For over one hundred years, Wilmington, Delaware, and DuPont had tightly intertwined histories. The story of DuPont is also closely imprinted in Joe Biden’s views on corporate oversight. Within Wilmington, DuPont was called Uncle Dupey.
As Vice President, Biden watched DuPont struggle to drive growth and attempt to thwart an activist shareholder. They lost, resulting in Dupont’s merger with Dow Chemical and cutting the Delaware workforce by 25%. Biden frequently cites the restructuring and downsizing of DuPont as modern capitalism gown awry.
Before we get lured to sleep with Biden’s narrative, let’s face reality. Uncle Dupey was a bad guy. He was dishonest, hiding some dark and ugly secrets. The patronizing relationship between a wealthy Company and a small town blinded the city to the facts. The polluted waters—full of a chemical named “GenX” a precursor of Teflon—in the Kanawha River in West Virginia and the Cape Fear River in North Carolina will outlast the DuPont name on all of the tall buildings in downtown Wilmington. As Wilmington business leaders danced in the DuPont Hotel’s ballroom, the Company was underperforming the chemical peer group and lying about hazardous waste. Shareholder activism was the best thing that could have happened to DuPont.
A Look At History
Wilmington, Delaware, is a company town. With DuPont as the largest employer, the city enjoyed its benefits by investing in numerous schools, libraries, and theatres. Hotel DuPont and the DuPont Country Club was the site for celebratory parties and dinners.
Many DuPont employees staffed Biden’s first campaign. Biden often singled out the DuPont company as a “conscientious corporation” for paying a higher tax rate.
As shown in Table 1, DuPont, underperforming against its chemical peer group, lost its ability to compete over the last decade. For the period, BASF outperformed DuPont. With a singular focus on margin, the Company struggled to grow, manage inventories, and drive improvement. The reason? The Company focused on manufacturing and failed to build a robust supply chain to serve global customers.
MORE FOR YOU
Table 1. Performance in the Chemical Industry
Trian, driving the shareholder activism suite, lost the initial battle but won the war. The shareholder activism resulted in the spin-off of assets and the merger with Dow. Chemours created in 2013 as a spin-off from DuPont, and finalized in 2015, produces and sells performance chemicals in three segments: Titanium Technologies, Flouroproducts, and derivatives including Freon, Teflon, Viton, and Krytox. The new Company also assumed legal liabilities for the DuPont lawsuits.
In 2015, DuPont and Dow merged. In 2017, the two companies became a single entity with the intent to break into three companies: Corteva, Dupont, and Dow. The marriage and divorce are now complete. The newer and smaller DuPont makes specialty chemicals ranging from adhesives to biomaterials. Chemours posted revenues in 2019 of 6 billion but continues to underperform the growth and inventory management. The focus continues to be on manufacturing with a focus on cost.
What Lessons Can We Learn From Uncle Dupey?
While I disagree with Joe Biden’s take on the lessons to be learned at Uncle Dupey’s knee, I do think that there are some important facts to consider:
Good Companies Take Care of the Planet. When challenged in court, DuPont was not forthcoming to own the problem and suggest a remedy for GenX pollution. Uncle Dupey saddled Chemours with pollution legal liability complicating the path for plaintiff remedy.
Mergers Need To Be Additive. DuPont’s purchase of Iowa-based Pioneer Hi-Bred in 1999 was an attempt to diversify. Agriculture was a bridge too far for the chemical business. There were just too few synergies between the chemical and agriculture business. The arrogance of the DuPont executives stilted Pioneer’s chances for success.
Manufacturing Is Important, But Not Sufficient. DuPont prides itself on running and operating the world’s most challenging manufacturing facilities. And, they are good at this mission. With a strong focus on cost and safety, the Company’s manufacturing culture struggled to innovate and drive new business models. The leadership team failed to embrace diversity and new ways of working. The Company’s focus on IT standardization also stifled innovation.
People As An Asset. Ironically, while the Company offered lucrative benefits, in my work with over 800 companies, I have never worked with groups of people as disenfranchised as the DuPont teams. In the last year, workers were riding the wave-after-wave of change to qualify for retirement benefits. The bureaucratic environment smothered creativity.
A Fine Line Between Corporate Greed and Altruism. To the people of Wilmington, Uncle Dupey was a great and rich uncle. The communities of Delaware rode Uncle Dupey’s coattails for prosperity. The salaries of DuPont executives and DuPont Corporate endowments defined a golden era for Wilmington, but at who’s expense? Shareholder activism is an important check and balance for the perpetuation of capitalism. It is not always pretty or fair, but it is necessary.
As Biden walks from the United States Capital to the White House for his inauguration, I am hoping that he can cast off the shadow of Uncle Dupey as a rich and good uncle. My fingers are crossed that he will be true to his word of being a president for all the people and walk the thin line between corporate greed and altruism to embrace the tenants of capitalism. One should always be suspicious of something too good to be true.