Fourth-quarter losses of $629 million; consolidated net sales 17 percent lower than the prior year; plummeting auto sales and housing starts stifling demand for the company’s coatings and construction products; shaky employee morale, thanks to 2,500 layoffs, salary freezes and cost cutbacks; a stock price dropping like a rock in the deepest part of the Brandywine.
Welcome to your new job, Ellen Kullman.
The extraordinary circumstances that greeted the DuPont Company’s 19th chief executive officer on January 1 nearly overshadowed the fact that she was the first in the company’s 206-year history to have two X chromosomes. Making her gender even less remarkable was the widespread knowledge that Kullman had long been the likely successor to Charles O. “Chad” Holliday Jr. Indeed, Kullman had been on the proverbial corporate fast track since she joined the company 21 years ago.
The DuPont of 2009 is significantly changed from the DuPont of 11 years ago, when Holliday assumed office. During his tenure, the company shifted its focus from traditional chemicals to science and biotechnology. It did so by completing about $60 billion worth of transactions—divestitures, acquisitions or joint ventures. Among the most significant were the 1999 purchase of the remaining 80 percent of seed producer Pioneer Hi-Bred, the 2001 sale of its pharmaceuticals business to Bristol-Myers Squibb, and the 2004 sale of the company’s fibers business to Koch Industries.
The result was to reshape the company’s portfolio from a traditional $45 billion-per-year oil and chemicals firm to a $30 billion-per-year science-based company concentrating on agriculture and nutrition, performance materials, and safety and protection.
It was the latter business that helped prepare Kullman for the top job. She told Fortune magazine that when Holliday asked her in 1998 to start a new unit focused on safety products, “Absolutely everybody, including my husband, told me I’d be better off staying in my current job,” which was leading the highly successful $2 billion titanium technologies business. But she accepted the challenge “to take the power we have in safety and figure out how we can create a stronger franchise there.”
“I started with five people over in Barley Mill Plaza,” she said at her first news conference as CEO-in-waiting, “and I learned more about myself as a leader, and I learned more about the strength of this company, and I think I learned more about teamwork. The experiences I had there were the most impactful.”
Kullman and her husband, Michael—currently director of corporate marketing—moved to DuPont from General Electric in 1988. Returning to Wilmington was a homecoming for Kullman, who is the first native Delawarean to lead the company since Lammot du Pont, who stepped down as president in 1940.
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The baby in a close Irish-American family of two boys and two girls, Ellen Jamison grew up on a cul-de-sac in Fairfax Farms just off U.S. 202 in North Wilmington. Grade school was a short walk away, across Sharpley Road to St. Mary Magdalen School, where she played basketball and softball. She went on to Tower Hill School, where she sang in the choir, worked on the yearbook, played lacrosse and was the center and captain of the basketball team her senior year. She also found time to work nights and weekends as a sales clerk in housewares at the old Wanamaker Department Store on Augustine Cutoff.
Kullman especially enjoyed—and still follows—basketball. Though only 5-foot-9, she says—with a trace of pride—“Back then I could out-jump the six-footers.” She admits, however, to having been “foul prone.”
Patty Marshall, her coach, now associate director of athletics at Tower Hill, confirms that assessment. “She was an aggressive player, a good rebounder. She was smart and knew how to box out, get good position. She got beat up pretty good at times, but she could give as well as she got.”
Kullman also played two years at Division III Tufts University before her knees started acting up. She earned a degree in mechanical engineering from Tufts, then worked in technical service and sales for Westinghouse while earning a master’s in business administration from Northwestern University.
Sports continue to figure prominently in her life, thanks in large part to her children: daughter Maggie, 18, a freshman at Tufts, and twins Stephen and David, 14, freshmen at Tower Hill. The twins play football, basketball and lacrosse at Tower Hill, and Maggie is on the ski team at Tufts.
“I’ve always played team sports,” Kullman says, “and I tell my kids you don’t always get to choose who you work with or play with, but you get to choose how you interact with them and work with them. So I think you learn a lot about working with people and understanding different people’s skills and strengths and weaknesses and how then you can work together to create a better outcome.”
Despite a hectic travel schedule, her goal is to attend half the twins’ games this year. “The home games are pretty easy because [the school] is like two miles down the road,” she says. “I can go to their games at 3:45 and be back in the office by 5.” She works for an hour or two after that and still makes it home in time for dinner with the family.
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Kullman’s Wilmington roots are important to her. Here, she’s surrounded by family and friends. Her 92-year-old father has lived with her family for the past three years, and she obviously dotes on him. Noting that he was an excellent golfer, she says, “He could beat me until he was about 87.” Her two brothers, Brien and Joseph “Jamie” Jamison Jr., run Brandywine Nurseries in North Wilmington, a 62-year-old landscaping contracting business. Kullman sees many of her cousins regularly.
