Corning Is Feeling the Heat in Breast Implant Debacle
                   ---
                   Company Had a Hand in Dow Corning,
                   But Is It Liable for Alleged Misdeeds?
                   By Joan E. Rigdon

                   01/29/1992
                   The Wall Street Journal
                   PAGE B4
                   (Copyright (c) 1992, Dow Jones & Co., Inc.)
 

                   Just two months ago, Dow Corning Corp. was the apple of Corning
                   Inc.'s eye.

                   And why not? The 50-50 specialty chemicals venture with Dow
                   Chemical Co. contributed 27% of Corning's record 1991 earnings. In
                   one review, Corning Chairman James R. Houghton called Dow Corning a
                   "classic example" of how to "speed Corning technology into the
                   marketplace."

                   But these days, Corning's darling is a prodigal son. "We don't comment"
                   on separate companies, a spokesman says.

                   Dow Corning's breast implant debacle is shaping up to be the biggest
                   potential litigation and public relations nightmare of Corning's 141-year
                   history. The Corning name, once known for the squeaky-clean and
                   well-managed company that made casserole dishes, Pyrex beakers and
                   medical equipment, now is associated with faulty breast implants that
                   allegedly cause immune disorders and skin disease.

                   As angry women and product liability lawyers swarm to sue the Midland,
                   Mich., venture for allegedly rushing the implants to market without
                   adequate testing, Corning's stock has plunged from a 52-week high of
                   $86.25 just a month ago to yesterday's close of $60.625 on the New
                   York Stock Exchange.

                   Corning officials insist the collapse isn't justified. However, the incident
                   shows how vulnerable a successful company is to a questionable product
                   that's associated with its name.

                   To be sure, the jury is still out on whether silicone breast implants are
                   unsafe. Just this week, Britain's chief medical officer issued a statement
                   saying they are safe; but the U.S. Food and Drug Administration has
                   temporarily banned the implants. It meets next month to decide whether
                   to make the ban permanent.

                   The question now hovering over Corning is whether it is liable for Dow
                   Corning's alleged misdeeds. That hinges on one key issue: Does it or can
                   it control Dow Corning? "Or are they funding it hoping for the best?" asks
                   Minneapolis attorney Bruce A. Finzen, whose firm litigated Union
                   Carbide Corp.'s Bhopal, India, chemical disaster on behalf of the Indian
                   government.

                   Corning clearly has a hand in Dow Corning's business. Besides owning
                   half of the company, it has five representatives among the 14 members of
                   Dow Corning's board, including Corning Chairman Houghton. (Dow
                   Chemical also has five representatives on the board, while Dow Corning
                   itself has four.)

                   Company literature also points to a research overlap. In Corning's 1990
                   annual report, Chairman Houghton said Dow Corning was formed in
                   1943 to "market the silicones created in a Corning laboratory." A
                   Corning spokesman says the 1940s marked the first and last time the two
                   companies shared research. Currently, "we do not share our research
                   with them," he notes.

                   Thomas Talcott, a materials engineer who worked for Dow Corning for
                   24 years before resigning over the breast implant issue, agrees that
                   Corning wasn't involved in the development of the implants. "I don't think
                   they had any involvement," Mr. Talcott says, adding that his doubts about
                   the implants never reached the board. "I think what the board of directors
                   heard was, things are going great."

                   If courts agree, that could protect Corning. Mr. Finzen says Union
                   Carbide was deemed culpable in its Indian subsidiary's disaster at Bhopal
                   partly because Union Carbide designed the plant from which poisonous
                   gas leaked in 1984, killing or injuring thousands of people in the area, and
                   it trained Bhopal workers at Union Carbide facilities in West Virginia.

                   But even if Corning isn't liable for its joint venture's potential damages, the
                   Corning, N.Y., company stands to lose a big chunk of earnings if Dow
                   Corning suffers. Last year, Dow Corning contributed 27% of corporate
                   earnings, down from 28.3% the year before and 30.3% in 1989.

                   That thinking caused investors to stampede out of Corning stock a month
                   ago when it was trading in the mid-$80 range. But now that the stock is
                   trading around $60, analysts are recommending the stock. Corning "is
                   attractive even under a worst-case scenario" of a Dow Corning
                   bankruptcy, says Prudential Securities analyst B. Alex Henderson, who
                   on Monday changed his recommendation on the stock to "buy" from
                   "hold."

                   Wall Street's faith is based on Corning's mix of profitable businesses,
                   including medical testing and optical fiber, which is being used to replace
                   copper wire in telephone lines. These businesses have been growing while
                   Dow Corning's contributions are shrinking, says PaineWebber Inc.
                   analyst Kim Ritrievi.

                   Meanwhile, Corning's image has been tarnished. One company manager,
                   who asks not to be identified, says that he is often mistaken for a Dow
                   Corning employee when he travels. "A lot of people have that problem,"
                   he says.

                   The confusion partly arises from Corning's ringing silence on how it has
                   been affected by Dow Corning's problems. Mr. Houghton, who is usually
                   accessible, has declined to comment. His only public statement was in a
                   Jan. 14 press release, in which he complained that Corning stock's
                   10-point drop the previous day was a "gross overreaction."

                   Crisis management experts are dubious of Corning's public relations
                   strategy. "They're saying, `Gee, we don't have a problem. Let's stick our
                   head in the sand. Maybe it will go away,'" says Norman L. Harris, editor
                   of Crisis magazine, Columbus, Ohio. Corning may want to avoid liability
                   by not commenting on Dow Corning's business, but it should comment on
                   whether its investment in Dow Corning is safe, Mr. Harris says.

                  -30-
 

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