products Group - Domestic Top Ten Accounts Report- Sales in ' Customer 1. General Electric 2. Koppers Company 3. International Paper Company 4. National Cash Register 5. Champion-Interna-tional Corp. 6. Westinghouse Electric 7. Weyerhaeuser Company ` 8. Mead Corp. 9. Nekoosa Edwards Paper 10. Federal Paper Board Total Year 1972 . Actual Budget 2488 2434 2367 2172 1688 1356 ..... -989 835 774 762 15865 1743 2567 2705 2037 1879 902 1040 840 782 595 15090 Year 1971 Actual 1667 1996 3104 2207 1711 1199 1062 833 669 633 15081 DSW 283777 STLCOPCB4065196 FUNCTIONAL PRODUCT GROUPS Specialty Products Group - Domestic Top Ten Gross Profit Contributors - $M Product Grouping 1. Rosin Size 2. Capacitor Fluids . 3. . Therminols (Heat Transfer) 4. Transformer Fluids ' 5. Surface Additives (Scripsets) 6. Solvents (MIPB-Santosol) 1 Biphenyl 8. PCT-Pydrauls 9. PCT-Plasticizer Aroclors 10. Coolanols Total Year 1971 Actual Year 1972 Actual Budget Year 1973 Budget 2277 - 991 . 1141 891 893 790 uux 1303 1059 266 3142 1939 1045 999 669 530 tzr\^7 1 436 345 298 2325 1234 . 493 1052 756 572 513 188 155 3099 1830 463 795 984 498 C07 186 10234 9910 7304 8383 DSW 283778 STLCOPCB4065197 FUNCTIONAL PRODUCT GROUPS Specialty Products Group - Dome stic Key Raw Material Report Year - 1972 PURCHASED' Benzene Chlorine - Anniston Hydrogen-1Water Glycol Cone. Raney Catalyst Sub Total MANUFACTURED Tora Santicizer 140 Phenol KOH Fumaric Acid Chlorine Sub Total Grand Total M lbs. Volume Price $/lb. Actual Budget 72975 10945 290 551 23 '.0291 .02720 .7429 .1421 3.292 .0272 .02937 .043 .1400 3.370 40562 1432 7508 2744 2424 65343 .095 .190 .068 .0350 .1605 .0274 .098 .183 .068 .0580 .13074 .O29S Gross Profil Effecl 139* 24 ' 203* 1* 2 317*- 122 10* 63 72* 157 260 57* 1 Purchased hydrogen used in IiB-AO to mo et production requireme nts, Santosol shipments to UK, and reduced level of biphenyl produ cticn requirements. ^Denotes loss - DSW 283779 STLCOPCB4065198 ( FLUIDS SUMMARY STATEMENT Continue strong emphasis on high technology energy transfer fluids. This will continue to be a viable specialty chemical business with gross profit in excess of 30^. Maintain lead ing position worldwide in dielectric fluids, aviation fluids, and in paper encapsulant solvents. Continue to build a specialty product business in the dye carrier field. Market all products worldwide, achieving greater M/I penetration into heat transfer and hydraulic applications. Capitalize on high level of polyphenyl technology by developing lowest cost manufacturing site and developing non-halogenated specialties for additional uses such as a heat transfer product, dye carriers and encapsulants. Technology on tractive lubri cants will be directed toward several attractive specialty applications, while retaining a long-term view toward poten tial conversion to tractive drives in automobiles. 1 ' , OSNN 283780 STLCOPCB4065199 / f IV. PROCESS FLUIDS Business Parameters 1973 . Sales /0 G.P. Heat Transfer Solvents Bye Carrier & Other $ 1.7M $ 3.2ft $ 2:1ft W 31$ 32# Current /o M/I 30fo SOfo ' 20/ Projected 10-yr Annual Growth Rate Spec. Prdts. Industry 3# ii# 11# W 4# A. Current Situation The process fluids family orignated as a diversification effort for the polyphenyls flowsheet whose main function was to supply biphenyl for Aroclor. Hydrogenated terphenyl is a major result of this effort and is sold as a plasticizer (HB-4o), as encapsulant solvents for carbonless copy paper (Santosol 300 and 3^0) and a heat transfer fluid (Therminol 66). Biphenyl is sold as a commodity and opportunistically, with significant sales, as a dye carrier for polyesters. Markets which were originally entered this way have proven to have needs which cannot be served by the polyphenyl flow sheet and it has been necessary to broaden our chemical base. Thus, when NCR demanded better performance in an encapsulant solvent than our