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Comparative Advantage:

Dow Corning and Praxair


Aaron Blackburn and Sandra Newland
Fall 2010

Introduction
Industrial chemical companies were the focus of our study of comparative advantage within the context
of a business organization. Dow Corning, Inc., a leader in the production of silicon and silicon
technologies; and Praxair, Inc., an innovator in the production of industrial gases, their distribution and
technologies.
We were actually surprised in our research to find that in 2001, Union Carbide Corporation (the
company from which Praxair was spun-off) became a wholly owned subsidiary of The Dow Chemical
Company (the parent company of Dow Corning). The companies were more closely related than we
thought!

Company Profiles
Dow Corning, Incorporated
Established in 1943 with the express purpose of exploring and developing plastics with the properties of
glass, Dow Cornings successful development and manufacture of silicones helped the company to
ascertain its place as industry leader throughout much of the 20th century (DowCorning.com).

Company History
Dow Corning, Inc. was initially structured as a joint venture between Dow Chemical and Corning Glass to
research and develop silicones, which combine the advantages of glass (temperature and moistureresistant) with those of plastics (strong and able to assume many forms). The company remains an
equally-owned joint venture to this day.
Over the next few decades, the company expanded dramatically entering Canada and Europe in the
late 1940s and South American and Japan in the early 1960s. Expansion continued to intensify in Europe
throughout the 1980s and in Asia in the 1990s and 2000s. New product development and silicone
application steadily drove this market growth and expansion, as Dow Cornings product repertoire grew
in range each decade. Products designed for aircraft engines, industrial lubrication, personal care and
biomedical dominated the first few decades, while expansion into medical and advanced materials
exploded throughout the past quarter century.
Throughout its history, silicone has defined the company and provided its primary source of profit.
Today the company describes itself as A global leader in silicon-based technology and innovation,
offering more than 7,000 products and services Product applications include automotive, electronics,
healthcare, household and cleaning, personal care, plastics, and textiles (Dow.com).

Industry Value Chain


Dow Corning uses silicone to create a number of products and their corresponding services for a wide
variety of consumers. Since the company requires so much of this resource, it has become the majority
shareholder in the Hemlock Semiconductor Group joint ventures, which is a "leading provider of
polycrystalline silicon and other silicon-based products used in the manufacturing of semiconductor
devices and solar cells and modules, explains Dow Corning on the company's Web site. Dow Corning
continues to invent and produce new silicone products and solutions for its customers.
Knowledge Systems
Human Resources
Environmental Services
Financing
Logistics
Manufac-

Material

Mining

Process
ing

Hemlock
Semiconductor Group

turing
Products

Product
Sales

Consumer

Dow Corning

Dow Corning is the majority shareholder in the Hemlock Semiconductor Group joint ventures

In addition to the development and production of innovative new silicone products, Dow Corning also
boasts capabilities in the following resource areas for their clients (Dow Corning, 2010):

Supply chain mapping and cost analysis


Global product registration
Supplier qualification
Procurement
Lab production and scale-up
Custom process development
Contract manufacturing
Root-cause analysis and improvement
Global logistics, warehousing and distribution
Import, customs and brokerage management
Packaging engineering and selection
Container recycling

Competitive Position
Dow Corning appeared on the Fortune 500 list consecutively from 1977 until 1996. The company is
based in the United States, but over half its business is conducted outside the U.S.
The company's top competitors include 3M Company, Bayer MaterialScience AG and Formosa Plastics
Corporation.
Along with Hemlock Semiconductor, Dow Corning manufactures solar panels that allow it to compete in
the energy industry with suppliers of coal, natural gas, wind, and hydro-electric. (DowCorning.com)

Praxair, Inc.
Praxair specializes in the sale of atmospheric, process and specialty gases, as well as high-performance
coatings (Praxair Corporate Brochure, 2009). However, industrial gases provide the greatest source of
revenue, contributing 86 percent of 2001 sales (International Directory of Company Histories, Vol. 48.,
2003). Their products, gas-delivery systems and applications technologies have made Praxair one of the
largest industrial and medical gases company worldwide, and the largest in the Americas.

Company History
Praxair, Inc. was established in 1992 when Union Carbide Industrial Gases was spun-off as an
independent company (Union Carbide Corporation - History). However, Praxair's origins date back to
1907 when a company named Linde Air Products Company was founded. Linde excelled in the
production of oxygen and nitrogen, developing several air separation plants throughout the early 1900s
(International Directory of Company Histories, Vol. 48., 2003). In 1917, Linde formally partnered with
competitor Union Carbide by joining three other companies and forming Union Carbide and Carbon
Company, one of the largest chemical companies in the United States at the time. Joining Union Carbide
allowed Linde to become the world's largest producer of industrial gases while maintaining its own
identity and a high level of autonomy within the division. It also provided the Linde Division with the
opportunity to share in research and development with the other Union Carbide divisions, as well as the
benefit of those divisions high utilization of Linde's gases.
Union Carbide was a Fortune 100 company for much of the twentieth century. The company was
consistently ranked in the Fortune 500 from 1955 to 2002; however, it began to drop in the rankings as
it lost market share to competitor Air Products and Chemicals in the late 1980s (International Directory
of Company Histories, Vol. 48., 2003). This eventually led to the decision to restructure and later create
a spinoff company, Praxair. The company under the name Praxair first appeared on the Fortune 500 at
#192 in 1994, just two years after it was established.

