A DuPont Chief's Days of Future Passed

DuPont (DD) Chief Executive Officer Ellen J. Kullman prepared for a deal that could redefine her company's future by studying its distant past. Kullman found inspiration in two out-of-print books that recount how three du Pont cousins took control of the gunpowder maker in 1902 and diversified into plastics and synthetic fibers, risky emerging technologies in those days. "I'm thinking, industrial biotechnology—there could be some parallels there," Kullman told Bloomberg in late December.

Less than three weeks later, Kullman on Jan. 9 struck a $5.8 billion deal to buy Danisco, a Danish company that uses biotechology to develop industrial enzymes that are catalysts used to make ethanol, food, animal feed, and textiles. The acquisition will make DuPont, already the world's largest car-paint maker and the second-biggest seed supplier, the No. 1 producer of food additives and the second-largest maker of enzymes used to make biofuels.

Kullman, 54, took DuPont's helm two years ago. She is convinced the chemical maker's best growth opportunities lie in capitalizing on market challenges stemming from the steady growth in global population: improving agricultural productivity, finding cleaner energy sources, and protecting the environment. "We are well aligned with these megatrends in the area of increasing the quantity and quality of food and decreasing dependency on fossil fuels," she says.

Danisco's product lines fit nicely with that strategy—one reason DuPont was willing to pay a 25 percent premium above the company's pre-deal stock price. The two companies already have a 50-50 ethanol joint venture, which in December 2009 opened a $50 million demonstration plant in Vonore, Tenn. It can make 250,000 gallons a year from corn cobs and switchgrass. The companies plan to open a U.S. plant in 2013 to make up to 50 million gallons of ethanol a year from corn cobs. A subsequent plant will produce commercial quantities of ethanol from switchgrass.

Kullman sees demand for biologically derived materials like those made by Danisco taking off the same way as sales of solar-panel parts, another DuPont line. "We have been in industrial biotechnology for 10, 15 years already, and so we are coming up that curve," she said. "There will be a tipping point."

When Kullman became CEO, some on Wall Street doubted whether DuPont could have predictable growth while it quickly adapted to newer technologies. Kullman won their trust when she successfully steered DuPont through the recession and delivered seven straight quarterly earnings that beat analysts' expectations. She slashed more than $1 billion in annual costs in her first year, froze capital spending, and eliminated all group vice-president jobs. Approving investors pushed up DuPont's shares 48 percent in 2010, an increase topped only by Caterpillar (CAT) among companies in the Dow Jones industrial average. "It's pretty remarkable," says Richard Vanden Boogard, an analyst at Victory Capital. "The Street believes them now."

The first woman to lead 208-year-old DuPont, Kullman says her experience as a parent helped her instill the discipline needed to bring her company through the recession. Kullman said she centered fearful employees by having them focus on what they could control, whether that was customers or costs or inventories. "I am a much better leader because I had three kids," she said. "With kids, they don't do what you want them to do when you want them to do it. Organizations don't necessarily, either. You've got to listen. You've got to learn how to influence."

Kullman's influences include Jack Welch, the former General Electric (GE) CEO, whom she observed as a freshly minted MBA while working as what she calls a "bag carrier" for Edward E. Hood Jr., then GE's vice-chairman. Welch's use of data to drive decisions and hold executives accountable rubbed off, Kullman said. "He would remember what that business leader told him last year, and he would hold that business leader accountable," she saysa. "It was, 'Say what you are going to do, and then do it.'"

Kullman went on to sell CT scanners at GE before leaving to join DuPont's medical imaging unit in 1988. She's been there ever since, along the way managing a wide range of DuPont businesses from pigments to safety and protection fabrics like Kevlar.

"Ellen was underestimated because everyone thought, 'It's just another 20-year DuPonter, what's going to change?'" says Don Carson, an analyst at Susquehanna Financial. "Ellen has brought a whole different degree of accountability there."

The bottom line: DuPont CEO Ellen Kullman is steering the company beyond traditional chemicals toward tech-driven food and biofuel ingredients.

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