“There’s a sense of community [in Wilmington], even with its growth,” she says. It’s a community that keeps her connected, though she’s frequently out of town. “People call me, and there is a network that’s created, and that’s very helpful for me in my different roles as a parent and in the community at large. It’s easy to live here because of that sense of community.”
As leader of the world’s fourth-largest chemical company in terms of revenue, she will need all the support she can muster. DuPont expects market conditions to remain difficult in 2009, as many customers idle plant capacity, use existing inventories rather than buy new products, and pull back on overall spending.
In response, DuPont is doing much of the same. It plans to reduce working capital to about $1 billion, reduce capital spending by about 20 percent this year, and reduce fixed costs by about $730 million. The resulting austerity program is evident in many areas, including severely curtailed travel, reduced advertising and promotion expenditures, and even a Scrooge-like control of office supplies, including eliminating some water coolers.
DuPont operates in about 70 countries, with a strong presence in emerging markets such as China, Brazil and India, as well as Europe. More than 60 percent of its sales are generated outside the United States, so overall performance is closely tied to the global economy, which is unhealthy at best. With no one to sell to because no one is buying, many DuPont field sales representatives are spending their time collecting past due accounts.
A bright spot in the DuPont portfolio is its Agriculture and Nutrition business, which represents about a quarter of company sales. DuPont is the world’s largest producer of corn, soy seed and crop protection products, and it is banking on the Pioneer Hi-Bred business to generate large revenue gains, especially in the first six months of the year, when ag sales tend to be higher. A parent seed-corn production facility is scheduled for construction in Hermiston, Oregon, to meet the rising demand for Pioneer products by a strong North American agriculture market.
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The DuPont business with the most significant growth potential is biomaterials, according to John E. Roberts, an analyst with Buckingham Research, who was quoted in a September 29 article in Chemical and Engineering News. But, Roberts added, growing the business may be a tall order. “The chemical industry has had a long period of a relatively limited number of new products,” he said, and developing a new biomaterial is particularly difficult.
A January research report commissioned by Morgan Stanley would seem to contradict Roberts’ statement. The report states that DuPont produces an amazing 900 new products per year. What’s more, products less than five years old represent 34 percent of company sales. The report shows that U.S. patents granted to the company also increased, with filings almost doubling, from 1,000 to 1,800, over the five-year period.
Critics say such well-known DuPont developments as Teflon, Corian, Kevlar, Tyvek and Tedlar were introduced decades ago, and no market-changing discoveries have emerged from the Experimental Station or other company labs for some time. (The possibility of developing another Nylon, perhaps the company’s signature product, disappeared with the sale of the synthetic fibers business six years ago.)
But Kullman is quick to point out the versatility of such products as Teflon and Kevlar. Though they are 40 years old, she says, “Every year we probably come out with five or six new applications for them, and it’s continued the growth of those businesses. So there’s a lot of life left in some of these franchises.” She says the company is even building more capacity for Tedlar, which is “growing great guns.”
At the same time, she says, “We are continuing to innovate. We still do a lot of basic research.” She cites Sorona, a thermoplastic polymer derived from corn that has found application in automotive parts, electrical and electronic systems, and some consumer products.
In addition to a “relentless focus” on cost, productivity and growth, Kullman also wants to increase the company’s agility.
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“I think we have a strong foundation in science,” she told stock analysts late last year. “Now the challenge is to build on top of that—to build out the businesses in our applied bioscience area, to build out the businesses further in agriculture, and to really see how that foundation in science can add tremendous opportunities for top-line growth and real differentiation.”
The announcement that Kullman was the unanimous choice of the board of directors to become president of the company last October 1 and CEO on January 1 was greeted with near-universal approval by DuPont watchers. State finance secretary Gary Pfeiffer, who served as DuPont’s CFO from 1996 till 2006, calls her “one of the most extraordinary business leaders I’ve ever had the pleasure to work with.”
“I think she’s going to be absolutely terrific for the company,” Pfeiffer says. “She’s smart, she’s decisive, she’s inclusionary. She’s all the things that are needed to run a major global enterprise in a time of difficulty. As a long-term employee and retiree and still a shareholder, I was delighted to see Ellen get that job.”
His boss, Jack Markell, is a former neighbor of Kullman’s. The governor characterizes her as “brilliant, tenacious.”
The 53-year-old Kullman becomes the sixth female CEO among the top 100 of the Fortune 500 companies. Pattie Sellers, Fortune editor-at-large, has worked on the magazine’s Most Powerful Women profiles for 11 years and has interviewed Kullman. “I think she’s great,” says Sellers. “She’s a real straight shooter, really smart and disciplined.” Sellers adds that during the past three years, women moving to the top of “really big Fortune 500 companies has become a real trend.”
