Note: In 1972, bond yields and the inflation rate were approximately as follows. Long-term treasuries = 6.2%; Aaa corporate bonds = 7.2%; Baa corporate bonds = 7.8%; inflation rate (CPI) = 3.2%.
Company Background
▪ Diversified manufacturer of fibers, plastics, industrial chemicals and other specialty chemical products ▪ Conservatively managed company with longstanding AAA bond rating ▪ Relied on retained earnings to fund capital expenditure programs ▪ Organized into 10 industrial departments (second smallest being pigments)
Titanium Dioxide Market
▪ White chemical agent used in manufacture of paints, paper, synthetic fibers, plastics, ink and synthetic rubber ▪ Manufacturing TiO2 involve sulfate process and chloride process ▪ Projected sales expected to reach $340 million by end of 1972 ▪ Volume of sales had been growing at 3% per year over past decade ▪ Sales projected to reach over 1 million by 1985
Capacity Decisions
▪ Introduced ilmenite chloride technology at Edge Moor plant in 1952 (only company with operational knowledge of this method) ▪ Another ilmenite chloride plant opened in 1985 in New Johnsonville, TN ▪ National Lead was second largest supplier of TiO2 ▪ National Lead
Links: du Pont product website Background write up from Lehigh Summary of case concepts