Throughout its century of operations, Praxair continued to research and market new applications for the
industrial gases it produced. For its efforts, the company rightfully secured a reputation as an innovator
in the field.

Industry Value Chain


Today, Praxairs primary product focus encompasses both the atmospheric gases Linde Air Products
began developing over a century ago (oxygen, nitrogen and argon), in addition to process and specialty
gases (carbon dioxide, helium, hydrogen and acetylene). The company is also known for its design,
engineering, and construction of cryogenic and non-cryogenic supply systems and pipelines. As you can
see in the diagram below, Praxair is responsible for the majority of the processes within the value chain.
The company designs and develops plants, traps or produces a number of gases, stores and transports
the products, and provides customer service to its wide-ranging consumer base. Praxair both uses their
own pipelines and trucks to transport their gases, as well as being part of the Syngas Alliance; a
partnership between various companies to share infrastructure to deliver their products.
Knowledge Systems
Human Resources
Environmental Services
Financing

Logistics
Gas
Trapping

Storage

Praxair

Sales

Transport

Syngas
Alliance

Consumer

Customer
Service

The spinoff company has managed to maintain its status as an innovator, continuing to lead the
development of new processes and technology, and serving a wide range of industries.

Competitive Position
Praxair has two primary international competitors: Air Products & Chemicals and L'Air Liquide.
Air Products is a U.S. company headquartered in Pennsylvania. It appears to be the most equally
matched to Praxair in terms of capabilities and areas of concentration. Both Air Products and Praxair

L'Air Liquide, a French-based company, earned high ranks in environmental responsibility and financial
soundness when Fortune Magazine named it one of their 50 most admired companies in 2008.
Environmental Leader reported earlier this year that L'Air Liquid is up to five times more efficient than
its competitors in use of resources (Environmental Leader, 2010).
In the U.S., Praxair must also compete with up-and-comer AirGas, now the country's largest industrial
gas distributor (Murphy, 2010). "Airgas is also a leading U.S. distributor of safety products, the largest
U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast,
and a leading distributor of process chemicals, refrigerants and ammonia products," reports the
company on its corporate Web site (AirGas - About, 2010).
In comparison with Praxair, both Air Products and L'Air Liquide are similarly structured, produce the
same industrial gases and focus on innovative solutions for their clients. However, one competitive
threat on the horizon has recently emerged. Over the past year, Air Products has made several attempts
for hostile takeover of Airgas. Praxair will need to be prepared for the possibility of the two companies
becoming one.
Praxair also competes with Air Products and Chemicals, Inc., Airgas Inc., LAir Liquide S.A., Linde AG.,
Sequa Corporation, Bodycote, PLC, and Sulzer Metco Management AG (Reuters, 2010).
The 2010 Fortune 500 rankings within the chemical industry are listed below. As you can see, Praxair
surpassed longtime competitor Air Products & Chemicals, the company partly responsible for the
decision to spin-off Praxair as a separate entity from Union Carbide in 1992. At this point, the decision
appears to have generated value for the company, as Praxair has increased its market share in relation
to Air Products & Chemicals.
PROFIT
S AS %
OF
Revenu
es
Rank

PROFITS AS
% OF
Stockholder
s' equity %

PROFITS AS
% OF
Stockholder
s' equity
Rank

REVENU
ES
$ mil.

PROFI
TS
$
mil.

PROFI
TS
Rank

PROFIT
S AS %
OF
Revenu
es %

46

44,945

648

13

13

86

27,328

1,755

24

190

12,239

336

11

10

11

MONSANTO

197

11,740

2,109

18

21

MOSAIC

231

10,298

2,350

23

28

PRAXAIR
AIR
PRODUCTS
&
CHEMICAL
S

262

8,956

1,254

14

24

273

8,381

631

13

ASHLAND

280

8,106

71

11

14

14

HUNTSMAN
SHERWINWILLIAMS

293

7,763

114

13

12

12

10

319

7,094

436

29

Indust
ry
no.
rank

Fortu
ne
500
rank

DUPONT
PPG
INDUSTRI
ES

DOW
CHEMICAL

Figure 1: Fortune 500 - Who's on Top by Sector: Chemicals (Fortune Magazine, 2010)

Analysis
Core Competencies

Dow Corning

It is evident when perusing Dow Corning's Web site that the company places a high level of importance
and pride in their history and success in both innovation and global presence.
"Innovation - the spark that started Dow Corning more than 60 years ago. The spirit that drives us
today," reads one heading (Dow Corning, 2010). Self-recognized as the "lifeblood" of the organization,
Dow Corning credits its success to the fact that innovation has facilitated the creation of products,
markets and new ways to serve customer needs since the company's inception. The company also
reports that it devotes approximately five percent of sales revenue to ongoing research and
development and arranges its business processes in a way that encourages innovation and invention.
Of the Dow Corning's annual sales, over half are made outside the United States reports the company
(Dow Corning, 2010). The company "provides performance-enhancing solutions to serve the diverse
needs of more than 25,000 customers worldwide," claims the corporate Web site referring to the fact
that the company maintains a worldwide distribution network. Dow Corning also boasts a worldwide
presence, employing almost 9,000 workers across the globe.
It also appears to be an advantage that Dow Corning is still equally owned by Dow Chemical and Corning
Glass. Dow and Corning are thriving companies in their own rights - consistently among the Fortune 500
for the last fifty years - and their joint venture company has the ensuing benefit of gained knowledge
and competencies from both companies.

