Early history
Dow was founded in 1897 by chemist Herbert Henry Dow, who invented a new method of extracting the bromine that was trapped underground in brine at Midland, Michigan.[10] The company originally sold only bleach and potassium bromide, achieving a bleach output of 72 tons a day in 1902. Early in the company's history, a group of British manufacturers tried to drive Dow out of the bleach business by cutting prices.[11] Dow survived by also cutting its prices and, although losing about $90,000 in income, began to diversify its product line.[12]
In 1905, German bromide producers began dumping bromides at low cost in the U.S. in an effort to prevent Dow from expanding its sales of bromides in Europe. Instead of competing directly for market share with the German producers, Dow bought the cheap German-made bromides and shipped them back to Europe. This undercut his German competitors.[13] Even in its early history, Dow set a tradition of rapidly diversifying its product line. Within twenty years, Dow had become a major producer of agricultural chemicals, elemental chlorine, phenol and other dyestuffs, and magnesium metal. Dow hired Charles J. Strosacker, another Case alumni, in 1907.[14]
During World War I, Dow supplied many war materials that the United States had previously imported from Germany. Dow produced magnesium for incendiary flares, monochlorobenzene and phenol for explosives, and bromine for medicines and tear gas. By 1918, 90 percent of Dow's production was geared towards the war effort.[15] At this time, Dow created the diamond logo that is still used by the company.[16] After the war, Dow continued research in magnesium, and it developed refined automobile pistons that produced more speed and better fuel efficiency. The Dowmetal pistons were used heavily in racing vehicles, and the 1921 winner of the Indianapolis 500 used the Dowmetal pistons in his vehicle.[15]
Founder's death
H. H. Dow died October 15, 1930, from cirrhosis of the liver[17] while receiving treatment at the Mayo Clinic in Minnesota.[18] He had personally received over 90 patents[19] and was awarded the Perkin Medal the January before his death.[20]
Founder's death
H. H. Dow died October 15, 1930, from cirrhosis of the liver[17] while receiving treatment at the Mayo Clinic in Minnesota.[18] He had personally received over 90 patents[19] and was awarded the Perkin Medal the January before his death.[20]
Diversification and expansion
Willard Dow
Willard Dow was born in 1897, the year his father founded Dow Chemical. He was the oldest boy and his father required him to work in every department at the Midland plant to expand his knowledge of the company. In 1922, Willard was named a company director and became general manager of the Dow plant in 1926.[18] When his father died, Willard was just 33, but he proved himself capable of successfully operating the company.[18] Strosacker was appointed to Dow's board of directors.[21] Dow invested heavily in research and development during the Great Depression.
In the 1930s, Dow began producing plastic resins, which would grow to become one of the corporation's major businesses. Its first plastic products were ethylcellulose, made in 1935, and polystyrene, made in 1937.[22]
Willard Dow
Willard Dow was born in 1897, the year his father founded Dow Chemical. He was the oldest boy and his father required him to work in every department at the Midland plant to expand his knowledge of the company. In 1922, Willard was named a company director and became general manager of the Dow plant in 1926.[18] When his father died, Willard was just 33, but he proved himself capable of successfully operating the company.[18] Strosacker was appointed to Dow's board of directors.[21] Dow invested heavily in research and development during the Great Depression.