first-generation PCB replacement (monoiso pjg^pyl biphenyl) could deliver, a benzyl chloride derivative pS\N 283781 STLCOPCB4065200 (Santosol 100) proved to be the best cost performer. In heat transfer the product line has been broadened to include an ester (Therminol 44) and an alkylbenzene by product (TherminoIL 55), and now we are developing a lowcost diphenyl oxide process to give us a vapor-phase heat transfer fluid. In dye carriers, we are building toward the ability to sell performance^rather than a chemicaly through differentiation. The above evolution, together with the phase-out of many applications of Aroclor due to the PCB problem, has created overcapacity in polyphenyls. This, together with a poor location for freighi:, poor fuel cost and availability, and an imbalance In hydrogen supply, has added up to a cost-of- goods problem of million-dollar magnitude. Nevertheless, with diverse markets and good products, this is a profitable product area. B. Objectives 1. Retain 90/ M/I in solvents to the carbonless copy paper market (U.S. and Europe). 2. Increase our participation in dye carrier market by introduction of more proprietary and environmentally acceptable produces; two new products by mid-1974 and $.750M new sales by 1973. DSW 283782 STLCOPCB4065201 3. Achieve a cost/market position in polyphenyls that will.enable the flowsheet to profitably survive the further decline of Aroclor usage of biphenyl. 4. Broaden heat transfer line to include vapor phase; sell $ 1.7M by 1978. Achieve 14$ growth rate in ' heat transfer. C. Strategy and Plan The cost problems in polyphenyls will yield only to drastic action; we will attempt' to reduce costs by developing a viable proposal for relocation of a smaller system to a Gulf Coast site. In heat transfer, wc will build a diphenyl oxide plant and sell a vapor phase product. Dye Carriers will be differen tiated via emulsifiable or liquid products, some biphenylbased. The Newport biphenyl plant will be viable if Aroclor remains the dominant European dielectric or if terphenyl-based encapsulant solvents remain strong and other biphenyl/ terphenyl markets are exploited; otherwise, there will be an optimum time to retire it and supply from the U.S. DSW 283783 STLCOPCB4065202 Potential competitive sources for encapsulent solvents are strongest outside the U.S. (Japan and Germany) so worldwide market intelligence and coordination will be maintained, and new models developed if required, with satisfaction of NCR and Wiggins-Teape (NCR licensee) requirements the prime consideration. D. Resources . 1. Increase Heat Transfer marketing effort by 3 men to increase share when vapor phase fluid becomes available (1974). 2. Establish polyphenyl know-how within Research to r6pl&Cc AiiTio. sis on rcc o\x ]r c o # 3. Capital: (a) $1.5H (b) $3.0M (c) $ ,6m Diphenyl Oxide - 1973 - 1974 Polyphenyl relocation - 1974 Santosol 100 expansion - 1975 DSW 283784 STLCOPCB4065203 V. HYDRAULICS AND LUBRICANTS Business Parameters Sales / G.O Pydraul Skydrol - U.S. Worldwide $ 3.9M .$ 0.9M $ 2.1M 14/ 38/ 36/ Current / M/I 40/ 40/ 50/ Projected 10 -yr Annual Growth Rate Spec. Prdt. Industry 6/ 6/ 7/ . 4/ - 7/ 4/ Introduction: Our Skydrol was the original fire-resistant aircraft hydraulic fluid. The Pydraul fire-resistant Industrial fluids use similar technology and the same production facilities, but serve a less quality-sensitive market. Skydrol enjoyed a 100/ M/I for many years but has more recently dropped to about 50/ in the face of industry approval of new sources and price competition from lower-density fluids. lydraul has always been a price-sensitive market, but performance can command a premium from some customers. Environmental aspects of hydraulic fluids (e.g. phenol content) are becoming important. Synthetic lubricants for aircraft and stationary (steam or gas) turbines represent a $ 10M potential which