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Mtbe Maker Reinvents Itself

by Alexander H. Tullo
March 15, 2004 | A version of this story appeared in Volume 82, Issue 11

Often when companies lose half their business in short order, they declare bankruptcy and subsequently liquidate themselves.

Last year, the phaseout of methyl tert-butyl ether (MTBE) in states such as California and the potential for a ban nationwide seemed to spell the end for Texas Petrochemicals. Gasoline reformulation cost the company roughly $300 million in sales, and by July it had slipped into bankruptcy.

But several months before it was bankrupt, Texas Petrochemicals started to fight for its life, says John Yoars, the company's vice president of operations. "We needed to reorganize manufacturing to deal with the phaseout that was occurring," he says.

The company decided to rebuild itself around the 50% of its sales that remained. In addition to MTBE, Texas Petrochemicals takes a crude C4 stream and turns it into products such as butadiene, 1-butene, isobutylene for butyl rubber manufacturing, diisobutylene for octylphenols, and polyisobutylene lubricant additives. The company still supplies some MTBE to an offshore customer, but today the fuel additive makes up less than 5% of its earnings.

Texas Petrochemicals had to trim costs, so it contacted Lexington, Mass.-based Celerant Consulting. "One issue was to restructure and redesign the organization and resize it in line with the new business mix," says Gary Traylor, a vice president at Celerant. The consultancy reworked everything at the company from the typical plant uptime and staffing issues to the amount of overspec product--product of higher purity than needed--that the company was making.

Celerant helped reduce Texas Petrochemicals' fixed costs by 10%, amounting to annual savings of $5 million. Yoars says the company, focused on non-MTBE products, is now viable and will soon come out of bankruptcy. In fact, earlier this month, the company raised $130 million in new financing as a step in this process.

Owing to the protracted downturn in petrochemicals, Traylor says, Celerant's cost reduction business has been robust. Recent clients include Bayer, Huntsman Corp., Basell, and the Westlake Group. He says outsiders like Celerant can reduce costs in a fundamental way that companies usually can't achieve on their own. "They get the low-hanging fruit and the slop that exists in any company," he says, "but neither will it be the full scale of improvement that is achievable nor will it be systematically sustainable."



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