Formosa Plastics Group: Industrial Safety is a Corporate Responsibility

Formosa Plastics Group:
Industrial Safety is a Corporate Responsibility
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
August 2, 2011

Summary: On Saturday morning, yet another fire broke out at the Number Six Naphtha Cracking Plant. The fire was quickly extinguished. But since last July, within one short year, the Number Six Naphtha Cracking Plant has experienced seven major or minor fires. These fires have lowered the Formosa Plastics Group's share prices. They have tarnished the reputation of the late Wang Yung-ching, Taiwan's famed "God of Managment." They have created a crisis of confidence in the petrochemical industry.

Full Text below:

On Saturday morning, yet another fire broke out at the Number Six Naphtha Cracking Plant. The fire was quickly extinguished. But since last July, within one short year, the Number Six Naphtha Cracking Plant has experienced seven major or minor fires. These fires have lowered the Formosa Plastics Group's share prices. They have tarnished the reputation of the late Wang Yung-ching, Taiwan's famed "God of Managment." They have created a crisis of confidence in the petrochemical industry.

The petrochemical industry on Taiwan is valued at over 3 trillion NT. It is one of the most important industries on Taiwan. The Formosa Plastics Group is the one of the leading companies on Taiwan. Founder Wang Yung-ching's lean, realistic, and efficient leadership and management style made the Formosa Plastics Group the pride of the industry. Management experts even speak of the "Formosa University" management model. It became a model for domestic and foreign enterprises to emulate. The accidents at the Number Six Naphtha Cracking Plant have dealt Formosa Plastics and the domestic petrochemical industry a major blow.

The seven fires at the Number Six Naphtha Cracking Plant broke out for different reasons. Some were the result of minor accidents. For example, a contractor accidentally collided with a pipeline. Others were the result of defects in the original design of the pipeline. Still others were due to environmental factors. Many explanations have been offered. Many factors played a role. But as Formosa Plastics Chairman Wang Chao conceded, "No matter how these fires broke out, they must not happen again." Formosa Plastics must focus once again on management. It must no longer point fingers left and right. Everything about the Number Six Naphtha Cracking Plant must be subjected to comprehensive review. This includes personnel, equipment, processes, management systems, and budget systems. Everything that can be done, must be done, in order to improve industrial safety and achieve a "zero accident" goal. That is the only way to end the string of accidents.

The Ministry of Economic Affairs and industry spokesmen have assessed the situation. Formosa Plastics' "cost rationalization" policy was once an object of pride. It achieved the highest efficiency at the lowest cost with the least manpower. But it may have been among the structural factors behind the recent accidents. The Ministry of Economic Affairs Industrial Development Bureau says it once asked Formosa Plastics to inspect the Number Six Naphtha Cracking Plant, to determine whether obsolete equipment should be replaced. But Formosa Plastics said it "would replace it at the end of its life cycle." Time dragged on. Months passed. The Industrial Development Bureau concluded that Formosa Plastics was indeed saving money at the expense of worker safety. Industry insiders have also privately criticized the Formosa Plastics Group for cutting corners and cutting personnel in order to lower costs. This led to reduced resources for front line industrial safety. This may be Monday morning quarterbacking, But there is considerable truth to these criticisms.

The free enterprise system is profit-oriented. Industrial safety is like any other form of administrative overhead. It costs money but generates no income. It is different from production. The retail sales system clearly generates profits. It makes money for the company. The only exception is when the economy deteriorates and products fail to sell. Otherwise, companies will not cut production and marketing funding or personnel. Industrial safety however, is another matter. The more successful the safety program, the longer a company is accident free, the less the company perceives the need. Industrial safety neither generates revenues nor increases production efficiency. When cutting personnel and costs, industrial safety tends to be first on the chopping block. Sadly, we think of industrial safety only when industrial accidents occur. Only then is the value of industrial safety understood.

The Number Six Naphtha Cracking Plant has caught fire, again. The day after the government announced its "four resolutions concerning the suspension of operations," the market value of the four crown jewels of the Formosa Plastics Group fell by 200 billion NT. Downtime led to the loss of hundreds of billions of dollars in revenue and profits. It is even harder to put a price on the loss of goodwil. Cutting back on manpower and resources for industrial safety is clearly penny wise and pound foolish. Formosa Plastics has been shrewd about cost control. Going too far on cost control may be profitable in the short term, but not in the mid or long term. Ultimately the losses may be inestimable.

The government has now issued a four-point resolution. Aspects of the resolutions exceed current legal requirements. But the Number Six Naphtha Cracking Plant has experienced seven fires in one year. People in the vicinity of the Number Six Naphtha Cracking Plant live in fear. People are angry at Formosa Plastics and the petrochemical industry. They are disappointed and skeptical. The government's four-point resolution is largely a response to public expectations. Industrial safety is not a techical issue that businesses can resolve behind closed doors, while keeping the public in the dark. It is a highly political social problem. Formosa Plastics must realize this. Only then can it understand the reaction of the government and the reaction of the public to the Number Six Naphtha Cracking Plant accidents. Only then can it appreciate the importance of industrial safety and social responsibility.

