Issue Date: March 6, 2006
Huntsman Takes Stock
Huntsman Corp. founder and chairman Jon M. Huntsman has been naval officer, egg salesman, polystyrene foam egg carton developer, billionaire entrepreneur, cancer survivor (twice), leading philanthropist, staffer in the Nixon White House, fishing buddy of Vice President Dick Cheney, author, iconoclast, father of nine (including the governor of Utah), and grandfather of 54.
One thing that Huntsman, 68, has not been is retired. When he sat down with C&EN for an interview in his Salt Lake City offices last month, he excused himself to consult with colleagues. Minutes later, he bounded back into the room declaring he had just charted out the next decade of his company's history "on the back of an envelope." He even teased C&EN with a quick glance at his scribbling but withdrew it before any useful perusal could be made.
Officers at many companies might have used such an interruption to end the interview. Huntsman sat back down and gave C&EN another hour. And unlike most executives who conduct such interviews across a boardroom table and flanked by functionaries, Huntsman sat relaxed on the couch in his office and ended the interview with a personal tour of the museum on the ground floor of Huntsman Corp.'s headquarters.
Later this week, in a ceremony at the New York Palace Hotel, Huntsman will be awarded the Chemical Industry Medal of the Society of the Chemical Industry's America Section. The award recognizes Huntsman's more than 35 years as a "corporate leader and a tireless advocate for the chemical industry."
Huntsman's career in chemicals came via an unlikely source: the egg. After attending the University of Pennsylvania's Wharton School of business, one of his first jobs, in 1961, was with a large Southern California egg distributor. Eggs, however, left Huntsman unfulfilled. "I got terribly bored selling eggs and managing eggs," he recalls. "In the egg business, there isn't a whole lot of complication and complexity. The chickens crank out the eggs, and you sell them."
The cartons that the eggs came in, however, did intrigue Huntsman. They were then only made of paper, and Huntsman wondered if they could be fashioned from plastic instead.
At the time, only one kind of machine could extrude thin polystyrene foam sheet. He made room at the back end of an egg-processing center to install that unit plus an improvised thermoforming unit to stamp out the prototype cartons. For the next three years, Huntsman tackled problems like the divots that hold the eggs, the latch that closes the carton, and the printing process for the labels.
In 1965, the egg distribution company merged its packaging efforts with Dow Chemical to form Dolco Packaging Corp., a company Huntsman subsequently led. By 1970, he wanted to move on and founded Huntsman Container Corp. with his brother Blaine. "Working with Dow was a great honor, but they were terribly, terribly slow in decision-making and bureaucracy," he says. "I had to move faster; I could see such great opportunities in plastics."
Huntsman scrambled for the cash needed to buy the equipment for his first plant in California, putting his own house up as collateral and even selling rock-and-roll albums through television commercials. His company went on to invent numerous products made of polystyrene foam, including the "clam shell" container used for takeout and for the McDonald's Big Mac. "Everyone today sees billions of plastic plates and plastic bowls and dishes, and those were all invented by our little company," Huntsman says.
Huntsman Container, which Huntsman sold in 1976 but continued to lead for four more years, also sowed the seeds of his future chemical businesses. The 1973 oil embargo made it impossible for the company to buy the polystyrene necessary to feed its plants. He also noticed that most other petrochemical products were difficult to come by.
So he set up a trading organization within his company. Team members would get their hands on a given chemical, say butadiene, and use it to barter their way-sometimes in as many as six trades-to the needed polystyrene. The system kept his plant running and was profitable. "It was a crash course in the survival of our company and in how the chemical industry worked," Huntsman says.
Huntsman saw opportunity in the chemical business because of its size and diversity. "The packaging industry was a very small microcosm of business compared to the broader global chemical industry," he says.
Huntsman's first chemical industry acquisition was his 1983 purchase of a polystyrene plant in Belpre, Ohio, from Shell Oil. Over the years, Huntsman picked up more polystyrene and polypropylene plants. In 1993, his firm, Huntsman Corp., purchased Texaco Chemical for $1.1 billion. And six years later, it purchased ICI's polyurethanes, titanium dioxide, and petrochemicals businesses for $2.8 billion. Both of these later acquisitions doubled the company's size at the time.
The lessons learned during the energy crisis were reinforced over Huntsman's long career in chemicals. "Most of what I found in my life in the chemical industry has been the need for creativity to avoid these massive pitfalls of an industry that is vulnerable to energy crises, hurricanes, shortages of products, fires, explosions, onerous government regulations, and such a wide variety of other elements outside your control," he says. "One has to be very flexible and agile to survive and be profitable in the chemical industry."
