US Dow’s Liveris bullish on Trump tax, regulation reforms

HOUSTON (ICIS)–Andrew Liveris was outright ebullient about the benefits Dow Chemical could receive from the regulatory and tax policies being proposed by the new administration of President Donald Trump, the CEO of the US major said on Thursday.

Liveris was chosen to head the administration’s manufacturing council.

Liveris himself has specific proposals for manufacturing, which he had outlined in a book released more than five years ago, called “Make It In America”.

During an earnings conference call, Liveris said that the Trump administration was providing a tailwind for the US economy. The new president has a “particular focus on structural reforms in several areas, including competitive taxes, smart regulation and fair-trade rules”.

Out of the Trump proposals, Liveris said he was most excited about regulatory reform.

Per employee, Liveris estimated that federal regulatory costs in the US are almost $20,000 for manufacturers. That compares with about $10,000 for US companies as a whole.

“The manufacturers have specific statements on the sorts of regs that have been coming out, especially these last eight years, that have really crippled us in terms of locating factories in the Unites States despite a decent growing US market,” Liveris said.

He added, “I believe the next 30, 60 days, you are going to see decisions from the administration that start to lift some of these regulatory burdens. A lot of that can be done through executive order.”

Liveris also has his eye on the various tax reforms being proposed by the US legislative chambers, by the president and by Paul Ryan, the speaker of the House of Representatives.

The Ryan plan addresses border-adjustment taxes, Liveris said. Because Dow is a large exporter out of the US, “that will immediately accrue to our bottom line, as a significant tax advantage for us. Frankly, we are quite big supporters of that”.

However, other US companies are not such big supporters, so a lot will have to happen between the time the plans are proposed and the time they are enacted, Liveris said.

Liveris did stress what was not being proposed. “Certainly, punitive measures as it relates to border tax, specific to certain sectors and certain companies – that is not on the agenda that’s going to be driven there. Bilateral trade will be, and putting in place bilateral trade-agreements that speak to a border-adjustment tax per the Ryan plan, we’re big proponents.”

Another highlight is the infrastructure plan on which Trump campaigned. That should benefit the construction industry and the coatings market, both important customers for Dow.

Liveris was also excited about energy policy, lauding Trump’s decision to sign an order that advanced the construction of the Keystone XL pipeline.

Keystone XL would link crude from Canada, along with Bakken crude from North Dakota, to refineries on the US Gulf Coast. Refineries are important sources for aromatics, propylene and feedstock naphtha. While US crackers predominantly use gas-based feedstock, some still rely on naphtha.

“The Keystone pipeline decision alone is a big positive for us,” he said. “We have got certain things we can now go do that actually unlocks more supply side, takes out the cost of supply, and then, on top of that, helps us, if you like, to look at expansion opportunities against the shale gas opportunities for our businesses in the US.”

Liveris did point out some potential problems. “There will be stuff we lose in terms of depreciation assets and claiming those, maybe a little bit on the R&D side, so we’re going to have to watch all of that, but we have a seat on the table and we will definitely be very, very vocal on some of those things.”

Liveris does not see a problem in Trump criticising companies that lay off US workers. Such layoffs would be the result of the pending merger between Dow and DuPont. After the merger, the resulting DowDuPont will spin off agrochemical, materials and specialty-chemical companies.

“At the end of the day, we are going to achieve cost synergies, which actually does mean head-count reductions, so we don’t fit the presidential agenda right away,” Liveris said. “But we are creating growth companies that will create growth opportunities.”

Once each of the three companies become more competitive, they can proceed to expand, Liveris said. “I can already see that this administration is going to move fast on taking out regulatory costs and giving us better tax regimens. That’s all tailwind to these new companies as we set them up, that will lift our growth synergies with time.”