Liveris Sees The World With Dow Chemical

A 1976 meeting in Australia would change the life of Andrew N. Liveris and shape the future of Dow Chemical.

It was a job interview. Liveris, an Australian whose grandfather emigrated from Greece, had just earned his degree in chemical engineering at the University of Queensland and decided to get “real world” experience rather than attend graduate school.

Dow was different from other companies he met with. He remembers recruiters who had a sincere interest in finding talented young people and providing them with opportunities. “They said they would show me the world,” Liveris recalls. “Going into the interviews, I will admit that Dow was not my first choice. Coming out of the interview, it was my only choice.”

Dow delivered on the promise. Twenty-eight years later, Liveris became Dow’s chief executive officer. Later this week, he will receive one of the chemical industry’s highest honors—the Society of Chemical Industry (SCI) America International Group’s Chemical Industry Medal—at the Waldorf Astoria hotel in New York City.

As head of Dow, Liveris launched what is perhaps the most ambitious transformation in the company’s history. The portfolio of bulk chemicals and plastics he inherited had become largely commoditized. Profits were cyclical. Liveris’ project—which, he says, is only in its “seventh inning”—is to make Dow more about innovation. He shed most of the commodities, bought specialty chemical maker Rohm and Haas, and fired up Dow’s dormant R&D engine, all to make the company more responsive to consumer desires, more innovative, and in better command of its financial performance.

At the same time, Liveris has tried to preserve Dow’s essence, particularly its strong manufacturing integration. In the U.S. and Saudi Arabia, Dow is spending billions to integrate specialty chemicals with low-cost raw materials.

After joining Dow, it didn’t take long for Liveris to get his passport stamped. He took on production engineer positions in Hong Kong and Louisiana. Yet it wasn’t until he returned to Australia that Liveris got his first big challenge.

He had gone back home to become part of a team developing an ethylene cracker in Adelaide, Australia, that would take advantage of local ethane reserves. But the company ended up canceling the project as well as similar projects around the world.

Then-CEO Paul F. Oreffice traveled to Australia to break the news to the team. He took Liveris aside and asked him to stay on to wind down the effort and make sure that the people involved landed on their feet.

His experiences in Adelaide, Liveris says, gave him “a taste for things outside of engineering and manufacturing” and a chance to demonstrate his potential. He was offered a job as marketing manager for Dow’s mining, oil, and gas business, his first of many managerial roles at the company.

Some of the themes from his early jobs would resonate during his tenure as CEO. For instance, while Liveris was still in his 30s he was appointed head of Dow’s operations in Thailand, where the firm was setting up a polymers joint venture with Siam Cement.

The idea of teaming with a strong local company is now being repeated on a grander scale in Dow’s Sadara joint venture with Saudi Aramco. The companies are putting about $20 billion into a chemical complex in Al Jubail, Saudi Arabia, that will make specialty chemicals, performance plastics, and polyurethane intermediates primarily for markets in Asia.

Similarly, it was as president of Dow’s performance chemicals division, a $5.5 billion portfolio of specialty businesses, that Liveris first put into practice strategies he would apply on a larger scale as CEO.

For example, one of the businesses under his umbrella was Dow’s Methocel cellulose ethers unit. Dow had the commodity strategy of supplying all comers at the lowest possible cost. “Our end-use markets were pretty much anyone who would buy it,” he recalls. “We pushed the tank cars and the pallets out.”

Under Liveris, the company started emphasizing more profitable markets such as pharmaceuticals, personal care, and cosmetics; it deemphasized paint, construction, and other lower-value uses. He also upped R&D spending in the targeted markets. Now the unit earns hefty profit margins of close to 40% on about $1 billion in annual sales, he says.

The performance chemicals unit was an oasis within Dow, which at the time was struggling. In 2002, the board ousted CEO Michael D. Parker after only two years on the job because of dismal financial performance.

