In 1981, Edward G. Jefferson took command of E. I. du Pont de Nemours & Co., moving into the chairman's office at the company he had joined as a chemist 30 years before.
In keeping with the deep Du Pont family tradition woven into the company, he did not replace the portraits in the chairman's office of the three Du Pont family members who had been among his predecessors the job.
Tomorrow, the British-born Jefferson retires, turning the chairmanship over to another Du Pont veteran, Richard E. Heckert. Although few would have predicted it, Jefferson's departure ends five years of dramatic and fundamental change at Du Pont, perhaps more change than any other chairman has had to confront.
Two events stand out as watersheds of Jefferson's tenure. One was the acquisition of Conoco Inc. in 1981 for the then-staggering sum of $7.6 billion in stock and cash.
Conoco, the nation's ninth-largest oil company and second-biggest coal firm, was acquired to provide Du Pont with a secure source for the oil and natural gas products its manufacturing plants consume in vast quantities. But the price was steep, tripling DuPont's debt level and tying its fortunes in a major way to the vagaries of the oil business.
The other, much different decision was the offer of early retirement incentives to Du Pont employes in 1985, a direct, costly and painful attempt to cut fat out of Du Pont's work force.
More than 11,000 of Du Pont's 122,000 U.S. employes took the offer, which sent a signal throughout the company that an era had ended.
James F. Kearns, head of Du Pont's materials and logistics operations, told the Wilmington News-Journal last year, "There are people out there who think if they got a job with Du Pont, they've got a job for life. We'd better damn well change their minds or none of us are going to have jobs . . . I don't believe it will ever return to the 'good old days.' "
The two milestones mark the swing in outlook not only at Du Pont but at most other major U.S. manufacturing companies in the 1980s. The decade began in a burst of optimism. Five years later, those high hopes had been hit head-on by recession, a high dollar and fierce import competition.
"If I have any regrets," Jefferson said in an interview last week, "it's perhaps we were a little too certain about growth when we started out." Jefferson, like his peers at the top of Du Pont, had counted on continued growth in the chemical industry. Between the end of World War II and 1970, annual sales growth averaged 8 percent. In the 1970s, despite oil shocks and recessions, the industry still managed a 4 percent annual average gain. And in 1980, there were brave predictions of a new decade of boom and prosperity.
"That was the tenor of things. It didn't turn out that way," Jefferson said with characteristic understatement. Much of the rosy profits in the late 1970s had come from exports, fueled by a cheap dollar. When the dollar soared in the 1980s, driving up the price of American exports, that advantage was lost. That left the industry sputtering along at a 1.8 percent annual growth rate for the past five years.
The slow growth caught Du Pont by surprise. "I think Ed Jefferson's tenure at Du Pont was principally geared to taking Du Pont into the 1990s," said Leonard Bogner of First Manhattan Co. As Du Pont's former research chief, Jefferson's natural focus was on the new technologies that would have to carry the company in the decades to come -- among them new synthetic fibers, plastics for automotive bodies, new approaches to computer memory storage, biomedical products, and a new generation of nontoxic herbicides. The assumption was that Du Pont had plenty of momentum for the 1980s, Bogner said. But it did not.
"He, like a lot of people in Du Pont, grew up in a culture that thought an awful lot about the long term -- decades down the road," said Paul Christopherson, who follows Du Pont for Bear, Stearns & Co. in New York.
The purchase of Conoco was in part a product of the same optimism. Jefferson -- still brand-new to the job -- celebrated with champagne when Du Pont beat out Mobil Corp. for control of Conoco in 1981. But the surprising move got Jefferson off to a rocky start with Wall Street, from which he never fully recovered.
"I doubt he'll get very high marks from Wall Street, because the wisdom among chemical industry analysts is that he made a mistake in acquiring Conoco, and they point to the current weakness in oil prices as justification," said Thom R. Brown, an analyst with Butcher & Singer of Philadelphia.
Brown, however, argues that time will vindicate Jefferson's decision. "I thought Conoco was a very bright move -- it gave them a chance to increase their cash flow pretty dramatically, giving them a great deal more flexibility than they would have otherwise had," said Brown.
"There's good news and bad news about Conoco," said Christopherson. "The bad news is that, in 1981, oil was $35 a barrel and now it's $13 a barrel. That's the big knock on Du Pont and Mr. Jefferson.