Praxair
Like Dow Corning, Praxair establishes its core competency in innovation on its corporate Web site by
recognizing its leadership in the development of industry processes and technologies. In its 2009 annual
report, Praxair cited innovation as its competitive advantage: "Praxair provides a competitive advantage
to its customers by continuously developing new products and applications, which allow them to
improve their productivity, energy efficiency and environmental performance."
The 2008 annual report explained that the company's research and development activities help Praxair
"create a competitive advantage and provide a platform for the company to grow its business at greater
percentages than the rate of industrial production growth in the geographies where it operates."

Opportunity Costs
Dow Corning
Dow Corning bought Hemlock Semiconductor Group because they knew they required polycrystalline
silicon to develop growth in new product lines. Operating opportunity costs will require Dow Corning to
make the best use of the materials they acquire as they vie with competitors for other silicon sources to
use in their products. Expansion decisions will not only have to be based on source materials, but also
transportation costs for a company that spans the world.

Praxair
Praxair has addressed the transportation part of expansion costs by joining the aforementioned Syngas
Alliance and utilizing their own pipelines. These address the most expensive part of their industries
research and development. Operating opportunity costs are relatively low for industrial gas companies
(International Directory of Company Histories, Vol. 48., 2003).

Added Value
Below are charts to assess the added value and added value intensities of the two companies.
Calculations can be found in the appendix. Added Value, both top and lower quality, for Praxair greatly
exceeds those for Dow Corning. Praxairs Added Value Intensities are also larger than Dow Cornings, but
there is less of a gap. This shows that Praxair not only performed better as a firm, but also made better
use of its resources.
Figure 2: Added Value (Top Quality) - Dow Corning vs. Praxair
2000.0000
1800.0000
1600.0000
1400.0000
1200.0000
1000.0000
800.0000
600.0000
400.0000
200.0000
0.0000

Dow Corning
Praxair

Figure 3: Added Value (Lower Quality) - Dow Corning vs. Praxair


1600.0000
1400.0000
1200.0000
1000.0000
800.0000

Dow Corning

600.0000

Praxair

400.0000
200.0000
0.0000

Figure 4: Added Value Intensity (Top Quality) - Dow Corning vs. Praxair
1.4000
1.2000
1.0000
0.8000
Dow Corning
0.6000

Praxair

0.4000
0.2000

1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009

0.0000

Figure 5: Added Value Intensity (Lower Quality) Dow Corning vs. Praxair
1.2000
1.0000
0.8000
0.6000

Dow Corning
Praxair

0.4000
0.2000

1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009

0.0000

Conclusion
In their article, Assessing corporate performance, Evan Davis and John Kay conclude that top
indicators of competitive advantage include innovation, architecture, reputation and monopoly (Davis &
Kay, 1990). Here we assess how those factors may have accounted for Dow Corning and Praxairs
relative downfall and ascendance over the past two decades.
Innovation
Both companies examined in this paper possess long histories of innovation and research, while
maintaining a specialized focus on nearly every aspect of their respective products.
Architecture
As explained in the company profile of Praxair, when the Linde Division (now Praxair), a small,
profitable business segment of Union Carbide began losing market share in the 1980s, Carbide first
attempted to centralize management of the division, renaming it Union Carbide Industrial Gases. Four
years later, the company was spun-off becoming Praxair, Inc. The new company emerged with strong
sales, more employees than its parent company, and several new joint ventures to give Praxair a strong
representation in areas where it was previously trailing the competition.
In Praxair's case the decision to spin-off and regain complete focus on gases appears to be paying off.
The company experienced growth in the 1990s, with stock prices rising through the 2000s.

Reputation
A major lawsuit against Dow Corning in the late 1980s and early 1990s hurt the companys reputation
and may have led to its downfall during and following that time. Well-publicized allegations that the
companys silicone breast implant products were the cause of medical problems led the company to file
for bankruptcy protection for nearly a decade. The allegations were eventually dropped after numerous
studies, government panels and courts detected no association between silicone implants and disease.
Monopoly
Neither company appears to have a monopoly in their respective industries. However, the level of
competition could be of benefit in driving innovation - strength and core competency of both
organizations.
Epilogue
Both Dow Corning and Praxair have made good use of both their innovating spirits and competition in
their successes. The differences, in Praxairs structure and Dow Cornings reputation, contributed to
their rise and fall respectively. If Praxair had not been spun-off from Union Carbide and Dow Corning did
not encounter the issues related to its breast implant products, Dow Corning might have remained on
the Fortune 500 list while Praxair never entered it. For managers of any organization, the components of
innovation, architecture, reputation and monopoly are as just as important to their health as their use of
capital to produce profit.

