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End in Sight: DuPont Works to Settle PFOA Litigation

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End in Sight: DuPont Works to Settle PFOA Litigation PART 1 OF 3

Background on DuPont’s PFOA Litigation

DuPont and PFOA

DuPont’s (DD) Performance Chemicals segment used PFOA (perfluorooctanoic acids) and its salts to manufacture fluoropolymer resins at various sites around the world—including its Washington Works plant in West Virginia. Prior to 2002, DuPont used to purchase PFOA from third parties for its manufacturing process. The EPA raised concerns about the safety of PFOA. As a result, major manufacturers like 3M (MMM) stopped producing PFOA. DuPont decided to produce PFOA instead of purchasing it for manufacturing activities.

Background on DuPont&#8217;s PFOA Litigation

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It was alleged that DuPont dumped industrial waste from the PFOA manufacturing plant into the Ohio River. It contaminated the local drinking water. The contamination could cause diseases including cancer. In August 2001, a class action was filed against DuPont related to health issues due to exposure to PFOA in drinking water. The EPA looked into the issue and established a stewardship program. The program required its participants to reduce 95% of the PFOA in their products by 2010 and eliminate PFOA by 2015. The EPA announced a health advisory level of 0.4 parts per billion for PFOA in drinking water. In May 2016, it was changed to 0.07 parts per billion.

During this time, there were ~3,500 lawsuits filed in various federal and state courts in Ohio and West Virginia related to several diseases. The above table shows the lawsuits against each of the diseases.

Chemours spin-off

On July 1, 2015, DuPont spun off its Performance Chemicals segment into a new company called Chemours (CC). There were talks that Chemours was spun-off to fail. All of the fluoro products processing facilities were moved under Chemours. With the spin-off of DuPont’s Performance Chemicals segment, the loss that could arise from the lawsuits related to PFOA would impact Chemours.

Investors can indirectly hold DuPont by investing in the Materials Select Sector SPDR Fund ETF (XLB). XLB invested 11.8% of its holdings in DuPont. The fund’s other top holdings include Dow Chemical (DOW) and Monsanto (MON). They have weights of 11.9% and 8.2% as of February 14, 2017.

In the next part, we’ll look at the settlement of the lawsuit related to PFOA.

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