"Du Pont bought oil wrong. But they bought Conoco right . . . . The timing of buying Conoco was very good." In 1981, Conoco was at a major turning point in its fortunes, said Christopherson, and since then it has enjoyed considerable success in finding oil, cutting exploration costs, and boosting profits on oil and coal production.
The irony is that Conoco's profits repeatedly have offset disappointing profits from some of Du Pont's high-tech forays, said Christopherson. "People say, 'Isn't it too bad they bought Conoco.' The reality is, Conoco has often saved Du Pont's bacon."
Jefferson acknowledges that he did not anticipate a world of $13-a-barrel oil when he approved the bid for Conoco. "It's easy to look back with the benefit of hindsight," Jefferson said, "and all that will give you is humility about forecasting. And what that says is you'd better think your way into the future with a good deal of contingency planning. You can't afford to plan based on a unique view of the future."
"But we didn't pay high prices for this oil on any basis. It's a large underpinning of Du Pont's stock value. Again, it's a depleting resource. If the prices stay down too low, the next upward spiral will be that much sooner."
"Would I do it again? Yes. In spite of the present circumstances, I have no doubt at all we did the right thing," Jefferson said.
He makes the same statement about the decision to cut back on Du Pont's work force, but calls it the hardest he had to make. "Some of that staffing that became unnecessary for us was really in anticipation of growth," growth that was not achieved.
"We have been considerate in the way way we went about reducing," said Jefferson. "We tried to preserve the jobs of young people, giving early-retirement encouragement to older people . . . . Generally, we preserved the employment of young people raising families."
Du Pont has paid relocation allowances to salaried employes and hourly wage earners whose jobs are eliminated at one plant, but who want to move to a new location, he added.
"That came very hard, because the Du Pont tradition was to be a good employer," said Charles B. Reeder, who retired as Du Pont's chief economist last year and is now a private consultant. "The recognition that you might be able to do without some levels of management was a bitter pill to accept."
The recognition came later to Du Pont than to some of its competitors, said First Manhattan's Bogner. "They were one of the later companies to determine the negative effects of disinflation. And, as such, it was forced to do more to catch up. I believe they are still in a catch-up phase.
"Mr. Jefferson has provided Du Pont an impetus to get off its rear end. He sent Du Pont to the 'fat farm,' " said Brown. "I think it still has a lot of fat."
The decision to cut the work force reflects a more basic realignment of Du Pont's goals, that Jefferson says are spelled out in its new "mission" statement.
The significance of the statement is its recognition that, from now on, Du Pont will seek to deliver for shareholders as much as for its customers and employes.
"Du Pont has been, and still is, substantially undervalued," said Christopherson. "The reason it's been undervalued is the investor's hunch -- with some foundation -- that whatever the company's strengths . . . those would not find their way into the pocket of the stockholder . . . . That is why, even today, Du Pont still sells below market. That is gradually changing.
"Like a lot of CEOs at Du Pont, he came up research side," Christopherson said . . . . There has been a mentality at Du Pont which says, 'We're very clever in the laboratory; we'll invent nifty products. If you want to invest, fine.' . . . I think that attitude has certainly changed."
"The emphasis on . . . . shareholders' interests was not a top concern at Du Pont -- the emphasis was on product quality, safety, research, stability of employment," said Reeder.
Traditionally, Du Pont had a conservative aversion to corporate debt, and not until the 1980s was its management authorized to use debt as an aggressive tool for expansion or acquisitions.
Part of the change reflects insights brought into Du Pont by Conoco's people, Jefferson said. "It's instructive to see what a sacred thing the profit objective was in Conoco. Their view of commitment to the profit objective has been infectious."
"The next five years?" Jefferson said. "I guess I was probably one of those who was optimistic about the first half of the '80s, so my crystal ball might not be the best.
"I think the second half [of the decade] will be better than the first, but I'd be the first to say that nobody is really able to forecast economic conditions."
He sees the years ahead as offering better opportunities than ever for Du Pont, hopefully with less disruption. Will the future be more stable? "Perhaps, somewhat more. But I hope not too [much so]," Jefferson said. That would be a luxury Du Pont can no longer afford.