Works Cited
AirGas - About. (2010). Retrieved October 2010, from Airgas.com:
http://airgas.com/content/information.aspx?id=about
Davis, Evan & Kay, John. "Assessing corporate performance". Business Strategy Review. Summer 1990.
Dow Corning. (2010). Innovation at Dow Corning. Retrieved October 2010, from Dow Corning:
http://www.dowcorning.com/content/about/aboutinnov/
Dow Corning. (2010). Total Supply Chain Management Capabilities - Dow Corning. Retrieved October
2010, from Dow Corning: http://www.dowcorning.com/content/etronics/soln_totl_supply_mgmt.asp
Environmental Leader. (2010, February 23). Air Liquide, BASF Top Chemical Industry Sustainable Value
Ranking. Retrieved October 2010, from Environmental Leader:
http://www.environmentalleader.com/2010/02/23/air-liquide-basf-top-chemical-industry-sustainablevalue-ranking/
Fortune Magazine. (2010, May 3). Fortune 500 - Who's On Top By Sector. Fortune Vol. 161 Issue 6 , pp.
pF-34-F-41, 6p.
International Directory of Company Histories, Vol. 48. (2003). Praxair - Company History. Retrieved
October 2010, from Funding Universe: fundinguniverse.com
Murphy, R. M. (2010, June 21). 50 Top Performers. Bloomberg Businessweek, Issue 4184 , pp. p56-71,
11p.
Praxair, Inc. (2009). Praxair Corporate Brochure.
Reuters. (2010). Company Profile for Praxair, Inc. Retrieved October 2010, from Reuters:
http://in.reuters.com/finance/stocks/companyProfile?symbol=PX.N
Union Carbide Corporation - History. (n.d.). Retrieved October 2010, from Union Carbide Corporation:
http://www.unioncarbide.com/history/index.htm

Appendix
Table 1. Dow Corning - Operating Profit

Year

Net Sales

1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

267.0060
353.6330
408.0720
479.0490
610.1540
681.5180
721.8610
662.7550
763.0630
855.1000
901.1000
1085.4000
1303.0000
1476.8000
1574.5000
1718.3000
1845.4000
1955.7000
2043.7000
2204.6000
2492.9000
2532.3000
2643.5000
2568.0000

Cost of Goods
Sold

Selling, General,
& Administrative
Expense

Taxes

142.6390
57.1570
- 21.7780
176.9230
71.2380
- 37.5440
208.4510
77.2340
- 40.1730
249.8010
95.6080
- 38.4080
319.3870
131.6520
- 53.6790
363.5660
149.7430
- 54.4320
393.1720
147.4680
- 49.1430
384.0180
141.9040
- 12.5950
428.4860
157.6620
- 37.4140
483.6000
177.3000
- 56.9000
528.3000
175.4000
- 38.1000
615.1000
219.6000
- 55.9000
737.6000
263.8000
- 69.0000
835.7000
293.3000
- 87.1000
878.5000
314.2000
- 93.5000
967.1000
351.6000
- 93.9000
1028.0000
397.3000
- 88.6000
1158.1000
410.4000
- 64.6000
1213.2000
403.9000
- 52.2000
1280.6000
415.4000
0
1450.4000
450.3000
0
1485.1000
462.3000
0
1610.4000
466.9000
0
1582.9000
471.4000
0
Beginning in 1994, Dow Corning began to defer all taxes.

Operating
Profit

=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=

45.4320
67.9280
82.2140
95.2320
105.4360
113.7770
132.0780
124.2380
139.5010
137.3000
159.3000
194.8000
232.6000
260.7000
288.3000
305.7000
331.5000
322.6000
374.4000
508.6000
592.2000
584.9000
566.2000
513.7000

Table 2. Dow Corning - Capital Employed

Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

Total
Assets

Total
Accounts
Payable

Capital
Employed

- 11.6520 = 320.5690
332.221
384.1040 - 13.3320 = 370.7720
433.1980 - 15.0370 = 418.1610
489.2120 - 22.5010 = 466.7110
598.5870 - 30.7860 = 567.8010
699.6450 - 33.9710 = 665.6740
787.0880 - 39.7640 = 747.3240
838.5470 - 33.3870 = 805.1600
865.9610 - 46.9190 = 819.0420
884.8000 - 52.3000 = 832.5000
1018.9000 - 52.0000 = 966.9000
1147.9000 - 72.8000 = 1075.1000
1361.2000 - 90.3000 = 1270.9000
1528.8000 - 148.3000 = 1421.2000
1678.1000 - 107.6000 = 1540.8000
1922.4000 - 137.3000 = 1773.7000
2119.9000 - 148.7000 = 2005.5000
2190.7000 - 114.4000 = 2025.3000
3262.3000 - 165.4000 = 3096.6000
4093.2000 - 165.7000 = 3911.6000
4958.4000 - 181.6000 = 4754.9000
5114.1000 - 203.5000 = 4943.4000
5318.7000 - 170.7000 = 4957.8000
6166.3000 - 360.9000 = 5805.4000
Dow Corning had neither Customer Advances nor
Accured Liabilities.