In the 1930s, Dow began producing plastic resins, which would grow to become one of the corporation's major businesses. Its first plastic products were ethylcellulose, made in 1935, and polystyrene, made in 1937.[22]
Magnesium
In just eight months from 1940 to 1941, Dow built its first plant in Freeport, Texas, to produce magnesium extracted from seawater rather than underground brine.[23] The Freeport plant is Dow's largest site, and the largest integrated chemical manufacturing site in the country.[24] The site grew quickly – with power, chlorine, caustic soda and ethylene also soon in production.[25] When Japan attacked Pearl Harbor in December, the plant was the primary source of magnesium in the United States.[26] After the attack, the U.S. government asked Dow to step up its magnesium production. Dow doubled its capacity in Freeport, built a second plant in Velasco, Texas, and added two new plants on the shores of Lake Michigan and Lake Huron in Michigan. In 1942, a critical year in gaining air supremacy over Europe, Dow-operated plants produced 84 percent of the nation's magnesium output.[26] Magnesium was required to manufacture lightweight parts for
Styrene
When the second world war began, access to natural rubber was essentially terminated. Polybutadiene was the synthetic rubber selected for use by the federal government. The product is made from Butadiene and Styrene. Dow was the only styrene producer in the United States.[26] In 1942, Dow agreed to provide the government with assistance to enable the U.S. to produce synthetic rubber during the war. Dow also operated several plants at the government's request to supply synthetic rubber to their armed forces.[26] Dow began its foreign expansion with the formation of Dow Chemical of Canada in Sarnia, Ontario to produce styrene for use in synthetic rubber.[28]
Plastics & foam
Dow produced several plastics used by the military in World War II, such as Ethocel, foamed polystyrene (marketed as styrofoam), and Saran, later sold to consumers as Saran Wrap.[26][29]
Dow Corning
In 1943, Corning Glass Works (now Corning Inc.) and Dow formed Dow Corning, established to explore silicone products for military use. Their first product was Dow Corning 4 Compound, an ignition-sealing compound that allowed airplanes to fly at high-altitudes. After the war, Dow Corning began producing products for civilian use and became the largest producer of silicone products in the world.[26]
The Ethyl-Dow Chemical Co. plant at Kure's Beach, NC, the only plant on the East Coast producing bromine from seawater, was attacked by a German U-boat in 1942.[30]
Post War
Carl Gerstacker was discharged from the Army in 1946 as a Major[31] and returned to Dow in Midland. He was a production engineer before the war, but his military service provided experience in problem solving and managing the finances and operations of numerous facilities producing war material. He shifted to finance and accounting and ascended the corporate ladder quickly. He was added to Dow's board of directors in 1948[32]
Airplane crash
Dow President and CEO Willard Dow died in an airplane crash on March 31, 1949. Leland Doan was named Dow president; Earl Bennett, father-in-law of Willard's brother (Alden B. Dow) became board chairman; general manager was Dr. Mark Putnam; Calvin Campbell was named secretary and Carl Gerstacker was selected as treasurer.[18]
Airplane crash
Dow President and CEO Willard Dow died in an airplane crash on March 31, 1949. Leland Doan was named Dow president; Earl Bennett, father-in-law of Willard's brother (Alden B. Dow) became board chairman; general manager was Dr. Mark Putnam; Calvin Campbell was named secretary and Carl Gerstacker was selected as treasurer.[18]
Leland Doan
When Leland Doan became president of Dow in 1949, the world was evolving rapidly. One of Doan's first tasks was to reorganize the company and oversee its diversification and expansion. As war production changed to a normal economy, residential construction boomed. In 1960, almost two-thirds of Americans owned their homes. As the consumer economy grew, so did the demand for household products. Dow had always sold products to other companies but recognized an opportunity and quickly developed a catalog of products for consumer use.
