Chemical Firms Could Divest Fiber Divisions

Anderson, SC, June 20--Stagnant sales and falling profits have led DuPont and other chemical companies to try to sell their textile fiber businesses. And despite a recent deal that significantly expands Honeywell's presence in South Carolina, a top company official said it won't be making fibers forever. Honeywell's April 30 acquisition of BASF's nylon business gives it three SC plants with 1,735 employees, including 600 at Irmo. Yet, hundreds of jobs have been lost at those plants in the past decade, and more cuts have come this year. On Monday, Honeywell told 750 workers at the former BASF plant in Anderson, SC that it will cut 103 jobs at the plant through attrition because the company closed an inefficient production line. BASF laid off about 50 workers on the line early this year. Rob Norman, a Honeywell nylon spokesman in Hopewell, VA, south of Richmond, said there are no plans now to close any of the plants. BASF agreed in January to give Honeywell $90 million and four nylon plants in exchange for a chunk of Honeywell's plastics business. Before the deal closed, Honeywell had 2,500 nylon employees. Now it has about 4,200, including those in the former BASF plants in Anderson and Clemson, SC. Combined sales are expected to be about $1 billion a year. The company moved the headquarters for the newly named Honeywell Nylon from Hopewell to Charlotte--the former home office for BASF nylon. The swap bulked up Honeywell's fiber business, but still leaves it smaller than DuPont, which makes most of the nation's carpet fiber. Some of that fiber comes from DuPont's plant in Kershaw County, operated by more than 700 employees and 600 contract workers. Within the carpet market, nylon is still king, accounting for 65 percent of the 3.2 billion pounds of carpet fibers shipped to U.S. mills last year, said Frank Horn, president of the Fiber Economics Bureau of the American Fiber Manufacturers Association. Making nylon isn't easy. It requires a lot of equipment, expertise and money. That's become more difficult to justify as fiber producers' profits have been squeezed by higher costs and lower selling prices. Honeywell spokesman Norman said the Honeywell-BASF combination works because there is overlap in customers and the potential to wring more efficiency out of the underused Hopewell plant, which supplies the key ingredient for nylon. Our intention is to run our Hopewell facility at full capacity," Norman said. "The combination was really a natural fit." Why would Honeywell, a $22 billion company generating most of its sales from advanced electronics, be so interested in expanding its investment in textiles? For one thing, from the end of World War II until the 90s, fiber was a profitable business that helped feed chemical companies' research into medicine and other fields more fertile for future profits. But in the last decade, DuPont, Hoechst -- and now BASF -- have gazed into the crystal ball and decided they would be better off selling or spinning off their textile fiber businesses. DuPont is courting an unnamed third party to buy its textile fiber business. It hopes to close a deal by year's end. "The straws are in the wind that the chemical companies want to get out of the fiber business," Horn said. Prudential Securities analyst Nicholas Heymann wrote in January that Honeywell is likely to try to sell the nylon business to reduce its debt and rid itself of a business with low profit margins. He estimated it could fetch $1 billion to $1.2 billion. Nance Dicciani, president of Honeywell's specialty materials unit that includes nylon, told Chemical Week magazine in May she expected Honeywell would eventually shed nylon fibers. "We're not in a rush to sell nylon and we're not going to sell it cheaply," Dicciani said. Nylon will be "a very profitable cash generator, more than paying its own way."

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