Bhopal (a): Choosing a Safe Plant Location and Design

Abstract

The A case deals with Union Carbide's decision to build a pesticide plant in Bhopal, India, as a joint venture with the Indian government. The case deals primarily with the choice of plant location and design. It demonstrates the difficulties of creating safety systems when cost restraints are a determining factor. The case allows students to analyze the design and safety data while critiquing the decision-making procedure. See also the B case, E-0160.

Excerpt

UVA-E-0159

BHOPAL (A):

CHOOSING A SAFE PLANT LOCATION AND DESIGN

In the late 1970s, Union Carbide India (UCIL) brought together a team to analyze whether the company should upgrade its pesticide plant in Bhopal, India. A subsidiary of the multinational chemical company Union Carbide Corporation, UCIL entered the pesticide industry in the early 1960s, just as the market had begun to boom. However, after a brief period of economic growth, the market for pesticides decreased even as competitors grew more plentiful. To maintain their growth and gain share in this decreasing market, UCIL looked to “backwards integrate,” or manufacture the raw materials and intermediate products for pesticides in the hopes of selling them to other manufacturers. The company reasoned that this backwards integration plan would not only help sales but also satisfy the Indian central government, who had been pushing UCIL to make all of the ingredients locally for its pesticides. Indian government policy favored domestic manufacture since it theoretically improved employment ratings and the import-export balance. Yet complete manufacture of Union Carbide's Sevin and Temik brand pesticides meant that UCIL would be producing and storing highly reactive chemicals such as methyl isocyanate (MIC) and phosgene, which were used as chemical weapons in World War I.

Company Background

In the late 1970s and early 1980s, Union Carbide Corporation called itself a “global powerhouse” with subsidiaries and joint ventures in 34 countries. Since 1934, the company had a long and respected history in India, first as the private company Ever Ready Company India Limited, and then as the public company Union Carbide India Limited. Union Carbide Eastern, Inc., a wholly owned subsidiary of Union Carbide who ran its Asian operations and owned 50.9 percent of UCIL. The remaining 49.1 percent was owned by Indian investors. Although UCIL had some ties to the Union Carbide Corporation, whose headquarters were in Danbury, Connecticut, all the day-to-day operations of the company rested in the subsidiary's hands.

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Keywords: political pressures, risk analysis, manufacturing strategy, location strategy, industrial engineering, industrial development, facilities planning, ethical issues, environmental issues, developing countries, corporate strategy, business ethics