Doan created Dow's biggest product diversification and expanded their markets. Department heads were given more authority, and he expanded his sales force and trained them to analyze their markets and the production process. A news release announced $25 million for expansion into plastic products. New facilities were planned for 1951 with a $100 million budget.[33] Gerstacker was named vice-president in 1955 and joined Dow's executive committee the following year. He was named chairman of the board in 1960.[34] Leland Doan reached Dow's mandatory retirement age in 1962 and stepped down. During his 13 years at the helm, employment at Dow more than doubled to 31,000 from 14,000, and sales soared to $890 million from $200 million.[35][36]
Ted Doan
Ted Doan rapidly climbed the company ladder and followed his father, becoming president when he was 40 years old. Doan immediately integrated disparate company branches to create an efficient organization focused on growth and expansion outside the U.S. His goal was to increase company earnings 10% each year. Dow sales surpassed $1 billion in 1964.[37] Doan began an open-door policy for employees, placed higher emphasis on research, and held the attitude that their employees were the company's strength. Those policies continued after Doan's departure from Dow.[38] Doan periodically visited the research labs at Dow and was always interested in the work of each employee.[38]
Troika is Russian term for a wagon pulled by a team of three horses abreast. Doan formed a management troika with Gerstacker responsible for finance and marketing, Ben Branch in charge of international business and manufacturing, and Doan managing everything else. The three met every other week on Monday mornings. Once each year they would retreat for a week to determine company strategy for the next year and evaluate all 300 senior managers. Upon their return personnel changes were effected.[39]
Overseas
When Dow realized that constructing manufacturing facilities in other countries created demand, they began producing plastics in Germany, Greece, Spain and Italy. The largest investment was in the Netherlands, at Terneuzen. That chemical complex opened in 1965. Plants were also built in South America: Argentina and Colombia plus New Zealand.[37] With extensive operations all around the world, Doan and his managers had a meeting in 1965 where they acknowledged the need to decentralize. They established a headquarters on every continent to manage business. Dow Europe, Dow Latin America and Dow Pacific were established in 1966.Technology centers were also established for 33 key products.[37]
Retirement
Doan stepped down from Dow in 1971 when global sales had achieved $2 billion[37] and Doan proclaimed that he and Dow were "healthy as horses".[39] He believed that competent younger employees should be placed in senior positions because they have the new ideas and energy to advance the company. Doan and Gerstacker established a policy that presidents, CEOs and board chairpersons must relinquish their post at age of 60 and retire from the company at 65. The five-year period became known as "deceleration".[40] It really wasn't "retirement" for him; he was only 48. He remained on Dow's board of directors and Dow Corning Corporation's board until 1987.[41]
Ben Branch
In 1971, Ben Branch became president and CEO.[42] In the post-war era, Dow began expanding outside of North America, founding its first overseas subsidiary in Japan in 1952, and in several other nations soon thereafter. Based largely on its growing plastics business, Dow opened a consumer products division, beginning with Saran wrap in 1953.[43]
Nuclear weapons
From 1951 to 1975, Dow managed the Rocky Flats Plant near Denver, Colorado. Rocky Flats was a nuclear weapons production facility that produced plutonium triggers for hydrogen bombs.[44]
Contamination from fires and radioactive waste leakage plagued the facility under Dow's management. In 1957 a fire burned plutonium dust in the facility and sent radioactive particles into the atmosphere.[44]
The Department of Energy transferred management of the facility to Rockwell International in 1975.[44] In 1990, nearby residents filed a class action lawsuit against Dow and Rockwell for environmental contamination of the area; the case was settled in 2017 for $375 million.[45] According to the Appellate Court, the owners of the 12,000 properties in the class-action area had not proved that their properties were damaged or they had suffered bodily injury.
Vietnam War: napalm and Agent Orange
The United States military used napalm bombs during the Vietnam War until 1973. Dow was one of several manufacturers who began producing the napalm B compound under government contract from 1965. After experiencing protests and negative publicity, the other suppliers discontinued manufacturing the product, leaving Dow as the sole provider. The company said that it carefully considered its position, and decided, as a matter of principle, "its first obligation was to the government".[47] Despite a boycott of its products by anti-war groups and harassment of recruiters on some college campuses, Dow continued to manufacture napalm B until 1969.[47]
Agent Orange, a chemical defoliant containing dioxin, was also manufactured by Dow in New Plymouth, New Zealand, and Midland, Michigan, in the United States for use by the British military during the Malayan Emergency and the U.S. military during the Vietnam War. In 2005, a lawsuit was filed by Vietnamese victims of Agent Orange against Dow and Monsanto Co., which also supplied Agent Orange to the military. The lawsuit was dismissed.[48]
Dow Corning breast implants
A major manufacturer of silicone breast implants, Dow Corning (Dow Chemical's Joint Venture with Corning Inc.) was sued for personal damages caused by ruptured implants. On 6 October 2005, all such cases pending in the District Court against the company were dismissed. A number of large, independent reviews of the scientific literature, including the Institute of Medicine in the United States, have subsequently found that silicone breast implants do not cause breast cancers or any identifiable systemic disease.[36][50]
Bhopal disaster
The Bhopal disaster occurred at a pesticide plant owned by Union Carbide India Ltd., a subsidiary of Union Carbide, in 1984. A gas cloud containing methyl isocyanate and other chemicals spread to the neighborhoods near the plant where more than half a million people lived. The government of Madhya Pradesh confirmed 3,787 deaths related to the gas release. The leak caused 558,125 injuries, including 38,478 temporary partial injuries and approximately 3,900 severely and permanently disabling injuries.[51] Union Carbide was sued by the Government of India and agreed to an out-of-court settlement of US$470 million in 1989. Dow Chemical acquired Union Carbide in 2001. Activists want Dow Chemical to clean up the site which is now controlled by the state of Madhya Pradesh.