Table 3. Dow Corning - Capital Charge (Top Quality)

Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

Capital
Employed

AAA
Bond
Rate

Capital
Charge (Top
Quality)

320.5690 * 0.0879 =
28.1780
370.7720 * 0.0798 =
29.5876
418.1610 * 0.0819 =
34.2474
466.7110 * 0.0916 =
42.7507
567.8010 * 0.1074 =
60.9818
665.6740 * 0.1321 =
87.9355
747.3240 * 0.1423 =
106.3442
805.1600 * 0.1183 =
95.2504
819.0420 * 0.1257 =
102.9536
832.5000 * 0.1213 =
100.9823
966.9000 * 0.1016 =
98.2370
1075.1000 * 0.0849 =
91.2760
1270.9000 * 0.1011 =
128.4880
1421.2000 * 0.0957 =
136.0088
1540.8000 * 0.0886 =
136.5149
1173.7000 * 0.0905 =
106.2199
2005.5000 * 0.0831 =
166.6571
2025.3000 * 0.0798 =
161.6189
3096.6000 * 0.0693 =
214.5944
3911.6000 * 0.0846 =
330.9214
4754.9000 * 0.0682 =
324.2842
4943.4000 * 0.0720 =
355.9248
4957.8000 * 0.0676 =
335.1473
5805.4000 * 0.0622 =
361.0959
Rate as of 12/01 of that year.

Table 4. Dow Corning - Added Value (Top Quality)

Year

Operating
Profit

Capital Charge
(Top Quality)

Added Value
(Top Quality)

Inflation
Factor

Added Value (Top Quality)


Adjusted for Inflation

1975

45.4320

28.1780

17.2540

0.311645

55.3643

1976

67.9280

29.5786

38.3494

0.328542

116.7259

1977

82.2140

34.2474

47.9666

0.350491

136.8556

1978

95.2320

42.7507

52.4813

0.375968

139.5896

1979

105.4360

60.9818

44.4542

0.408687

108.7732

1980

113.7770

87.9355

25.8415

0.448474

57.6209

1981

132.0780

106.3442

25.7338

0.485537

53.0007

1982

124.2380

95.2504

28.9876

0.510662

56.7648

1983

139.5010

102.9536

36.5474

0.527704

69.2573

1984

137.3000

100.9823

36.3177

0.546783

66.4206

1985

159.3000

98.2370

61.0630

0.561934

108.6657

1986

194.8000

91.2760

103.5240

0.574841

180.0916

1987

232.6000

128.4880

104.1120

0.592598

175.6873

1988

260.7000

136.0088

124.6912

0.614501

202.9145

1989

288.3000

136.5149

151.7851

0.635879

238.7012

1990

305.7000

106.2199

199.4801

0.662298

301.1938

1991

331.5000

166.6571

164.8429

0.683377

241.2180

1992

322.6000

161.6189

160.9811

0.698257

230.5471

1993

374.4000

214.5944

159.8056

0.713462

223.9861

1994

508.6000

330.9214

177.6786

0.728649

243.8465

1995

592.2000

324.2842

267.9158

0.743293

360.4442

1996

584.9000

355.9248

228.9752

0.756987

302.4823

1997

566.2000

335.1473

231.0527

0.769151

300.3995

1998

513.7000

361.0959

152.6041

0.777587

196.2535

Inflation Factor as of 10/01 of that year.

Table 5. Dow Corning - Added Value Intensity (Top Quality)

Year

Added Value (Top


Quality) Adjusted for
Inflation

Selling, General, &


Administrative
Expense

Capital
Charge (Top
Quality)

Added Value
Intensity (Top
Quality)

1975

55.3643

57.1570

28.1780

0.6488

1976

116.7259

71.2380

29.5786

1.1578

1977

136.8556

77.2340

34.2474

1.2276

1978

139.5896

95.6080

42.7507

1.0089

1979

108.7732

131.6520

60.9818

0.5647

1980

57.6209

149.7430

87.9355

0.2424

1981

53.0007

147.4680

106.3442

0.2088

1982

56.7648

141.9040

95.2504

0.2394

1983

69.2573

157.6620

102.9536

0.2657

1984

66.4206

177.3000

100.9823

0.2387

1985

108.6657

175.4000

98.2370

0.3971

1986

180.0916

219.6000

91.2760

0.5793

1987

175.6873

263.8000

128.4880

0.4479

1988

202.9145

293.3000

1360.0844

0.1227

1989

238.7012

314.2000

136.5149

0.5296

1990

301.1938

351.6000

106.2199

0.6579

1991

241.2180

397.3000

166.6571

0.4277

1992

230.5471

410.4000

161.6189

0.4030

1993

223.9861

403.9000

214.5944

0.3621

1994

243.8465

415.4000

330.9214

0.3267

1995

360.4442

450.3000

324.2842

0.4653

1996

302.4823

462.3000

355.9248

0.3697

1997

300.3995

466.9000

335.1473

0.3745

1998

196.2535

471.4000

361.0959

0.2357

Table 6. Dow Corning Capital Charge (Lower Quality)

Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

Capital
Employed

BBB
Bond
Rate

Capital Charge
(Lower
Quality)

320.5690 * 0.1056 =
33.8521
370.7720 * 0.0912 =
33.8144
418.1610 * 0.0899 =
37.5927
466.7110 * 0.0994 =
46.3911
567.8010 * 0.1206 =
68.4768
665.6740 * 0.1514 =
100.7830
747.3240 * 0.1655 =
123.6821
805.1600 * 0.1414 =
113.8496
819.0420 * 0.1375 =
112.6183
832.5000 * 0.1340 =
111.5550
966.9000 * 0.1158 =
111.9670
1075.1000 * 0.0997 =
107.1875
1270.9000 * 0.1129 =
143.4846
1421.2000 * 0.1065 =
151.3578
1540.8000 * 0.0982 =
151.3066
1773.7000 * 0.1043 =
184.9969
2005.5000 * 0.0926 =
185.7093
2025.3000 * 0.0881 =
178.4289
3096.6000 * 0.0769 =
238.1285
3911.6000 * 0.0910 =
355.9556
4754.9000 * 0.0749 =
356.1420
4943.4000 * 0.0789 =
390.0343
4957.8000 * 0.0732 =
362.9110
5805.4000 * 0.0723 =
419.7304
Rate as of 12/01 of that year.

