The push toward a comprehensive U.S. manufacturing policy has gained steam in recent years under the Obama administration. The Dow Chemical Co.'s leadership team has been one of the more vocal proponents of government/business partnerships that leverage federal support and incentives to strengthen the U.S. manufacturing base.
Dow Chemical CEO Andrew Liveris outlined his "case for reinventing" the U.S. economy in his 2011 book "Make It In America." Liveris, who also serves as co-chair of President Obama's Advanced Manufacturing Partnership, contends globalization has "rewritten the rules" of free-market economics and that some government support is necessary to foster innovation and growth.
Liveris isn't the only Dow executive campaigning for manufacturing policy. Carol Williams, executive vice president of Dow Manufacturing and Engineering, frequently speaks at events and conferences about critical manufacturing issues. Williams, who is also a member of the company's executive leadership committee, will present as a keynote speaker at IndustryWeek's Best Plants Conference on April 24.
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"Almost every other country in the world has an energy policy and we do not."
IW: One of the goals of the Advanced Manufacturing Partnership is to bring advanced materials to market faster. How is this progressing?
CW: A key example of innovation on the advanced manufacturing side is our solar shingles. With these, instead of having to build a roof and then a separate roof for the solar panels, the panels get integrated right into a shingle. It's essentially an electrical system that gets embedded into a shingle. So that's one example of a chemical company combining our material science capability with some of the global trends that are required for the world. That manufacturing is being done in Midland, Mich., which is where our headquarters is.
And we had the help of an R&D tax credit, which has never been finalized in this country. It's a yearly event we have to get approved on the policy side. We had the benefit of American investment into what we were doing. So it's a great example of advanced manufacturing happening in a region of the United States that needs that kind of investment.
IW: Could you have developed this solar shingle without the R&D tax credit?
CW: We have R&D facilities all around the world, so what America has to realize is there's some great research going on in China; there's great research going on in Europe. Oftentimes we forget that we have global competitors. So do I feel Dow would still work on this and would have done the research in some of our other regions of the world? Very possibly.
Global companies have choices that we can make in our investments. Let's take not having an energy policy: Dow Chemical buys as much energy -- and that's whether it's used to make electricity or to use as a feedstock -- as the country of Australia uses every day. So energy and its uses are critical to us as an organization. Almost every other country in the world has an energy policy, and we do not.
IW: That leads into my next question in regards to shale gas development here in the United States.
What impact has that had on Dow and the rest of the chemical industry?
CW: I've worked for the company for 32 years. For about the first 20 of it, the U.S. had a natural gas advantage. We as a chemical industry were net exporters. As a matter of fact, chemicals was the second-largest export that America had. Within five years, America went from being a net exporter of chemicals to a net importer. And for about 10 years there was almost no investment in the industry, not just Dow, but in the United States. With the shale gale that is happening, we have gone from being a net importer to net neutral, and it's going to tip over where we are going to be a net exporter again in the chemicals sector.
Dow alone announced $4 billion of investment in the Gulf Coast (which includes an ethane cracker.) So shale gas has had a huge change in making the U.S. a competitive force again. Dow feels we have a unique position to take advantage of it. Seventy percent of our global ethylene assets are in the cost-advantaged regions, and the U.S. Gulf Coast region we see as another opportunity for us. So our investments are perfectly timed and we see them as perfectly located to deliver value for Dow.
IW: Any potential investment opportunities in the Midwest with the availability of natural gas in the Utica and Marcellus regions?
CW: For Dow, we have facilities in West Virginia, which would obviously benefit from having that, but most of our large hydrocarbon assets today are already located in the U.S. Gulf Coast, so having the site infrastructure already located there is advantageous to us.
IW: What are some of the more proactive approaches manufacturers can take beyond lobbying for favorable policies to remain competitive?
CW: I think we can do a lot of things. For example, in the area of energy efficiency Dow has had a long history as a leader. From 1994 to today Dow has saved enough energy at our facilities that we could light the homes in California for 18 months. So energy efficiency is a part of Dow's DNA. But in the United States there are no programs like there are in other countries that drive support for energy efficiency. So you really need to get involved with the government on all kinds of engaging activities.
For example, in Europe if you sell a home, you have to prove that you are at the average for energy efficiency. There's nothing close to that in the U.S. So that's an example of how innovation can come from many different stages and many different kinds of places. The U.S. doesn't have a lot of support where other countries do, in helping companies explore opportunities to make a difference in how they operate and what they do.
IW: It sounds like, though, in Dow's case you were able to cut energy usage without government programs in place?
CW: At Dow, sustainability is a key element and has been throughout my entire career. When I first started at Dow, one of the programs we initiated, which still exists today, is called WRAP. It means Waste Reduction Always Pays. We may take the stream from one facility and use it in another. We may take waste heat that comes out of one facility, and rather than heating up something over there you transfer the product and you use heat from one to another so you can save energy.
But in a house, for example, if an owner has a choice between investing in a nice countertop or blue insulation in the walls, without a building code, what do you think would happen? That's why Dow has always been a strong proponent that there is cooperation between government and business that does have to happen to help drive some of the behaviors that are necessary for the success of the country.
IW: Throughout your career with Dow, what have been some of the major changes you've seen in research and development and how it's impacted product development?
CW: Over my 32 years I would say we as an industry have seen that product development is a process. There is an innovative spark activity. But there is a difference between the invention and the innovation. The invention is the spark -- the idea. But the innovation is bringing it to where it delivers money for the company, so we have developed processes for stage-gating the different steps of development.
For instance, making sure you are addressing all the different issues and stopping things early before you get all the way to product development. Because once you reach product development, you're spending a lot of money. It's a matter of each business in the company understanding innovation is a process and needs to be managed and owned by each of the businesses. All across our industry that's been a recognition, and you'll see things are stopped earlier because there isn't going to be success or the market isn't going to be an adopter and business has driven more success.
Carol Williams will be a keynote speaker at IndustryWeek's Best Plants Conference taking place April 23-25 in Indianapolis.For more information, visit www.iwbestplants.com