DBCP
Until the late 1970s, Dow produced DBCP (1,2-dibromo-3-chloropropane), a soil fumigant, and nematicide, sold under the names the Nemagon and Fumazone. Plantation workers who alleged that they were sterilized or suffered other afflictions subsequently sued both Dow and Dole Foods in Latin American courts. The cases were marred by extensive fraud, including the falsification of test results and the recruitment of plaintiffs who had never worked at Dole plantations.[52] While Nicaraguan courts awarded the plaintiffs over $600 million for damages, they have been unable to collect any payment from the defendants. A group of plaintiffs then sued in the United States, and, on 5 November 2007, they were awarded $3.2 million by a jury in Los Angeles. Dole and Dow vowed to appeal the decision.[53] On 23 April 2009 the two cases against Dole and Dow were thrown out by a judge in Los Angeles due to fraud and extortion by lawyers in Nicaragua recruiting fraudulent plaintiffs to make claims against the company.[54] The ruling casts doubt on $2 billion in judgments in similar lawsuits.[55]
Tax evasion
In February 2013 a federal court rejected two tax shelter transactions entered into by Dow that created approximately $1 billion in tax deductions between 1993 and 2003. The court wrote that the transactions were "schemes that were designed to exploit perceived weaknesses in the tax code and not designed for legitimate business reasons". The schemes were created by Goldman Sachs and the law firm of King & Spalding, and involved creating a partnership that Dow operated out of its European headquarters in Switzerland.[56][57] Dow stated that it had paid all tax assessments with interest. The case was against the Internal Revenue Service seeking a refund of the taxes paid.[58] The case was appealed to the 5th Circuit court, where Dow's claims were again rejected. Dow has petitioned for an en banc hearing by the 5th Circuit, arguing that the decision was contrary to established case law.[59]
Price fixing
Dow Chemical was implicated in a price-fixing scheme that inflated the cost of polyurethane for customers. The U.S. Justice Department closed an investigation in 2007 without charges or recommendations, but a class-action civil lawsuit won at a jury trial in 2013. Dow settled the suit in 2016 for $835 million.[60]
Recent mergers, acquisitions and reorganization
1990s – transition from geographic alignment to global business units
In the early 1990s, Dow embarked on a major structural reorganization.[61] The former reporting hierarchy was geographically based, with the regional president reporting directly to the overall company president and CEO. The new organization combines the same businesses from different sites, irrespective of which region they belong (i.e. the vice president for Polystyrene is now in charge of these plants all over the world).[62][63][64]
1990s – transition from geographic alignment to global business units
In the early 1990s, Dow embarked on a major structural reorganization.[61] The former reporting hierarchy was geographically based, with the regional president reporting directly to the overall company president and CEO. The new organization combines the same businesses from different sites, irrespective of which region they belong (i.e. the vice president for Polystyrene is now in charge of these plants all over the world).[62][63][64]
DowBrands
In 1998, S. C. Johnson & Son purchased Dow Chemical's DowBrands consumer products division, based in Indianapolis. The two business units included Home Food Management with Ziploc, Saran and Handi-Wrap; Home Care Products Fantastik, Scrubbing Bubbles and Spray'N Wash.[65] The sale reflected a shift in Dow's business focus by concentrating on specialty and industrial materials.[66]
Union Carbide merger
At the beginning of August 1999, Dow agreed to purchase Union Carbide Corp. (UCC) for $9.3 billion in stock.[67] At the time, the combined company was the second largest chemical company, behind DuPont.[68] This led to protests from some stockholders, who feared that Dow did not disclose potential liabilities related to the Bhopal disaster.[69]
William S. Stavropoulos served as president and chief executive officer of Dow from 1995 to 2000, then again from 2002 to 2004.[70] He relinquished his board seat on 1 April 2006, having been a director since 1990 and chairman since 2000. During his first tenure, he led the purchase of UCC, which proved controversial, as it was blamed for poor results under his successor as chief executive officer, Mike Parker.[71]
2006–2008 restructuring
On 31 August 2006, Dow announced that it planned to close facilities at five locations:[74]
In 2006, Dow formed the Business Process Service Center (BPSC).
