Dow Chemical CEO: Era of large, diverse public companies is ending

The merging Dow Chemical and DuPont plastics giants each grew too large and sprawling, and each company had operations that would fit well with pieces of its rival, said Dow Chairman and CEO Andrew Liveris said Wednesday in Houston.

That is why a combined DowDuPont — the merger deal is expected to close by year’s end — will splinter in 2018 into three smaller and more focused companies. A chemicals and plastics company will maintain the Dow name in Michigan. The agriculture company will keep the DuPont brand in Delaware. And a third specialty products company will also call Delaware home.

“We may be seeing the end of the large, huge, diversified publicly traded company,” Liveris said Wednesday at the IHS Energy CERAWeek conference.

Both Dow and DuPont were in “an arms race to keep scaling up” and arguably became “diversified to a fault,” Liveris said. Both companies faced pressure from activist investors to change.

He said the market reacts more quickly than ever and “large companies can’t pivot easily.” CEOs must “manage the short term with a maniacal focus on productivity,” while still focusing on long-term strategies.

Liveris will retire by mid-2017 and DuPont CEO Edward Breen will take over the merged entity of “two, iconic American brands.” Liveris said he and Breen are “joined at the hip.”

Liveris specifically touted Dow’s ongoing $6 billion investment in Freeport and Lake Jackson south of Houston. The sprawling Freeport campus will stay with the Dow brand after it is broken into three companies.

“We’ve got almost a (new) plant a year until 2017 and 2018,” Liveris said.

In December, Dow started commercial operations at its new propylene production facility in Freeport. The propane dehydrogenation unit makes propylene — a core chemical building block of many plastics.

Liveris said Dow is building a second unit now.

In January, Liveris commemorated the opening of Dow’s Texas Innovation Center, a five-building technology development facility in Lake Jackson that can accommodate more than 2,000 workers. Dow employs about 6,200 people in the Houston area, including 4,200 at the Freeport complex.

But Dow and DuPont are both currently cutting jobs in advance of the merger.

After announcing about 1,700 planned job cuts last spring, Liveris in early February said the number will grow to 2,200 positions. Dow has eliminated 1,200 jobs thus far, so another 1,000 cuts are forthcoming. Dow employed nearly 50,000 people globally last year. Dow would not say whether Texas is impacted.

DuPont said recently it will cut 1,700 jobs in its home state of Delaware and thousands more globally as it prepares for the merger. DuPont counts about 1,500 employees in Southeast Texas, mostly at its Sabine River Works plastics facility in Orange. It also has a plant in La Porte, where a chemical leak last year killed four workers.

Globally, Liveris said the U.S. and China are driving the economy. Despite China’s economic slowdown, its product demand remains strong, he said.

“The next few years are uncertain, volatile and you need to react in the moment,” Liveris said.

But Dow is even growing as a shale gas exploration and production company.

Liveris noted that Dow recently committed about $500 million more to produce gas in Argentina in a partnership with state-owned YPF. Natural gas is the feedstock for many of its chemical plants.