Dow Chemical Tries Again

Stavropoulos will relinquish his role as president, but will continue as chairman and chief executive officer.

Since Stavropoulos has cast such a long shadow over the company since he first became CEO almost a decade ago, little is known about Liveris, who started working for the company in Australia in 1976 and only arrived at U.S. headquarters in 1992. Though the announcement didn't address the issue of succession, many speculate that Liveris, an Australian of Greek descent, will ultimately succeed Stavropoulos. If so, then Liveris will be Stavropoulos' second successor.

Michael Parker, also a veteran Dow (nyse: DOW - news - people ) employee, held the job for almost two years before Stavropoulos was asked by the board to replace him in December 2002. The rationale: Parker simply wasn't cutting costs fast enough when the chemical industry found itself facing a very difficult operating environment in which both crude oil and natural gas, the industry's major raw-material costs, were skyrocketing.

That is still the rub at the $30 billion company. "Dow has aggressively cut costs, but it still needs to be laser-focused on doing the same thing in the future in order to continue to offset its feedstock costs," says Andrew Brady, a senior analyst at Creditsights in New York.

Is Liveris the man for the job? He declined the opportunity to talk to the media, but in recent comments it is clear that Liveris is an optimist. "Some say there's no growth left in the chemical business, but I disagree with that," he told a February meeting of the Synthetic Organic Chemical Manufacturers Association. The solution, as Liveris explained it, was to focus on innovation, not maintenance, in the stodgy chemical industry. Then six months later Liveris repeated the theme in a profile published in his native Queensland, Australia. "Faced with diminishing returns from productivity...there is one main management option for a knowledge and asset-intensive business such as Dow. Be creative," he reportedly said. "I have got to tell you it is an overused word, but it is the only answer."

How easy will it be to be creative at Dow, especially since Liveris himself concedes that the traditional route may be closed to the company--that is, to continue wringing productivity improvements out of a company that doubled revenue from ten years ago while keeping employment stable at around 49,000.

Over the last decade, Liveris has managed to steer clear of the U.S. commodity chemical business, though Dow's involvement in it deepened with its acquisition of Union Carbide in 2001. In 1993, soon after arriving in the U.S., Liveris was put in charge of the company's startup businesses in environmental sciences. He then ran Dow's Asian operations out of Hong Kong. In the late 1990s he helped create Elemica, the chemicals e-commerce site.

Liveris is also credited with helping Dow build a new business unit. Dow started making custom chemicals on contract in 1995, and while several other companies including Eastman Chemical (nyse: EMN - news - people ), Honeywell (nyse: HON - news - people ) and PPG Industries (nyse: PPG - news - people ) got into the business in a larger way, Dow decided to do things differently. It was content to remain a very small player for four years, learning the ropes. Then in 2000, Liveris was put in charge of the group, bringing together many of Dow's acquisitions to form a custom manufacturing business. Today that group, called Performance Chemicals, is a $5.1 billion portfolio of 30 diverse companies making chemicals for industries from pharmaceuticals to agriculture.

Liveris' innovations may be difficult to apply to the entire company. "The company has large unfunded pension and post-retirement obligations which will need to be addressed," notes Brady. "At the same time, the company has stated that it wants to lower its debt level. Both would reduce the capital availability for growth initiatives. The new executive will also need to oversee the (continued) legal isolation of Union Carbide. Dow has been very diligent in putting together its structural defense (against Union Carbide's asbestos liabilities) but Dow recently lost a Supreme Court appeal in its West Virginia case."

In other words, Liveris will have his plate more than full.