Du Pont's Troubled Dynasty

"Du Pont has been on a plateau for the past few years. It is at a high altitude, but it is still a plateau." This judgment of the recent growth of the world's largest chemical company comes from Charles Brelsford McCoy, 60, president of E. I. du Pont de Nemours & Co. McCoy betrays a hint of nervous candor not often shown at the 167-year-old firm, where fluctuations in corporate fortunes often have been shrugged off as mere ripples in the stream of its history. Lammot du Pont Copeland, now 64, who moved up to board chairman in 1967 when McCoy became president, more characteristically refers to the past decade of declining profitability as a "period of adjustment." The adjustment has been severe: net income as a percentage of sales has declined from 20% in 1956 to 11% in 1968. Copeland maintains that it has had comparatively little to do with the long-range health and growth of the family empire.

Behind the euphemisms, Du Pont managers are plainly worried. Many stockholders share their concern. Though Wall Street still considers the company to be among the bluest of blue chips, Du Pont shares have dropped from $261 in 1965 to last week's $106.

Stunted by Success. Growth seems stunted by past success, company policy and the Justice Department. Du Pont's old flair for turning the test tube into a horn of plenty made it the 15th largest industrial company in the U.S., with $3.5 billion in sales in 1968. From this lofty level, Du Pont finds it nearly impossible to match past expansion. Sales almost trebled in the 1940s and doubled in the 1950s, but in the decade now ending, they have climbed only about 60%. Overseas, where 1968 sales were $440 million and just starting to be profitable, Du Pont lags far behind European chemical giants and is meeting savage price competition from aggressive Japanese companies. Agile competitors, who have benefited from Du Pont research, make it questionable whether the company will ever again have a proprietary invention so spectacularly successful as nylon, which Du Pont had to itself for nearly 15 years. Competition also produced overcapacity and falling prices for textile fibers, plastics and organic chemicals. By Du Pont's own price index, the level fell from 100 in 1957-59 to an estimated 80 for 1969.

The company has spent generously on drug research for two decades, but its first really promising product, an oral flu-preventive pill called Symmetrel, has been a commercial flop since it was introduced in 1967. Reason: Du Pont lacked both expertise and a sales force for drug marketing, and one result was that doctors generally did not prescribe it. Corfam, the first synthetic leather to "breathe," cost $60 million to get into production in 1964, but quick and stiff competition has made it only barely profitable. Du Pont is now improving the versatility of Corfam--in order to expand its big market from shoes to luggage and apparel--and trying to reduce its production cost.

This month, in an important new move, Du Pont expects to complete its first domestic acquisition in a quarter of a century. It will acquire Endo Laboratories, a small Long Island-based pharmaceutical maker (1968 sales: $22 million). Du Pont is obviously buying marketing flair, not volume. "We need Endo," says Roger E. Drexel, manager of Du Font's industrial and biochemicals department. "Without a feedback of marketing information, we reduce our chances of success with a new pharmaceutical product."

Clout and Cash. Du Pont is virtually free of long-term debt, and has the clout and cash to acquire practically anything--its assets amount to $3.3 billion --but the Justice Department would almost certainly oppose any sizable expansion by merger. At the same time, Du Font's ability to grow from within is checked by its management philosophy. Because the company does not believe in competing with customers, it rules out any major "forward integration" into finished goods like textiles. "Backward integration" into oil and the raw materials that it converts into chemicals has not seemed profitable enough.

Du Pont has enthroned research and development and staked its future on it: $255 million was spent on it last year. The company has 17 technically proven but so far unmarketed "new ventures" in process. Some are secret, but others include an office copier that uses ordinary paper, a range of plastic building materials, and a new desalination process. Speaking about the copier, Everett B. Yelton, director of the development department, says: "We may just be too late. Perhaps we should have moved faster."

Du Pont is not likely to change quickly. Though Brel McCoy is the first president not related to the Du Pont family by blood or marriage, he has been nurtured in Du Pont traditions; his father was a director, vice president and member of the executive committee. McCoy, who has spent 37 years with the company, is typically calm, thoughtful, and a believer in moving cautiously. The tone of the company is still set by the Du Pont family, one of the largest and most cohesive dynasties in U.S. history. Through its Christiana Securities Co., the family can vote a dominant 29% of Du Font's common stock, and eleven of the 25 directors are either Du Ponts or married to Du Ponts. Many of the adult members of the Du Pont family, and the related Copeland and Laird clans, are spotted through the company.

While agreeing with Chairman Copeland that Du Pont has never wanted to go after "the fast buck," McCoy admits that some decisions should have been quicker and better. "We may have missed chances," says McCoy, but he is too well trained not to add: "We still do not believe in doing things on a crash basis. We try instead to evolve continuously and deliberately."

Is deliberate evolution enough? Some executives of competing firms fault Du Pont for unaggressive sales efforts. McCoy has begun to apply pressures for change: more young blood, a bit of organizational tinkering, more stress on exploiting overlooked opportunities large and small. Still, the company's patrician disdain for the jousting of the market place may retard its revitalization. When Du Pont can rouse itself to greater adventure in some hitherto unfamiliar areas of business, it will have all the ingredients for another surge of growth.

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