In December 2007, Dow announced a series of moves to revamp the company. A 4 December announcement revealed that Dow planned to exit the automotive sealers business in 2008 or 2009.[85] Within several weeks, Dow also announced the formation of a joint venture, later named K-Dow, with Petrochemical Industries Co. (PIC), a subsidiary of Kuwait Petroleum Corporation. In exchange for $9.5 billion, the agreement included Dow selling 50-percent of its interest in five global businesses: polyethylene, polypropylene and polycarbonate plastics, and ethylenamines and ethanolamines.[86] The agreement was terminated by PIC on 28 December 2008.[87]
Rohm & Haas Co. purchase
On 10 July 2008, Dow agreed to purchase all of the common equity interest of Rohm and Haas Co. for $15.4 billion, which equated to $78 per share.[88] The buyout was financed with equity investments of $3 billion by Berkshire Hathaway Inc. and $1 billion by the Kuwait Investment Authority.[89] The purpose of the deal was to move Dow Chemical further into specialty chemicals, which offer higher profit margins than the commodities market and are more difficult to enter for the competition. The purchase was criticized by many on Wall Street who believed Dow Chemical overpaid (about a 75 percent premium on the previous day's market capital) to acquire the company; however, the high bid was needed to ward off competing bids from BASF.[90] The transaction to purchase the outstanding interest of Rohm and Haas was closed on 1 April 2009.[91]
Accelerated implementation
On 8 December 2008, Dow announced that due to the 2008 financial crisis, it would accelerate job cuts resulting from its reorganization. The announced plan included closing 20 facilities, temporarily idling 180 plants, and eliminating 5,000 full-time jobs (about 11 percent of its work-force) and 6,000 contractor positions.[92]
Strategy interruption
Citing the global recession that began in the latter half of 2008, the Kuwaiti government scuttled the K-Dow partnership on 28 December 2008.[93] The collapse of the deal dealt a blow to Dow CEO Andrew Liveris' vision of restructuring the company to make it less cyclical. However, on 6 January 2009 Dow Chemical announced they were in talks with other parties who could be interested in a major joint venture with the company.[94] Dow also announced they that it would be seeking to recover damages related to the failed joint venture from PIC.[94]
After the K-Dow deal collapsed, some speculated that the company would not complete the Rohm & Haas transaction, as the cash from the former transaction was expected to fund the latter.[95] The deal was expected to be finalized in early 2009 and was to form one of the nation's largest specialty chemicals firms in the U.S.[96][97]
2007 dismissal of senior executives
On 12 April 2007, Dow dismissed two senior executives for "unauthorized discussions with third parties about the potential sale of the company". The two figures are executive vice president Romeo Kreinberg, and director and former CFO J. Pedro Reinhard. Dow claims they were secretly in contact with JPMorgan Chase; at the same time, a story surfaced in Britain's Sunday Express regarding a possible leveraged buyout of Dow. The two executives have since filed lawsuits claiming they were fired for being a threat to CEO Liveris, and that the allegations were concocted as a pretext.[104] However, in June 2008 Dow Chemical and the litigants announced a settlement in which Kreinberg and Reinhard dropped their lawsuits and admitted taking part in discussions "which were not authorized by, nor disclosed to, Dow's board concerning a potential LBO" and acknowledged that it would have been appropriate to have informed the CEO and board of the talks.[105]
2008 sale of zoxamide business
In summer 2008, Dow sold its zoxamide business to Gowan Company. Included in the sale were the trademarks for a potato and grape fungicide called Gavel (fungicide). It is employed by potato growers to control early and late potato blight and is also registered in Canada for control of downy mildew in grapes, except in British Columbia.[106]
2014 – New operating segments
In the fourth quarter of 2014, Dow announced new operating segments in response to its previously announced leadership changes. The company stated it would give further support to its end-market orientation and increase its alignment to Dow's key value chains – ethylene and propylene.[107]
U.S. Gulf Coast investments