Table 7. Dow Corning - Added Value (Lower Quality)

Capital Charge
(Lower
Quality)

Added Value
(Lower
Quality)

Inflation
Factor

Added Value (Lower Quality)


Adjusted for Inflation

45.4320

33.8521

11.5799

0.311645

37.1574

1976

67.9280

33.8144

34.1136

0.328542

103.8332

1977

82.2140

37.5927

44.6213

0.350491

127.3110

1978

95.2320

46.3911

48.8409

0.375968

129.9069

1979

105.4360

68.4768

36.9592

0.408687

90.4340

1980

113.7770

100.7830

12.9940

0.448474

28.9738

1981

132.0780

123.6821

8.3959

0.485537

17.2920

1982

124.2380

113.8496

10.3884

0.510662

20.3430

1983

139.5010

112.6183

26.8827

0.527704

50.9427

1984

137.3000

111.5550

25.7450

0.546783

47.0845

1985

159.3000

111.9670

47.3330

0.561934

84.2323

1986

194.8000

107.1875

87.6125

0.574841

152.4118

1987

232.6000

143.4846

89.1154

0.592598

150.3808

1988

260.7000

151.3578

109.3422

0.614501

177.9365

1989

288.3000

151.3066

136.9934

0.635879

215.4395

1990

305.7000

184.9969

120.7031

0.662298

182.2489

1991

331.5000

185.7093

145.7907

0.683377

213.3385

1992

322.6000

178.4289

144.1711

0.698257

206.4728

1993

374.4000

238.1285

136.2715

0.713462

191.0003

1994

508.6000

355.9556

152.6444

0.728649

209.4895

1995

592.2000

356.1420

236.0580

0.743293

317.5839

1996

584.9000

390.0343

194.8657

0.756987

257.4228

1997

566.2000

362.9110

203.2890

0.769151

264.3030

1998

513.7000

419.7304

93.9696

0.777587

120.8477

Year

Operating
Profit

1975

Inflation Factor as of 10/01 of that year.

Table 8. Dow Corning - Added Value Intensity (Lower Quality)

Selling, General, &


Administrative
Expense

57.1570

Capital
Charge
(Lower
Quality)
33.8521

103.8332

71.2380

1977

127.3110

77.2340

1978

129.9069

1979

90.4340

1980

28.9738

1981

17.2920

1982

Year

Added Value (Lower


Quality) Adjusted for
Inflation

Added Value
Intensity (Lower
Quality)

1975

37.1574

0.4083

1976

33.8144

0.9884

37.5927

1.1087

95.6080

46.3911

0.9148

131.6520

68.4768

0.4519

149.7430

100.7830

0.1157

147.4680

123.6821

0.0638

20.3430

141.9040

113.8496

0.0795

1983

50.9427

157.6620

112.6183

0.1885

1984

47.0845

177.3000

111.5550

0.1630

1985

84.2323

175.4000

111.9670

0.2931

1986

152.4118

219.6000

107.1875

0.4664

1987

150.3808

263.8000

143.4846

0.3692

1988

177.9365

293.3000

151.3578

0.4002

1989

215.4395

314.2000

151.3066

0.4628

1990

182.2489

351.6000

184.9969

0.3396

1991

213.3385

397.3000

185.7093

0.3659

1992

206.4728

410.4000

178.4289

0.3506

1993

191.0003

403.9000

238.1285

0.2975

1994

209.4895

415.4000

355.9556

0.2716

1995

317.5839

450.3000

356.1420

0.3938

1996

257.4228

462.3000

390.0343

0.3020

1997

264.3030

466.9000

362.9110

0.3185

1998

120.8477

471.4000

419.7304

0.1356

Table 9. Praxair Operating Profit

Year

Net Sales

1991 2469.0000
1992 2604.0000
1993 2438.0000
1994 2711.0000
1995 3146.0000
1996 4449.0000
1997 4735.0000
1998 4833.0000
1999 4639.0000
2000 5043.0000
2001 5158.0000
2002 5128.0000
2003 5613.0000
2004 6594.0000
2005 7656.0000
2006 8324.0000
2007 9402.0000
2008 10796.0000
2009 8956.0000

Cost of
Goods
Sold

1409.0000
1460.0000
1396.0000
1507.0000
1777.0000
2564.0000
2764.0000
2807.0000
2732.0000
3028.0000
3053.0000
2950.0000
3328.0000
3987.0000
4641.0000
4968.0000
5557.0000
6495.0000
5032.0000

