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The Associated Press State & Local Wire
May 29, 2004, Saturday, BC cycle
After 9 years in bankruptcy, Dow Corning looks to silicon.
By DAVID RUNK, Associated Press Writer

Nine years ago, when Dow Corning Corp.'s Gary Anderson signed the papers to put the company into bankruptcy after a flood of liability lawsuits, he promised that he would sign the papers to get it out. Dow Corning was best known for the silicone breast implants that it stopped making in 1992, but Anderson says executives knew the only way the company could survive was to focus on the future of silicon-based technology.

Since its bankruptcy filing in 1995, the company has continued to be a key supplier of silicone that is in everything from cosmetics and cleaners to cars and buildings. And through new research and development partnerships, it has sought to make itself more integral to the manufacturers that are its primary customers. With that foundation in place, Anderson on Tuesday is set to sign the papers for Dow Corning to emerge from bankruptcy protection. Anderson says the company was able to survive by giving a few dozen employees the task of navigating bankruptcy. That group worked out a plan that provided for more than $2.35 billion to pay those who claimed silicone implants caused health problems, while the rest of the company tried to look ahead. "The small, focused team really ... made the difference in letting people get back to work," Anderson, Dow Corning's chairman, said during a recent interview at the company's Midland headquarters. "We told everybody: 'Hey, your job is to keep the company healthy, focused on the customers, service."

With hopes of putting the implant controversy behind it, Dow Corning has been working to develop new uses for silicon-based materials in industries as diverse as electronics, biotechnology and energy. And it is expanding its geographic reach into emerging markets such as China. "Our entire mission is to explore silicon-based technology and bring it into new markets and new applications," said Stephanie Burns, who took over as president in 2003 and became chief executive in January. "We've spent the last five years really refocusing the company for growth." Dow Corning's settlement and reorganization plan didn't address the conflicting claims about the safety of breast implants. The company continues to insist that the silicone-gel implants it made from 1962 until 1992, when they were banned for most uses by the U.S. Food and Drug Administration, were safe. Women blamed leaking gel from the implants for illnesses including lupus, rheumatoid arthritis, body aches, fatigue, memory loss and hardening of the breasts.

Major scientific studies since haven't linked implants to serious diseases like lupus or cancer. One by the Mayo Clinic and another by Harvard failed to find any link between breast implants and disease. And in 1999, the Institute of Medicine declared there was no evidence that implants cause major illnesses. But women's health advocates say the issue needs to be studied more thoroughly. Faced with about 19,000 lawsuits over breast implants by 1995, its bankruptcy filing was a way for Dow Corning to consolidate the claims and remain viable. It used a strategy forged by other companies faced with crippling liability lawsuits, such as makers of asbestos fireproofing materials.

"If you allow a company to rehabilitate, it is going to create more value for everybody," said Jeff Linstrom, senior vice president and general counsel for financial services company Hilco Trading Co. "Instead of spending the money paying the claims, they would have spent the money defending the claims."

In all, about 170,000 women who received breast implants and 75,000 people who had other kinds of silicone implants, including joint and facial implants, have filed claims. The first settlement checks will be paid starting around June 15. "There is a good deal of work to be done to get each woman the amount of money she is entitled to," said Sybil Niden Goldrich, a member of the committee that represents those with implant claims against Dow Corning. She described the payments as "a long time in coming." A claimant herself, Goldrich had four sets of breast implants after a bilateral mastectomy. She said the implants made her feel like she possibly had advanced cancer until they were removed and her symptoms disappeared.

The controversy over implants hit employees hard. In the turmoil leading up to its bankruptcy filing, morale was low, Anderson recalled, and the fear among employees about what would happen was high. But once the settlement was reached in 1999, the ongoing Chapter 11 process faded into the background. "We had a business to run," said Larry Tarvestad, who manages a Dow Corning plant in Greensboro, N.C., and stuck with the company through bankruptcy. "I wanted to know what was going on there, but I had a lot of work."

Executives say the company has been changed by the experience that led it into bankruptcy. As other companies push federal regulators to again permit the use of silicone implants, Dow Corning isn't planning to make implants again. And a toughened review process now governs decisions about what it makes and sells. "You audit, both before you take a new product to market - where it's going to be used and what the potential risks are," Anderson said. "Secondly, periodically go back and review products that have been in existence for a long time."

Formed in 1943 as a joint venture of Midland-based Dow Chemical Co. and Corning, N.Y.-based Corning Inc., Dow Corning was established to explore the potential of silicon-based materials. It has grown to employ about 8,000 worldwide as its products became used in more industries; in 2003, it earned $176.6 million on sales of $2.87 billion.

"The average person doesn't appreciate how many times a day silicon touches them," Burns said. Hand lotion, shampoo and deodorant are among the long list of personal care products that contain Dow Corning silicone. In the 1960s and '70s, the company first used silicone in new sealants, rubbers, coatings and glazing compounds as well as implants. And Dow Corning grew to supply silicon used in computer chips. Anderson was Dow Corning's president when it went into bankruptcy and also served as CEO for part of the reorganization. After his promise to see the company emerge is kept, he is retiring effective July 1 and will serve in a part-time capacity, running some board meetings and handling some special projects. "It's kind of a nice thing to know that the world can't grow in the direction it wants to grow without our technology," Anderson said. "It's a bright future for us."