Document mm7Kz2BdR5wa1nnp15bj5QkbJ

CHEMICALS AN*3 PLASTICS * 270 park avenue, new york, new york 10017 To (Hama) Division Location Copy to Mr. P. D. Dexter Chemicals & Plastics 270 Park Avenue 29th Floor Dot* Originating Dpi Antworlng Uttar data September 18, 1968 Pulp and Paper Mr. T. W. Carmody Svbfacf Effect of Asbestos Business Plan on Pulp and Paper CONFIDENTIAL Dear Mr. Dexter: We discussed three asbestos cases alternative to the 1969 Preliminary Plan. Others may emerge from discussions with Mining & Metals Division -- and I presume you will be considering this in light of their land equity. This is to give you a realistic feel for the financial effects the Pulp and Paper market area would realize in the event of abandonment of asbestos. Obviously, its effects on our ability to sell products to the industry other than asbestos will depend very much on how we handle the matter. The P & P asbestos customer list for 1968 and 1969 is made up of more than 30 accounts (Table I). Of these, 13 are regular purchasers, the remainder buying in carload lots on an infrequent basis during various stages of mill testing. Four accounts -- Simpson Lee, Riegel, Glatfelter, Hammermill -- are purchasers of small regular quantities of "T", likely can be eased out back to Ti02 with some recrimination. Nine accounts, designated as "hard core", have been on the books for some time. Their uses are characterized by one or more of the following: (1) Developed and selling proprietary paper products based on asbestos usage. (2) Installed particular handling equipment involving capital outlay. (3) Reversion to use of substitutes (for asbestos) represents sizable loss in savings. As indicated, the "hard core" group comprises 4,670 tons of 1969 sale of HP out of the 5,100 ton total; and 600 tons of "T" out of the 1969 1,700 ton total of the Plan. Boise Cascade, using 1,800 tons of HP in 1969* makes of the ord'*r of 90,000vfehs of paper therefrom, at a savings of better than $2.00 per ton. They are a coating chemical prospect, not yet an appreciable customer. Quick withdrawal of asbestos without some phase-out could precipitate legal threat. Phase-out might be estimated at 6-9 months requiring 900 tons of Asbestos HP. Longview uses HP for pitch control in Kraft bag stock. Could revert to talc -- or possibly a new J-M asbestos product -- but likely would insist on a transition time; estimate phase-out at 6-9 months and 300 tons HP. No prospect for other P & P products. International Paper Co. is a prominent prospect for coating chemicals at a number of mills; current sales run about $50,000 per annum. Our oppor tunities for the short term non up to $1 MM latex potential at one mill alone. Ticonderoga has installed handling equipment, pipe lines, etc., with a capital outlay of about $6,000 to use "T". Will be highly sensitive to termination because of emphasis on restricting investment in an old mill being replaced (in one year) by nearby mill under construction. Could expect strong recrimination from local people and repercussions throughout the I.P. organization -- including possible debit for the capital outlay. Tonawanda has established a new grade of paper using HP -- is selling upwards of 5,000 tons per annum. Could contend they would lose this sale having a sales value to them of over $100,000. Coupled with the Ticonderoga situation this could give us a very tough atmosphere in I.P. Brown has shifted an appreciable part of their Ti02 usage to "T". This has meant extensive testing in a series of paper grades over a long time. Could revert to Ti02 with a loss of savings amounting to $50,000-60,000 per annum. This obviously would have some effect on our coating opportunities, now under evaluation, to an immediate extent of $150,000. Minimum phase-out time estimated at 9 months. Kimberly-Clark at Munising uses very small amounts of HP in a "wet" sandpaper. This use was developed k years ago and makes a superior product according.,,to Munising. Current sales of other paper chemicals to the K-C organizatuil amount to $120,000 per year. Cut-off of Munising may put this $ , .in jeopardy as well as additional coating chemical prospects of the order of 300 000 Conwed uses 1,200 tons HP per annum in manufacture of mineral board for ceiling tile use. Use existent for 3+ years in the course of which starch reduction in the composition (using HP) has permitted them to obtain higher fire ratings on their products. Could shift them back to the use of Amosite asbestos; however, availability of Amosite, effects