China Petroleum is also part of the petrochemical industry. Fifteen years ago, it experienced a chain of industrial accidents. China Petroleum replaced its chairman, invited foreign experts, and changed its internal structure, It evenutally overcame its problems with industrial safety. Over the years, it has been free of serious accidents. Formosa Plastics is renowned for its advanced management practices. As a private sector company, it has flexibility. The Formosa Plastics Group must devote more resources to public safety. It must not look to the short term. It must not cut salaries for industrial safety personnel. It must conduct an in depth review of personnel, equipment, processes, management systems, and budget systems. They can improve industrial safety, and achieve the goal of "zero accidents." They can ensure that industrial accidents are a thing of the past, and restore the lustre on Formosa Plastics' halo.

做好工安是台塑的企業責任
2011-08-03 中國時報

上周六凌晨，六輕又發生火災。雖然火勢迅速撲滅，但從去年七月至今短短一年，六輕連續七次大小不等的火災，不僅震垮了台塑集團的股價，也讓經營之神的金字招牌蒙塵，更讓國人對石化業產生信心危機。

台灣石化產業產值超過三兆元，是國內最重要的支柱產業；台塑企業集團則是國內最大型的龍頭企業之一。在台塑創辦人王永慶的領導下，台塑精益求實的作風，高效率的管理方式，讓台塑的經營績效傲視業界。甚至，管理學界還發展出「台塑學」的管理範本，成為國內外企業取經學習的對象。這次六輕連番出事，對台塑、對國內石化產業，都是一大打擊。

六輕七次火災的原因固然不盡相同，從一個小環節、一個小意外（如承包商不小心碰撞管線），到追本溯源的「當初管線設計有問題」、麥寮的「環境因素」等等，各種說法都有，這些因素也可能都扮演了一定的角色。不過，正如台塑化董事長王文潮承認的說「不論火災是怎麼發生的，一再出事就是不應該」。台塑仍應回頭從本身管理面著眼，不再「怪東怪西」找理由，對六輕全廠，從人員、設備、製程、管理制度、預算體制等方面全面檢討，一切以提高工安、達到「零事故」為目標作調整，才是終止連續工安事故的治本之道。

從經濟部的說法與業界的評估來看，過去台塑引以為傲的「成本合理化」，以最低的成本、最少的人力、達到最高的產能、最佳的效率，也許正是一個結構性的根源因素。例如，經濟部工業局就說，曾經要求六輕汰換檢查一個設備，但台塑卻答以「要待歲修時再處理」；這個時間一拖，就是幾個月。因此，工業局認為台塑的確有為節省成本而犧牲工安。此外，業界私下也一直批評台塑為節省成本，精簡人力、壓低成本，導致第一線的工安資源減少。以事後諸葛來看，這些批評有相當的道理。

在一個以獲利為導向的企業體系中，工安正如其它行政資源體系一樣，是「只花錢卻看不到營收入袋」；其特性迥異於生產、銷售體系有明顯的入帳，可以為公司賺錢。除非景氣變差，產品賣不出去，否則，企業不會隨便削減生產與行銷的經費、人員。但工安卻是一個非常「尷尬」的角色，作得越好、企業長期沒有工安意外，企業就越感覺不到其存在的價值；因此，對工安這種「看不到獲利，看不出生產效益」的部門，就很容易在精簡人事、降低成本的考量下，優先被犧牲。悲哀的是，只有在工安意外頻頻發生時，大家才會想起工安這事，工安部門的價值才會被凸顯。

以這次六輕再發生火災而言，在政府宣布「停工四決議」後第一天，台塑四寶市值就蒸發了二千億元，因停工導致的營收與獲利損失都以數百億元計，至於商譽損失，就更是「無價」而難以估算了。相較於為工安投入較多人力、資源，精簡工安明顯是為小利而失大利。台塑精於成本控制，但如控制「過頭」，只汲營於短期利益，卻不見中長期利益，則最後企業的損失可能高到難以預估。

政府此時祭出四點決議，雖然確實有些決議超出現行法令要求；但也容我們指出，六輕連七爆，不僅六輕廠區周圍民眾恐懼、憤怒，一般民眾也普遍對台塑、乃至石化產業，感到失望與不信任。政府作的四點決議，相當程度上是回應社會期待。工安問題不是企業關起門來，自拉自唱的技術性問題，一般庶民不得與聞；它是高度的政治與社會問題。台塑惟有體認這點，才能理解政府與社會對六輕事件的反應，也才能體認做好工安的社會責任與重要性。

同屬石化產業的中油，在十五年前，也曾發生工安事件連環爆，中油更換董事長，請來國內外專家，調整內部體制與結構，終於克服工安問題；這麼多年來，未再發生嚴重的工安事件。台塑一直以管理良善著稱，又有民間企業的靈活彈性，相信只要台塑集團願意為工安投入更多資源，不以短利、苛扣為尚，從人員、設備、製程到管理制度、預算體制等方面，都能深入檢討調整，一切以提高工安、達到「零事故」為目標作調整，必然可以讓工安意外絕跡，再度擦亮台塑的金字招牌。