C&EN: BUSINESS - FUTURE SHOCK

MARC REISCH

Speakers at the Commercial Development & Marketing Association (CDMA) meeting in Boston at the end of April tried to divine the future. None of the speakers at the three-day conference, attended by 75 marketing experts, admitted to having all the answers. But all the speakers had thoughts on how to make a more perfect future.


	HONORED William J. Tuszynski (right), past president of CDMA, presents the CDMA Award for Executive Excellence to Jennings. BASF PHOTO

A panel of analysts and investors took a prescriptive approach. T. Kevin Swift, senior director and economist for the American Chemistry Council (ACC), saw U.S. energy policy as the greatest challenge ahead for the chemical industry. Without lower and more consistent prices, U.S. chemical makers probably will not be able to compete in global markets.

On the other hand, Mark R. Gulley, senior specialty chemicals analyst at Banc of America Securities, suggested that chemical makers don't have to be "the weak link in the supply chain." Because they frequently buy energy and raw materials monthly but sell products to customers quarterly or annually, they act as "shock absorbers" between high upstream prices and the consistent low prices offered to consumers. "You've got to buy and sell monthly or quarterly" to preserve profits, he told his audience.

Gulley as well as Telly Zachariades, senior managing director at Bear, Stearns & Co., urged chemical makers to pay more attention to R&D. Many have depleted R&D investments as an "easy way to save money and pay down debt" during the economic slowdown, Gulley said. He did not recommend dramatic increases in R&D, but he did urge executives to spend wisely. "You need to be focused on what customers want and what your customer's customer wants," he said.

A panel of top executives took an opportunities-based approach to the future. Harold A. Sorgenti, former Arco Chemical president and now chairman of Sorgenti Investment Partners, told his audience that "you can't participate in change without participating in China and the rest of Asia." China is a strong competitor, selling specialties at half of current U.S. prices. The answer to this "commoditization" of specialty chemicals is to sell more complex products, sell further downstream, and sell a solution, not a product, he said.

Nicholas P. Trainer, president of Atofina's Sartomer unit, said the key to success was developing strong relationships with customers. James Cederna, former president and CEO of Calgon Carbon, said that to improve profitability, corporate executives have to pay attention to getting the most out of their employees by winning their trust. Also important, he said, is letting them know that if they are committed, their jobs are safe.

Carl A. Jennings, an executive vice president of BASF Corp., offered further insight both as a panelist and as winner of CDMA's Award for Executive Excellence. In his award speech following a dinner in his honor, Jennings pointed out that when his career got under way 30 years ago, "growth opportunities were mostly driven by accidental discoveries." Such discoveries include DuPont chemist Roy J. Plunkett's discovery of Teflon nonstick coatings and 3M scientists' discovery of the adhesive for Post-It Notes.

HOWEVER, "profitable sustainable growth cannot rely on unfocused efforts or chance discovery. For our industry, innovation by accident must be replaced by innovation by design," Jennings said. Examples of product design innovations at BASF are Ecoflex biodegradable packaging and the new low-dose, high-efficacy strobilurin class of fungicides.

Future new products will benefit from advances in biotechnology, chiral chemistry, and nanotechnology, Jennings said. The demand for the latest electronic devices will likely create an explosion in new electronic chemicals, he predicted. And chemistry will play a role in developing and managing existing energy sources and newer sources including wind, the sun, and fuel cells.

In his first speech since retiring as president and CEO of ACC in late October, Frederick L. Webber acknowledged that this was a "tough time" for the chemical industry. He called the natural gas pricing and supply situation "an unprecedented and crippling issue." In addition, the industry faces challenges including plant security measures, taxes, and Europe's proposed policy on chemicals regulation. Despite it all, Webber said he is still optimistic about the future prospects of the chemical industry.

He is encouraged because of new public policy developments. Among them are EPA Administrator Christine Todd Whitman's willingness to partner with industry, the White House's readiness to recognize the value of ACC's security guidelines, and the House of Representatives' development of a tax incentive plan that would allow further development of domestic energy resources. Other encouraging news: the Supreme Court decision to limit excessive punitive damage awards (C&EN, April 14, page 8). Webber said the decision bodes well for further government tort reform actions.

The industry also has an opportunity to work with the new Department of Homeland Security, Webber said. Working with the government on projects won't be easy, he acknowledged. Nevertheless, "we've got to get in the game" to develop new products and processes to enhance national security. Overall, given the improving public policy situation, "my gut says things are getting better faster than most people think," Webber said.