Several plants on the Gulf Coast of the US have been in development since 2013, as part of Dow's transition away from naphtha. Dow estimates the facilities will employ about 3000 people, and 5000 people during construction.[108] The plants will manufacture materials for several of its growing segments, including hygiene and medical, transportation, electrical and telecommunications, packaging, consumer durables and sports and leisure.[109]
Dow's new propane dehydrogenation (PDH) facility in Freeport, Texas, was expected to come online in 2015, with a first 750000 tonne per year unit, while other units would become available in the future.[110][111] An ethylene production facility was expected to start up in the first half of 2017.[112][113]
Chlorine merger
On 27 March 2015, Dow and Olin Corporation announced that the boards of directors of both companies unanimously approved a definitive agreement under which Dow will separate a significant portion of its chlorine business and merge that new entity with Olin in a transaction that will create an industry leader, with revenues approaching $7 billion.[115] Olin, the new partnership, became the largest chlorine producer in the world.[116]
2015 merger and 2019 separation with DuPont
On 11 December 2015, Dow announced that it would merge with DuPont, in an all-stock deal.[117] The combined company, which was known as DowDuPont, had an estimated value of $130 billion, was equally held by the shareholders of both companies, and maintained their respective headquarters in Michigan and Delaware.[117] Within two years of the merger's closure, DowDuPont was set to split into three separate public companies, focusing on the agriculture, chemical, and specialty product industries.[118] Shareholders of each company held 50% of the combined company.[119] In the new entity, Dow Chemical chief executive officer Andrew N. Liveris became executive chairman and DuPont chief executive officer Edward D. Breen became chief executive officer.[120]
Focus on higher margin business
Dow Chemical has begun to shed commodity chemical businesses, such as those making the basic ingredients for grocery bags and plastic pipes, because their profit margins are relatively low. Dow is, as of 2015, focusing its resources on specialty chemicals that earn profit margins of at least 20%.[116][125]
Dioxin contamination
Areas along Michigan's Tittabawassee River, which runs within yards of Dow's main plant in Midland, were found to contain elevated levels of the cancer-causing chemical dioxin in November 2006. The dioxin was located in sediments two to ten feet below the surface of the river, and, according to The New York Times, "there is no indication that residents or workers in the area are directly exposed to the sites".[126] However, people who often eat fish from the river had slightly elevated levels of dioxin in their blood.[126] In July 2007, Dow reached an agreement with the Environmental Protection Agency to remove 50000 cuyd of sediment from three areas of the riverbed and levees of the river that had been found to be contaminated.[127] In November 2008, Dow Chemical along with the United States Environmental Protection Agency and Michigan Department of Environmental Quality agreed to establish a Superfund to address dioxin cleanup of the Tittabawassee River, Saginaw River and Saginaw Bay.[128]
Sale of herbicide business
In December 2015, Dow Chemicals agreed to sell part of its global herbicide business, which had reported falling sales for nearly a year. A portfolio of weed killers known as dinitroanilines was sold to privately held Gowan Company, a family owned company located in Yuma, Arizona, which markets a variety of pesticides to the agricultural and horticultural industries.[129] The global trademarks for Treflan (pesticide), which can be sprayed on field corn, cotton and some fruit and vegetables, were included in the sale, as well as a formulation and packaging facility in Fort Saskatchewan, Alberta, Canada. Edge (pesticide), Team (pesticide), Bonalan (pesticide) and Sonalan (pesticide), intellectual property and labels for herbicides based on the molecules trifluralin, benfluralin and ethalfluralin were also included in the sale. Annual grasses and small seeded broadleaf weeds can be controlled with these products in a wide range of crops including cotton, beans, canola, cereals, crucifers, cucurbits, and vegetables. Dinitroanilines, are also known as "DNA herbicides", and have been commercialised at least since 1970.[130]