Selling, General,
& Administrative
Expense

Taxes

Operating
Profit

452.0000
469.0000
450.0000
467.0000
557.0000
760.0000
741.0000
716.0000
708.0000
727.0000
760.0000
820.0000
841.0000
946.0000
1067.0000
1173.0000
1288.0000
1409.0000
1162.0000

36.0000
48.0000
52.0000
55.0000
80.0000
62.0000
84.0000
116.0000
99.0000
68.0000
99.0000
121.0000
141.0000
143.0000
176.0000
265.0000
382.0000
488.0000
390.0000

=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=

572.0000
627.0000
540.0000
682.0000
732.0000
1063.0000
1146.0000
1194.0000
1100.0000
1220.0000
1246.0000
1237.0000
1303.0000
1518.0000
1772.0000
1918.0000
2175.0000
2404.0000
2372.0000

Table 10. Praxair Capital Employed

Accounts
Payable
(Trade)

3451.0000
3344.0000
3255.0000
3520.0000
4134.0000
7538.0000
7810.0000
8096.0000
7722.0000
7762.0000
7715.0000
7401.0000
8305.0000
9878.0000
10491.0000
11102.0000
13382.0000
13054.0000

208.0000
181.0000
153.0000
215.0000
272.0000
408.0000
383.0000
378.0000
361.0000
409.0000
413.0000
378.0000
413.0000
502.0000
639.0000
682.0000
818.0000
820.0000

2009 14317.0000

730.0000

Year

Total
Assets

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

Accrued
liabilities
-66.0000
-27.0000
10.0000
63.0000
118.0000
9.0000
-41.0000
-14.0000
-26.0000
31.0000
-22.0000
-41.0000
78.0000
153.0000
192.0000
207.0000
116.0000
-73.0000
178.0000

Capital
Employed

= 3309.0000
= 3190.0000
= 3092.0000
= 3242.0000
= 3744.0000
= 7121.0000
= 7468.0000
= 7732.0000
= 7387.0000
= 7322.0000
= 7324.0000
= 7064.0000
= 7814.0000
= 9223.0000
= 9660.0000
= 10213.0000
= 12448.0000
= 12307.0000
= 13765.0000

Table 11. Praxair Capital Charge (Top Quality)

Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Capital
Employed

AAA
Bond
Rate

Capital
Charge (Top
Quality)

3309.0000 * 0.0831 =
274.9779
3190.0000 * 0.0798 =
254.5620
3092.0000 * 0.0693 =
214.2756
3242.0000 * 0.0846 =
274.2732
3744.0000 * 0.0682 =
255.3408
7121.0000 * 0.0720 =
512.7120
7468.0000 * 0.0676 =
504.8368
7732.0000 * 0.0622 =
480.9304
7387.0000 * 0.0755 =
557.7185
7322.0000 * 0.0721 =
527.9162
7324.0000 * 0.0677 =
495.8348
7064.0000 * 0.0621 =
438.6744
7814.0000 * 0.0562 =
439.1468
9223.0000 * 0.0547 =
504.4981
9660.0000 * 0.0537 =
518.7420
10213.0000 * 0.0532 =
543.3316
12448.0000 * 0.0549 =
683.3952
12307.0000 * 0.0505 =
621.5035
13765.0000 * 0.0526 =
724.0390
Rate as of 12/01 of that year.

Table 12. Praxair - Added Value (Top Quality)

Year

Operating
Profit

Capital Charge
(Top Quality)

Added Value
(Top Quality)

Inflation
Factor

Added Value (Top Quality)


Adjusted for Inflation

1991

572.0000

274.9779

297.0221

0.683377

434.6385

1992

627.0000

254.5620

372.4380

0.698257

533.3825

1993

540.0000

214.2756

325.7244

0.713462

456.5406

1994

682.0000

274.2732

407.7268

0.728649

559.5652

1995

732.0000

255.3408

476.6592

0.743293

641.2800

1996

1063.0000

512.7120

550.2880

0.756987

726.9449

1997

1146.0000

504.8368

641.1632

0.769151

833.5982

1998

1194.0000

480.9304

713.0696

0.777587

917.0291

1999

1100.0000

557.7185

542.2815

0.789498

686.8692

2000

1220.0000

527.9162

692.0838

0.808875

855.6126

2001

1246.0000

495.8348

750.1652

0.824986

909.3071

2002

1237.0000

438.6744

798.3256

0.840164

950.2025

2003

1303.0000

439.1468

863.8532

0.858003

1006.8188

2004

1518.0000

504.4981

1013.5019

0.885725

1144.2623

2005

1772.0000

518.7420

1253.2580

0.916923

1366.8082

2006

1918.0000

543.3316

1374.6684

0.943252

1457.3717

2007

2175.0000

683.3952

1491.6048

0.967915

1541.0493

2008

2404.0000

621.5035

1782.4965

0.988487

1803.2566

2009

2372.0000

724.0390

1647.9610

0.992551

1660.3284

Inflation Factor as of 10/01 of that year.