on fire rating, etc., up in the air and undoubtedly would cause strong repercussions and possible suit. Estimated phase-out is 9 months and 600 tons. Conwed is a customerprospect for Coatings Intermediates Division sale of WC-130. -3- Pridrie State is a small regular user of HP for "gunk control" (asphalt, polyethylene, etc.) in wastepaper stock source. Could be shifted back to talc -- but likely under duress because of superior asbestos per formance. Not a customer for other products. Estimated phase-out is 6 months and 150 tons. St. Regis (Rhinelander) uses HP on a regular basis as a retention aid. Likely paper product amounts to 20,000 tons per year and savings of $50,000 or more. The St. Regis organization is an immediate prospect for over $200,000 worth of coating chemicals business. Phase-out time estimated at 6 months and 150 tons. In the aggregate the "hard core" group presents existing sales (apart from asbestos) for Pulp and Paper products of about $200,000 -- with another $500,000 in prospect. Total liabilities (for capital outlays) could amount to $15,000. In addition the "hard core" group buys important dollar volume of goods from other corporate divisions; as Table I shows, this adds up to $7.0 MM -- mostly for polyethylene film. The degrees of influence on our business are dependent on how abandonment is undertaken: (a) If we were to phase out over a period of 9-12 months we may avoid serious effects on other business, suits, debit claims for equipment, etc. At best we might lose another $50,000 of existing sales (coating chemicals) and other liabilities perhaps of the order of $5,000-10,000. (b) Immediate termination -- such as by January 1, 1969 -- undoubtedly would bring all of the above pressures to bear. We would estimate the influence on 1969 (apart from asbestos) to be $150,000 of NIFS and $50,000 of contribution income -- with liabilities of $15,000-20,000. We can make no estimate of the impact of a possible suit -- such as by Conwed. The influence of this abrupt action on 1970 is estimated at $200,000 of coating chemicals sales and $60,000 of contribu tion income. The impact may be greater if our work with the total industry is taken into account -- and reliability as a supplier is made an issue. Beyond current users are numerous large accounts who are in various stages of testing asbestos. While we feel we can close down these programs without immedi ate retaliatory actions, there is no question these people have expended time and effort. They represent a prominent customer list for other Pulp and Paper chemical products. This commentary is reduced to tabular form as given in Table II. As of now, we have no alternative but to proceed with asbestos marketing to the paper industry on the basis of the 1969 Preliminary Plan as it stands. -4- This includes the position we will continue to take with our Marketing and Sales people at our September 23-25 sales meeting, various mill trial pro grams, etc. This underscores the urgency of clarifying an intended Asbestos Business Plan at an early date -- so that we may attempt to minimize the impact on over-all business. Very truly yours. AEP/dh Attachments A. E. Pufahl TABLE I CURRENT 1969 ASBESTOS SAIES PLAN HARD CORE Boise Cascade Longview International Ticonderoga Tonawanda Brown Kimberly-Clark, Munising Conwed Prairie State St. Regis (Rhinelander) Tons HP T Other P&P Sales $ M 1,800 800 100 50 1,200 360 ,360 4,670 Prospect No 200 [ $50 M now ) $1 MM prospect 4oo $150 M prospect $120 M now - - $200 M prospect 600 PHASE OUT Simpson Lee Riegel Glatfelter Hammermill 180 240 100 100 620 ADVANCED TRIAL STAGES Weyerhaeuser (2), Wausaw,"'1 Nicolet, Blandin, Oxford, 1 Champion (2), W.Va. P&P, 1 Northwest, Union Camp, r Kimberly-Clark (other), Scott, Crown Zellerbach, Georgia Pacific + 430 TOTALS 5,100 480 1,700 $54o m $493 M Identified UCC Sales $ M $2.2 MM PE $90 M PE - $100 M WC-130 - $4.5 MM PE $150 M PE AREA NIPS Asbestos Chemicals Overhead Asbestos Chemicals Contribution Income Asbestos Chemicals Possible Liabilities TABUS II FINANCIAL EFFECTS ON P & P $M 1969 Preliminary Plan Phase Out Asbestos 9-12 Mos. $ 1,033 9,971 $11,004 $ 320 _2i21 $10,241 l4o MU; $ 1,151 30 1,011 $ i,o4i 67 3,087 $ 3,154 34 3,072 $ 3,106 5-10 Terminate Asbestos Jan. 1 $ -2*823: $ 9,821 - 1,011 $ 1,011 - 3.027 $ 3,027 15-20 AREA NIFS Asbestos Chemicals . . Contribution Income 1970 Preliminary Plan $ 1,174 11,126 $12,300 $ 3,553 Phase Out Asbestos $ 11,126 $11,126 $ 3,348 Terminate Asbestos Jan. 1 (1 $ 10,926 ' $10,926 $ 3,318