These lessons came in handy during the industry's rough times in 2001 and 2002, a trough that Huntsman says made for the toughest times the chemical industry has ever seen in the U.S. "Every single element that could possibly work against the chemical industry was at play at the same time," he explains.
Natural gas prices quadrupled and oil prices soared. A recession hit the manufacturing sector particularly hard. The U.S. industry, accustomed to exporting 10-15% of its products, saw its export markets disintegrate because of its lack of competitiveness. And a large slug of new petrochemical capacity, planned when profits were strong, came onstream all at once. "We shot ourselves in the foot as an industry, as we do in every 10-year cycle, by using all of our profits to get market share instead of focusing on profits," he says.
Huntsman Corp. nearly went bankrupt, owing to the tough market and its huge debt load. The investment firm MatlinPatterson stepped in, snatched up Huntsman bonds on the cheap, and in 2002, swapped that debt for a 49% equity stake in the company.
The deal kept Huntsman Corp. afloat and allowed the Huntsman family to continue to run the company. "I was determined that this company would not be financially bankrupt" and that it would "stay alive and stay strong and solid, which we did," Huntsman says. "We paid every supplier 100 cents on the dollar, kept every customer, and paid 100% of every loan we ever had."
MatlinPatterson later helped Huntsman consolidate the assets it had purchased from ICI. The investment firm also merged its Vantico epoxy resins unit with Huntsman.
In the wake of all of this, Huntsman wrote a book on business ethics titled "Winners Never Cheat: Everyday Values We Learned as Children (But May Have Forgotten)," published by Wharton School Publishing. The book is an answer to the Enron and WorldCom financial scandals. "Cooked ledgers, look-the-other-way auditors, flimflams of every sort have burrowed their way in today's corporate climate," he writes.
Huntsman's prescription is a return to business ethics where executives use the "moral compass" that all people learn as children. He advises not to let conduct be defined merely by what isn't against the law, because a legally allowable course isn't necessarily an ethical one.
Huntsman goes into some detail about his stint working for H. R. (Bob) Haldeman in the Nixon White House and the moral dilemmas that that presented. For example, during his tenure there, Huntsman wrote, he refused to use one of his packaging plants as a vehicle to dig up dirt on a Nixon political enemy. He even derides Nixon for giving only $500 of his $400,000 annual income to charity.
In the book and in person, Huntsman highlights the competence, loyalty, and "adherence to proper values" that he looks for in employees. "We have been able to acquire companies and gain their loyalty very rapidly. I think it is because they sense that the family is sincere," he says, adding that he often has gatherings with employees in which he brings his entire family. "They never meet a Mr. Dow, or a Mr. DuPont, or BASF, or Shell. But all of a sudden here comes Mr. Huntsman, and not only that, here come his nine kids and his 54 grandkids."
While Huntsman's values may stay constant, his company is ever changing. He and MatlinPatterson took it public last year, then early this year considered selling it to private investors. Last month, the company said it was planning to spin off its commodity chemicals business as a separate firm (C&EN, Feb. 27, page 9). It also agreed to purchase Ciba Specialty Chemicals' textile chemicals business and sell its butadiene business to Texas Petrochemicals.
One of the drivers behind these moves is that Jon Huntsman and MatlinPatterson want to cash out some of their respective interests in the company. For his part, Huntsman would like to use a chunk of the money to fund his philanthropic activities, which include the Huntsman Cancer Institute at the University of Utah.
Over the years, Huntsman has donated more than half a billion dollars to causes such as the cancer center, Huntsman Hall at the Wharton School, disaster relief following the 1988 earthquake in Armenia, the Red Cross, scholarships, and various other causes and charities.
When C&EN asked Chief Executive Officer Peter R. Huntsman, Jon Huntsman's son, last year whether another Huntsman Corp. could be built today, he answered with a flat-out "no." Ever the optimist, Jon Huntsman contends that it would be possible, although more difficult than when he did it. He lists stricter environmental regulations and volatile energy prices as the biggest challenges that would face a chemical entrepreneur today.
"I think Peter could," Huntsman says. "Our family members went through this with me, and I don't think it took any mysterious black magic to build this business. Most of it was being very people oriented and convincing the sellers of chemical businesses that we were fair."
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