Table 13. Praxair - Added Value Intensity (Top Quality)

Year

Added Value (Top


Quality) Adjusted for
Inflation

Selling, General, &


Administrative
Expense

Capital
Charge (Top
Quality)

Added Value
Intensity (Top
Quality)

1991

434.6385

452.0000

274.9779

0.5979

1992

533.3825

469.0000

254.5620

0.7372

1993

456.5406

450.0000

214.2756

0.6873

1994

559.5652

467.0000

274.2732

0.7549

1995

641.2800

557.0000

255.3408

0.7894

1996

726.9449

760.0000

512.7120

0.5712

1997

833.5982

741.0000

504.8368

0.6691

1998

917.0291

716.0000

480.9304

0.7662

1999

686.8692

708.0000

557.7185

0.5427

2000

855.6126

727.0000

527.9162

0.6818

2001

909.3071

760.0000

495.8348

0.7241

2002

950.2025

820.0000

438.6744

0.7549

2003

1006.8188

841.0000

439.1468

0.7865

2004

1144.2623

946.0000

504.4981

0.7889

2005

1366.8082

1067.0000

518.7420

0.8619

2006

1457.3717

1173.0000

543.3316

0.8491

2007

1541.0493

1288.0000

683.3952

0.7817

2008

1803.2566

1409.0000

621.5035

0.8881

2009

1660.3284

1162.0000

724.0390

0.8803

Table 14. Praxair Capital Charge (Lower Quality)

Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Capital
Employed

BBB
Bond
Rate

Capital Charge
(Lower
Quality)

3309.0000 * 0.0926 =
306.4134
3190.0000 * 0.0881 =
281.0390
3092.0000 * 0.0769 =
237.7748
3242.0000 * 0.0910 =
295.0220
3744.0000 * 0.0749 =
280.4256
7121.0000 * 0.0789 =
561.8469
7468.0000 * 0.0732 =
546.6576
7732.0000 * 0.0723 =
559.0236
7387.0000 * 0.0819 =
604.9953
7322.0000 * 0.0802 =
587.2244
7324.0000 * 0.0805 =
589.5820
7064.0000 * 0.0745 =
526.2680
7814.0000 * 0.0660 =
515.7240
9223.0000 * 0.0615 =
567.2145
9660.0000 * 0.0632 =
610.5120
10213.0000 * 0.0622 =
635.2486
12448.0000 * 0.0665 =
827.7920
12307.0000 * 0.0843 =
1037.4801
13765.0000 * 0.0637 =
876.8305
Rate as of 12/01 of that year.

Table 15. Praxair - Added Value (Lower Quality)

Capital Charge
(Lower
Quality)

Added Value
(Lower
Quality)

Inflation
Factor

Added Value (Lower Quality)


Adjusted for Inflation

572.0000

306.4134

265.5866

0.683377

388.6383

1992

627.0000

281.0390

345.9610

0.698257

495.4638

1993

540.0000

237.7748

302.2252

0.713462

423.6037

1994

682.0000

295.0220

386.9780

0.728649

531.0895

1995

732.0000

280.4256

451.5744

0.743293

607.5318

1996

1063.0000

561.8469

501.1531

0.756987

662.0364

1997

1146.0000

546.6576

599.3424

0.769151

779.2255

1998

1194.0000

559.0236

634.9764

0.777587

816.5988

1999

1100.0000

604.9953

495.0047

0.789498

626.9870

2000

1220.0000

587.2244

632.7756

0.808875

782.2908

2001

1246.0000

589.5820

656.4180

0.824986

795.6721

2002

1237.0000

526.2680

710.7320

0.840164

845.9447

2003

1303.0000

515.7240

787.2760

0.858003

917.5682

2004

1518.0000

567.2145

950.7855

0.885725

1073.4543

2005

1772.0000

610.5120

1161.4880

0.916923

1266.7235

2006

1918.0000

635.2486

1282.7514

0.943252

1359.9247

2007

2175.0000

827.7920

1347.2080

0.967915

1391.8659

2008

2404.0000

1037.4801

1366.5199

0.988487

1382.4353

2009

2372.0000

876.8305

1495.1695

0.992551

1506.3903

Year

Operating
Profit

1991

Inflation Factor as of 10/01 of that year.

Table 16. Praxair - Added Value Intensity (Lower Quality)

Selling, General, &


Administrative
Expense

452.0000

Capital
Charge
(Lower
Quality)
306.4134

495.4638

469.0000

1993

423.6037

450.0000

1994

531.0895

1995

607.5318

1996

662.0364

1997

779.2255

1998

Year

Added Value (Lower


Quality) Adjusted for
Inflation

Added Value
Intensity (Lower
Quality)

1991

388.6383

0.5124

1992

281.0390

0.6606

237.7748

0.6159

467.0000

295.0220

0.6969

557.0000

280.4256

0.7255

760.0000

561.8469

0.5008

741.0000

546.6576

0.6051

816.5988

716.0000

559.0236

0.6405

1999

626.9870

708.0000

604.9953

0.4775

2000

782.2908

727.0000

587.2244

0.5952

2001

795.6721

760.0000

589.5820

0.5896

2002

845.9447

820.0000

526.2680

0.6284

2003

917.5682

841.0000

515.7240

0.6763

2004

1073.4543

946.0000

567.2145

0.7094

2005

1266.7235

1067.0000

610.5120

0.7551

2006

1359.9247

1173.0000

635.2486

0.7521

2007

1391.8659

1288.0000

827.7920

0.6578

2008

1382.4353

1409.0000

1037.4801

0.5651

2009

1506.3903

1162.0000

876.8305

0.7389