William S. Stavropoulos, who had led Dow from 1995 to 2000, came out of retirement to right the ship and find a permanent CEO. Liveris was one of four finalists asked to assess Dow and present a vision for its future.

His assessment was frank. “We probably have one decent chance left to restore our innovation engine and allow our company to move to higher-margin territory and more predictable margins,” he told the hiring committee. Liveris got the job, and Dow’s board put its imprimatur on his strategy.

Now in his ninth year, Liveris is one of the company’s longest-serving CEOs. The stability has been good for revitalizing Dow, he notes. “It takes a long-tenured CEO to see it through and overcome the detours and the forks in the road and the jagged path that one inevitably follows,” he says.

The biggest detour under Liveris’ watch came in late 2008 after the company had signed two transformational deals: the $15 billion acquisition of Rohm and Haas and the $9 billion sale of the bulk of its petrochemical business to a joint venture, K-Dow, which Dow would operate with state-owned Petrochemical Industries Co. of Kuwait.

The money Dow was to receive from Kuwait was to be the largest source of financing for the Rohm and Haas purchase. In December 2008, at the height of the financial crisis, the Kuwaiti government vacated the deal only days before it was set to close.

Liveris says his worst day as CEO was when he learned the news. He was on holiday in the Caribbean with his wife and children. After breakfast, his BlackBerry vibrated. The text said, “Call urgently. We have a problem.”

That message kicked off a period Liveris calls “the 90 days.” Rohm and Haas refused to give Dow extensions to complete the deal. Dow could close using a $12.5 billion bridge loan meant as an insurance policy. But the bad economy put Dow in danger of breaking restrictive covenants in the loan’s terms.

Dow managed to renegotiate the loan in February, at the height of the worst financial crisis since the Great Depression. That was the turning point. “I may have looked tired,” Liveris says of that time. “But I never looked down.”

When Liveris became the CEO of Dow, he also became the highest-profile figure in the chemical enterprise, embracing the limelight in a way that is rare for industry executives. He made Dow an Olympic partner through 2020, allowing it to share the podium with the likes of Coca-Cola. In the past month alone, he gave testimony before a Senate committee and wrote an editorial in the Wall Street Journal urging the government to exercise caution in allowing the export of natural gas.

The leadership role is one that Liveris relishes. “The truth is I cannot think of a better industry to represent,” he says. “I am driven to make the industry better understood. Our people deserve better recognition.”

The willingness to stand up for the chemical industry stems from Liveris’ enthusiasm about chemistry itself, which he attributes to good science teachers who planted in him the idea that chemistry can make the world a better place. “Chemistry is the continuum between the infinitesimally small and the expansively large,” he says.

Liveris’ leadership extends beyond chemistry to encompass the American manufacturing sector. Liveris even wrote a book, “Make It in America: The Case for Re-Inventing the Economy” (John Wiley & Sons, 2011: Hoboken, N.J.), about reinvigorating the American manufacturing sector. In it, he offers suggestions such as bolstering government incentives for manufacturers and better preparing students for life in the workforce. Liveris also served as cochair, along with former MIT president Susan Hockfield, of President Barack Obama’s Advanced Manufacturing Partnership, a private-sector-led, national effort to revitalize U.S. manufacturing, particularly in emerging fields.

Although many past SCI medalists were at or near retirement when honored, Liveris, 58, says he needs more time to complete the transformation he started. Dow’s corporate culture, for example, hasn’t quite caught up with the changes in the company’s business portfolio. “There is still a big part of the Dow culture that isn’t market driven or technology focused,” he says. That culture still needs to change, “one person at a time.”

Liveris is coy about what he’ll do when he does step down from Dow. He is interested in the intersection of politics and business, but he admits that as a former CEO he might have a tougher time seeking elective office than he would becoming a political appointee.

One thing for certain is that Liveris wants to remain active. “Even though I am from Australia,” he says, “I won’t retire on a beach.”