we are only beginning to penetrate. Our ester Jet lubes are blended frcm purchased base stock, while we are basic in the phosphate esters used in stationary turbine lubes. " DSW 283785 STLCOPCB4065204 A. Current Situation Skydrol: Both prices and M/I appear to have bottomed out in the U.S., while Europe is'following the recent U.S. pattern. The performance and toxicity disadvantages of the low-density fluids are becoming evident to customers, which may presage a return to higher-density fluids where Monsanto is stronger. .Pydraul: Recent reformulations to eliminate first PCB and then PCT have given us a product line which is no longer proprietary, but still somewhat technically superior to competition and allowed us to save our market share, but our cost position has been weakened. Lubes: We are in the midst of customer and OEM testing to achieve the necessary approvals and credibility that will permit bidding on business. ' Cost: We have a serious overcapacity problem in phosphate ester base stocks. This has aggravated cost and, with very competitive pricing, has squeezed profit. Internal transfer pricing has hurt profitability to this business group, but not to MICC. B. Objectives 1. We will maintain worldwide M/I at 50% minimum in Skydrol by exploiting product performance. DSW 283786 STLCOPCB4065205 2. In Pydraul, our continuing standard will be 45$ M/I and 30$ G.P. . - 3. Fydraul will be our stepping stone into the metal working industry with such products as rolling and cutting oils; our goal is one new type of product to this market by 1974. 4. Our hydraulic fluids will surpass competition in low toxicity and low environmental impact. We will evaluate ways to participate in the revenue from fluid, reclamation. 5. In turbine lubes, we will achieve OEM approvals . (e.g. G-.E.) in 1973. We will sell 5^ pounds, $3-0M in 1978.' . 6. We will correct overcapacity in phosphate esters by . improved volume and/or other products. 70$ occupancy by 1975, 99$'by 1978. C. Key Assumptions 1. Toxicity and environmental compatibility will become additional primary factors in.customer fluid selection decisions, along with fire resistance, price and performance. SW 283787 STLCOPCB4065206 2. Reclamation and recycle of used fluid will have a major impact on new fluid sales to the industrial market within five years. D. Strategy and Plans Skydrol: We will encourage a return to the higher-density fluids in which we are strongest and modify products to ' eliminate any serious toxicity or handling questions. The "general aviation" business, where Monsanto has a high M/I for historical reasons, is not well served by anyone, and we must find a better way to do so. Pydraul: A further round of reformulations will lower vyui CU O U ? 1 r> wo -? n-(-o t 'pine' o X r\4-n4**iTro VtUVw .1. S/ -- * rr^ r*\ o rfnrm o "r> r* c A V - >-- w and low toxicity. Customers, in response to governmental pressure,, will demand a continuing reduction or elimination of phenolic content of fluid, both new and in use. Longer- term, to get products of even better environmental compati bility, a water-based technology will be needed. We will investigate strategies to permit profitable participation in recycle of used fluid. Our Pydraul sales to Europe will remain via U.S. export until/unless volume justifies a European plant. OSVd 283?88 STLCOPCB4065207 Cost: We will attempt to improve volume by sale of base stock to^ competitors, provided we can do so with out giving away our cost or performance edge. Cost con trol in Pydraul base stock will be improved. Acquisition: Acquisition will be considered as a key strategy for broadening our metal working product line and increasing our market participation. See Section on Acquisitions. E. Resources . 1. M.A.T. levels will remain near the current amounts. 