Waving or drowning?

Is he waving or is he drowning? In fact he is emerging. This sculpture of Poseidon emerging from the waves is located in the main square of the city of Siracusa in Sicily. The exhibit fights for pride of place with the recently restored Duomo, City Hall and other buildings in the piazza following their restoration prior to the G20 environment conference recently held in the city, which also hosted the SCI 2009 Global Summit. So why choose to highlight this sculpture?

It could be said that this waving, drowning or emerging figure represents the global chemical industry as delegates heard at the SCI Summit, since some companies are suffering badly while others are making the best they can despite the setbacks and others even seeing some improvement. The meeting had as its theme: Thriving in a world of continuous change, and in his opening presentation, Paul Laudicina, chairman and ceo, A. T. Kearney, pointed out that the chemical industry, and indeed all commerce, is in the midst of a fundamental change in the ‘theory of business’; ‘one of those rare times in history when the basic assumptions that underlie the business environment are radically altered,’ he said. ‘So many of us were caught by surprise but in retrospect, we can all say we saw some of the antecedents. We need to look through the fire,’ he added, to see what lies beyond the current situation. But what about the current situation? John Quelch, senior assistant dean, Harvard Business School, said it is probably the worst recession since the Great Depression of the early 1930s,’but we will have to see how bad it will be – the degree of industry contraction is the worst since 1945’. He added that ‘exports have tanked, especially in Korea, China and Taiwan, which was part of the surprise for some, and the world is awash in accumulated debt’.

When will it end? Well, US consumer confidence has leapt to an eight-month high, with the largest increase recorded by the US Conference Board since April 2003, however, this change is viewed cautiously by observers as there are still few signs of real economic improvement. Amongst those observers, Quelch emphasised the ‘green shoots’ we keep hearing about have been delayed by other bad news, despite recent stock market rallies. ‘All bets are off unless we can fix the financial sector,’ he said, adding that banking needs transparency and a ‘weeding out’ of the weak. He is also very concerned about protectionism, which he pointed is growing around the world, in the US, France, Russia, China and Korea among many other countries. He sees nothing to halt and reverse this. ‘We may be entering a dark era of trade war,’ he added.

Quelch also expressed concern about what he described as ‘the stunning growth of government intervention’. Reaganism and Thatcherism are in retreat, he added, and state capitalism is growing and ‘will not be easy to unwind’. Three quarters of the world’s energy resources are state controlled, he noted, adding that there will therefore be new global competition between economic models with a new set of winners and losers. He believes the crisis has seriously weakened the US, ‘which is reeling from recent events, with some suggesting it will lose its Triple A rating, while China has strengthened and is on the rise’. China, said Quelch, needs to build its domestic market at the expense of US dependence. One result of these changes, he believes, is that we will perhaps be looking at a ‘world of G2 not G20’.

And speakers and delegates in Siracusa echoed the disagreement of speakers at the SCI/CIA Business Outlook conference held at the beginning of May (C&I 2009, 10, 4) as to whether the industry is facing a crisis, or something that just looks like a crisis. ‘The future is not cancelled,’ said Steve Welch, energy giant BP’s chief operating officer US refining and marketing and global petrochemicals, adding that ‘we need to focus on what we can control’. However, there will be losers, and he also noted that this is not a time for sympathy for weaker competitors.

The main message from Welch was that since the Chinese symbol for crisis comprises two words: danger and opportunity, the industry should be focusing on the opportunities that are being presented by the current economic situation. He noted, however, ‘there are a lot of people who are paralysed, even though they know what they should do.’ Laudicina too noted that paralysis seems to have been the most widespread response to the crisis. ‘According to nature, it is grow or die,’ he said, saying that many people and organisations have been overwhelmed by a sense of risk and have been unable to seize opportunities because of perceived risk. But Quelch said that the industry cannot afford to waste this crisis. ‘It is exploding with opportunities. Creative destruction lives and leadership will make the difference between winners and losers.’

Neil Eisberg
Editor, Chemistry & Industry

ACS CEO Reflects on the 2009 SCI Global Summit

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