Local women business leaders have been quick to extend their congratulations to a sister CEO. Connie Bond Stuart, president of PNC Bank, Delaware, since 2002, has a senior girl at Tower Hill, so she knows Kullman on a professional and a personal basis. “I thought it was a natural evolution,” Stuart says. “I would’ve been surprised if she hadn’t been chosen. She has the depth, the background to do an extremely good job of leading DuPont. She’s extremely bright, and she also has a very good sense of humor.”
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As CEO of W. L. Gore & Associates, a major DuPont customer, Terri Kelly has known Kullman for some time. “I’m really excited for Ellen. I think her natural leadership ability is going to serve her well,” Kelly says. “I see her reaching out to both make connections and understand the issues. I sense that, with Ellen, she really connects well with individuals. When you can connect at that level, it invites a lot more openness and better decisions because people will speak their minds.”
Kelly believes female CEOs face some challenges that their male counterparts do not. “There is always that balance of how do you strike the right tone of being assertive but also showing empathy,” especially when working with “strong male leaders,” she says. “There still are not as many women as I would like to see [in management positions], or minorities, for that matter,” Kelly says. “But the engineering population at Gore is close to 50-50, so that gives me great hope. That’s a stark change from when I graduated from Delaware 20-some years ago.”
One DuPont retiree claims that when he started with the company in the early 1960s, “the only women employees were secretaries or elevator operators.” While that may be an exaggeration, DuPont’s top management has traditionally been testosterone heavy. Kullman admits that she doesn’t know if her gender has affected her career. “I never spent a lot of time trying to figure that out,” she says. “Did I get opportunities because I’m a woman? Was I expected to hit higher standards because I’m a woman? They probably balance themselves out. At the end of the day, it comes down to delivering against the commitments you make in whatever job you’re in and creating a vision and a sense of team. That’s really important for our company.”
Sellers notes that about one-third of top female CEOs have “house husbands.” Not so with Kullman. She and her husband have worked for the same two companies for 25 years. By now, she hardly gives their 8-to-5 relationship a second thought. Though she says Michael “loves his job” and that he has “great marketing and brand capability,” she claims they have little interaction during the work day. “He’s never reported to me, and I’ve never reported to him. People ask me if he has undue influence on me, and I say he’s had undue influence on me for 25 years, so I’m not quite sure what’s going to change now.”
Two months after Kullman became president of the company, DuPont announced elimination of 2,500 jobs, mostly serving the U.S. and European automotive and construction markets, thus reducing total payroll to about 57,000 worldwide. The company also announced it would trim 4,000 contractors by the end of 2008, with additional contractor reductions expected this year. In April, salaried employees were asked to voluntarily take the equivalent of two weeks off without pay, and 75 senior leaders agreed to take three weeks off without pay.
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With DuPont yoked to the stagnant housing and automotive industries, some observers have wondered if more layoffs lie ahead. Kullman’s boilerplate answer to that question is worthy of her most circumspect predecessors.
“Our businesses go through cycles,” she says, “and we do look at them from a performance standpoint every quarter, every year, and understand what their strengths and their weaknesses are [and] work toward upgrading them. Analyzing our businesses and their performance is a constant part of our managing process, and then we make decisions at appropriate times given what the circumstances are. Those are decisions we’ve made across the 206-year history of this company.”
Her predecessor’s decade as DuPont’s leader was marked by criticism from stockholders as stock performance waned over the past few years. (The change at the top has done little to improve that. On October 1 the stock was at $40.47. By mid-March it had dropped more than 50 percent.) Holliday will stay on for some time as chairman of the board, and he has offered advice frequently, but respectfully. “He’s very thoughtful about the advice he gives,” says Kullman. “He doesn’t want it to sound like a directive. At the same time, he wants me to get the benefit from understanding it from his perspective so that I can make my own decision. And he’s been very, very helpful.”
In relinquishing the corporate reins back in October, Holliday, a Tennessean given to down-homeisms, remarked that “you don’t change the roof on the barn when it’s raining,” then explained, “We are extremely well positioned for eventual recovery. In fact, trends that emerge from the recession will favor our new fleet of products and technologies.”
Bad as the economic landscape was then, it worsened through the first quarter of 2009. The rare good news came from government stimulus packages here and in Western Europe and China, which Kullman and DuPont hope will encourage infrastructure development, construction, energy efficiency, mass transit, public safety and other initiatives that could spur sales of DuPont products.
“We’ve got teams of people combing through every bit of information we can get about the packages to connect them back into our businesses,” Kullman says.
Ellen Kullman seems both eager and well-qualified to lead the country’s 81st largest corporation through the worst global financial crisis in 60 years. It will be a daunting task, and she will need to demonstrate once again a skill she exhibited many years ago on the basketball court at Tower Hill: the ability to rebound.
