Sunday, February 28, 2016

You Can Now Add Blackmail To The Long List of The Du Pont Company's Sins

The last time we looked in on Du Pont, a 214-year-old company that in so many ways was Delaware, the once mighty chemical giant was floundering in the corporate wilderness.  Badly.  
This sad state of affairs is substantially self inflicted.   
Du Pont was unable -- no, make that did not have the smarts or the will -- to adapt its brilliantly successful decades-long strategy of pouring much of its profits from wonder products into developing still more wonder products as the world around it changed in dramatic and unexpected ways.  What Du Pont did do was set out on a course to render itself irrelevant. 
It has hemorrhaged thousands of jobs through a series of jujitsu-like contortions to fend off financial market vultures while unsuccessfully trying to grow profits and market share, and its latest attempt at reinvention is a merger with almost-as-venerable Dow Chemical. 
The purpose of the marriage with this bosom buddy world-class creator of amazing stuff and toxic waste was further breaking up the companies.  That is not a misprint, because truth be known, the companies don't have a lot in common.  Wall Street has noticed. 
This latest jujitsu move led to an extraordinary development -- Du Pont blackmailing Delaware:  If the state didn't pony up big bucks, Du Pont might not keep its corporate headquarters there.   
My sister astutely remarked when the merger was announced last December that it was a consequence of what she called Corporate Alzheimer's, and she knew of what she spoke because our father worked for Du Pont from the time he graduated high school until a few months before his death at age 61.   
Formally known as E.I. du Pont de Nemours and Company, or Uncle Dupy, as we called it, Du Pont was an outsized presence in Wilmington from the time E.I. emigrated from France, where he faced tough competition, to the young American republic, which had a growing market for blowing up things.   
From the modest gunpowder mill E.I. opened on the banks of the Brandywine in 1802, Du Pont grew into a global giant that owns an extraordinary 21,000 patents for wonder products like Freon, Kevlar, Lycra, Nomex and, of course, good old Nylon.  (Teflon has been quietly dropped from the A-list after Du Pont's decades-long cover-up of the virulently toxic qualities of PFOA, one of Teflon's precursor chemicals, was revealed.  Millions of dollars in legal settlements for myriad cancer-related deaths later, better pots and pans now carry "PFOA-free" labels.)   
Anyhow, Du Pont's buildings dominated the Wilmington skyline, its name and those of various family forebears were on highways, university and school buildings, country clubs, a hotel and theater. 
Du Pont's influence was mostly for the good.  It treated my father well, looked out for our mother after he passed, and kept us in No. 2 pencils and notepads while we were in school, as well as a steady stream of beta-stage products like tooth and hair brushes, and tires for our Chevy Parkwood station wagon, that never wore out.  And because we had a safety engineer dad, we were the first family in our neighborhood to have seat belts in our cars. 
Blackmail is a strong word, but that too often is the coin of the realm these days when it comes to corporate relationships with states and municipalities.   
In Du Pont's case, an incredibly deep historic bond with a state and city counted for bupkis, and officials were told they had a mere 10 weeks to save a two-century-old relationship by putting together an incentive deal larded with enough tax breaks, subsidies and capital improvement assistance to persuade Du Pont to keep thousands of jobs in Delaware and not move them to Iowa or Indiana, the other two states in competition for Du Pont's corporate carcass.  
Delaware emerged poorer but semi-victorious as Du Pont announced that they had decided to keep two of the three businesses that will be spun off from the Dow merger in Delaware.  The cost of the blackmail is dear: $56 million by my calculations, which includes $17 million in sweeteners and a loss in corporate income taxes of nearly $39 million.  There also is the teensy question of how much of the revenues the post-merger businesses generate will stay in Delaware.
The irony-impaired hometown News Journal rhapsodized the other day that the deal "is proof that Delaware knows how to step up and get the job done under a tight deadline."   
To me it's proof that a company my father devoted his life to was incapable of aging well, let alone graciously, and turned out to be just another rapacious, money-grubbing corporation that will stop at virtually nothing to get its way.


Kathy Tittle said...

This is very interesting Shaun.
As I was just reading about Dr Pol's ( tv Veterinarian) 50 yr old son-in-law who's funeral was yesterday. His obituary said he woeked foe Dow Corning as a Chemist Tech for 20 yrs.
I had also read quite awhile ago that DuPobt's Heir was convicted od sexually abusing his young daughter, but his female judge refused to send him to prison bevause he was too "rich".. Just the little things you pick up on along the way.
Nice story. Thanks for shating. And Ill be sure to check out your books!

Kathy Tittle said...
This comment has been removed by a blog administrator.
Alan Muller said...

I largely agree with this, although the decline of DuPont is more complicated and multi-faceted. As far as all the giveaways, Markell is a malignant character and always looking for excuses to do this sort of thing....