DuPont and Dow Chemical: DBT saw it coming a year ago

Sam Waltz
Sam Waltz
Founding Publisher

“Could Hagley Museum be the only remaining DuPont Co. brand in Delaware by the year 2020?”

“Could the rest of schools, street names and the like be the artifacts of a great industrial chapter in the State’s history?”

“Does the ‘sale’ of the DuPont Theatre Jan. 20 to the Grand Opera House and its renaming to the Playhouse on Rodney Square portend the future?”

A few friends scoffed openly to me, and doubtless several more privately, after these words above appeared in this column on Jan. 20, 2015

I’m not particularly a betting man, or else the prescience of that forecast — indeed that entire column — could have made me a big money winner on Wall Street, or in Las Vegas.

Even a couple of friends who remembered the column and scoffed called me up in the last week to concede that I may have been the only business journalist in America offering this unprecedented and dramatic prediction, even unlikely, in January 2015 that came true about DuPont by year-end 2015.

In that column, I’d mentioned three important variables:

1. Obligations of corporate leadership to shareholders.

2. Stewardship and deployment of capital.

3. The reality that every business is “built to sell.”

All of that added up to this insight in conclusion, “the reality simply is that DuPont as an asset may be worth more to some of its competitors than its current share prices indicate it might be worth to investors.”

And, frankly, those three variables are what led to the dramatic year-end changes for the DuPont Co.

Like many longtime DuPont Co. observers, I felt like she had rescued the company from the oblivion of its wandering in the wilderness years under her predecessor, an era when former senior DuPont execs across the area openly wondered where the company was headed.

Whether she was right, or whether she was wrong, indeed, Ellen Kullman was a strong leader, and never indecisive. I’d gotten to know her reasonably well in her first job at DuPont about 1990, when she was about 30 or so, freshly arrived back home to Delaware from GE to DuPont, where she immediately fast-tracked
as a superstar.

And, unlike most DuPont Co. CEO transitions, when a graduating class of three to five senior VPs arrived at the door of the ninth floor, one of them awaiting anointment, in Kullman’s case, she positioned herself so effectively that she was the consensus candidate for years ahead of her selection, there were no other finalists.

And Kullman’s strategy seemed to be sound. DuPont’s issues stemmed from other things, in my view, among them:

1. The R&D pipeline seemed to be drying up too quickly, which should have been foreseen. DuPont’s forte for several generations was molecular chemistry, and the dramatic innovations (e.g., nylon, polyester, Kevlar, etc.) from molecular chemistry were deep in the rear-view mirror. Advances seemed more incremental, less dramatic.

2. Life Sciences indeed were the future for DuPont, but the R&D pipeline seemed too slow to an impatient market to create the kinds of breakthroughs that would buoy DuPont from declines in the value of its traditional product portfolio. As a result, growth in the niche always was anticipated from some kind combination with another company.

3. A variety of legacy issues always made DuPont “the high cost producer,” whether it was capital deployment, labor, facilities, or simply old-age. Even the unprecedented relocation of its headquarters, as well as prospective sales of DuPont Hospitality, could not accelerate cost reductions.

4. Her biggest frustration often seemed to be getting DuPont “turned,” a task as complicated in scope and scale as mounting an invasion. Both Alfred du Pont Chandler in his 1971 tome “Pierre S. du Pont and the Making of the Modern Corporation” and Peter Drucker in his famous management studies of General Motors ended up studying DuPont’s pioneering management systems. The matrixed management worked in another era, but, when fleetness seemed critical, they too often delivered inertia instead.

5. Finally, DuPont ended up being the Cinderella of the ball, her fading rags failing to hide the beauty of a colossus undervalued by the market, with the prospect of order-of-magnitude better returns when repackaged in a way that better suited her for this era. And even a compelling personality and the promise of strategy could not overcome the stagnation in stock price that ultimately would make DuPont a high-value acquisition target, or partner.

Perhaps like a Chip Kelly Eagles football team, attempting to mount the winning TD drive in the 2-minute drill at the end of the game, the clock simply ran out on Ellen Kullman. And on DuPont.

So what events portend for the Delaware business community in 2016? What can I forecast that trumps this 2015 success? Well, I guess you’ll just have to wait two weeks and see!

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