2. Capital will be required only for cost improvement projects except for the possibility of European manufacture of Pydraul base stock. This would probably be a joint venture with the Plasticizer Business Group. STLCOPCB4065208 '( VI. DIELECTRICS ' . Business Parameters . , U.S. and Export U.K. EEC /USSR ' " 1973 Sales /?> G.P. $ 8.4m $ 0.7H $ 1.3JT 38/ 20/ 15/ Current M/I ^ Projected 10-yr Annual Growth Rate -gpec< prdtt Industry 100/ -2/ 100/ 0/ 30/ 0/ 4/ 7/ 5/ A. Current Situation ' Aroclor dielectrics have been made for 40 years and are the original reason for the manufacture of biphenyls and terphenyls. Since Aroclor became identified as "PCB and an environmental hazard" a feu years ago, applications have been narrowed to the original dielectric application where no suitable replacement is yet available. We have been able to raise prices to cover the cost increases caused by overcapacity, raw material cost and extensive environmental work. Conditions are such that a new sup plier of PCB's may occur in the USA. Japan has banned PCB's, which has caused some U.S. demand for non-PCB capacitors for equipment for export to Japan. While this volume is small, it could result in establishing feasibility of non- PCB dielectrics, which would erode our position. Our own ' - new dielectrics are promising in potential cost and perfor mance, but 1-2 years will be required to prove their utility DSW 283790 STLCOPCB4065209 and profitability and volume.required. Metallized film capacitors will require less fluid, and may use a commodity which could decrease the size of the total market. B. Objectives 1. In Aroclors, retain M/I of 95-100/ U.S., 100/ U.K., 30/ Europe. Gross profit 35/ worldwide. 2. Support dominance of Aroclor as major dielectric fluid through 1975* ` 3. In new non-PCB dielectrics, achieve at least 50/ M/I domestically through 1976. C. Key Assumptions . 1. PCB's will not be banned by major worldwide governments, but some customers will prefer non-PCB fluids once they are proven. . 2. There will be growing acceptance that capacitor ' dielectrics need not be fire-resistant in most applications. 3. Neither we nor our competition will develop an economical capacitor dielectric which is both fire-i'esistant and biodegradable (i.e. a trade-off is necessary). DSW 283791 STLCOPCB4065210 D. Strategy and Plan To maintain a competitive lead and achieve targeted sales of new dielectrics in 1975*.we will supply pilot-scale quantities of new non-PCB dielectric fluids to major customers "by late 1973 and establish interim manufacturing facilities during 197^. Our product strategy is to blend additives (which contribute a high dielectric constant) with commodity-type hydrocarbons or esters, thus allowing us to tailor cost/performance to the desires of customers. We will seek to make the additives proprietary in chemistry or source. As a contingency, we will have a low-key effort to find a dielectric which is both fire-resistant and bn M A. o Cl W 'X' ' Meanwhile, we will continue to protect the Aroclor usage through tight plant pollution control, policing of customer losses, working with governmental agencies and technical societies, etc. As Aroclor volume shrinks, prices will be increased to cover costs, and Aroclor will thus be driven from all applications except those where fireresistance is vital. DSW 283792 STLCOPCB4065211 The shift toward metallized film capacitors could be an opportunity as well as a problem. The major effort here will be to get our customers to tell us what they need and to determine whether Monsanto or our Business Group has a profitable approach. E. Resource 1. Current marketing level. 2. Research effort will be at a 3$ level of Aroclor dielectric sales for dielectric products and pro cesses. ' 3. Capital: ' (a) Further plant PCB pollution control . $100M 1973 - 1974 (b) U.S. high-DK additive facility $1.5M 1974 or 1975 (c) EEC Blending - " $.5M 1974 or 1975 DSW 283793 STLCOPCB4065212