The new president and chief executive of agriculture giant Archer Daniels Midland Co. has three striking characteristics: She’s a woman, she hails from Big Oil and she’s not a member of the Andreas family.
For all three reasons, Patricia Woertz, 53, is a trailblazer.
She instantly becomes a symbol as the most highly placed female executive in the country. At $36 billion in revenue, Decatur, Ill.-based ADM is among the nation’s biggest and most powerful companies and the largest to be run by a woman.
And she replaces G. Allen Andreas, 62, whose family has run the company for years. ADM and the Andreas family have wielded enormous political clout in Washington and became the focus of a messy price-fixing scandal a decade ago. Andreas will continue as chairman, but in passing over his inside choices for successor, the board has put Woertz firmly in charge at what could be a major turning point for a powerhouse of the U.S. agriculture industry.
Her challenge is to use her experience at Chevron Corp. to help ADM boost its corn-based ethanol business and other alternatives to $70-a-barrel oil.
“I’m excited about the company’s growth, global presence and about coming here to the Midwest,” Woertz said in an interview Friday.
Long one of the world’s largest processors of oilseeds and corn for the food industry, ADM hopes to expand its renewable-energy business. That is evident from its selection of an oil industry executive to be CEO. At Chevron, Woertz was the refining and distribution boss.
What’s clear is that there may never have been a better time for alternative energy than now, which helps explain why ADM’s stock has more than doubled over the past year. Although ADM’s stubborn push to spend heavily on the development of ethanol over the last two decades has drawn withering criticism from Wall Street, “suddenly we’re the golden boys and girls,” said one ADM director who asked not to be named.
Ethanol has drawn ire from many quarters over the years largely because it has failed to take off in the marketplace despite heavy subsidies–funding that opponents view as pork for Midwestern lawmakers and evidence of the Andreas family’s clout in Washington. Ethanol’s production costs have been too high to be attractive when energy prices are low.
But today, supporters say that ethanol is suddenly facing a “perfect storm” of factors that could catalyze growth and finally make it an important part of the nation’s energy equation. The first among them is the soaring cost of crude. Then there is support from the Bush administration looking for ways to paint a brighter future ahead of the fall elections. At the moment, there are almost 40 proposals in Congress for programs expanding the use of renewable fuels, according to the Renewable Fuels Association.
The industry is adding 1.4 billion gallons of production capacity over the next year, bringing the total to 6 billion gallons. Moreover, the Big Three automakers have made a push to offer vehicles that run on both regular gas and E85, a blend of 85 percent ethanol. The problem: E85 is available at only 600 of the nation’s 170,000 gas stations.
But that could change quickly. The industry is experiencing impressive progress in molecular science, which could change its economics entirely. New genetically engineered enzymes are making it possible to produce ethanol from not only corn kernels and sugar cane, but also from plant waste products and fast-growing organisms like switchgrass. They promise to make processing much less expensive than it is now and open up the market to a wide array of raw materials. Most of these technologies are still in their infancy but moving quickly toward commercial application.
“We’re talking about the transformation from a petroleum-based economy to a carbohydrate-based economy,” said Mark Emalfarb, a Highland Park native who runs a Florida biotech company called Dyadic International Inc.
ADM started to produce ethanol at the request of President Jimmy Carter in 1978 when petroleum supplies were scarce and prices high. Friction with petroleum producers quickly arose, recalled Andreas.
“The oil companies felt we were taking part of their markets away,” he said.
Today, ethanol is only about 5 percent of ADM’s $36 billion in sales. But ethanol’s 12 percent operating margin shines compared to 2 percent for ADM’s other agricultural products, said Morningstar Inc. analyst Greggory Warren.
Since last October, ethanol futures contracts have soared from $1.62 a gallon to $2.70, said Phil Flynn of Alaron Trading Corp. But the fuel still presents enormous challenges. As a highly corrosive substance, it can’t be transported through pipelines like petroleum.
In the next two years, ADM plans to increase its production of ethanol and other biofuels by 50 percent, to 1.5 billion gallons. Within 10 years, Andreas projects biofuels may account for as much as 25 percent of sales.
ADM will devote a good share of its $3 billion capital improvement budget to build about a dozen plants worldwide. And Woertz is viewed as having the skills to make it work.
“She understands how to get the product from the processing plant to the consumer’s gas tank,” said Morningstar’s Warren. “ADM is betting the future on energy products.”
Four independent board members directed the seven-month search for the new CEO, Andreas explained. He was cut out of the initial process but interviewed the three finalists–one was a woman.
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“We were looking for skills to manage the business,” Andreas said. “She’s capable, knowledgeable and had strong ethics. There was no measure of gender interest in the decision.”
The main interest was to refocus ADM. “Our industry is going through major structural changes that have dramatically shifted our business,” he said. To smooth that transition, Woertz’s knowledge of “energy and petroleum products makes her particularly well qualified.”
When asked about the subject of her sex, Woertz, a single mother of three grown children, was matter-of-fact. “I’ve always been gender-neutral, focusing instead on performance and capabilities,” she said.
But she did concede that as a female CEO she will be a new role model.
“Perhaps it will present a bit of an opportunity,” she said.
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PROFILE
One of the world’s largest processors of farm commodities, including corn, wheat and soybeans.
Archer Daniels Midland
Headquarters: Decatur, Ill.
Employees: 26,000
2005 revenues: $35.94 billion
2005 net income: $1.04 billion
ADM’S POLITICAL PAST
The new CEO, Patricia A. Woertz, will replace G. Allen Andreas, who established strong and sometimes controversial political connections. For example:
– Between 1981 and 1994 Sen. Bob Dole (R-Kan.) and his political foundations collected $178,000 in contributions from Andreas, Andreas’ family and ADM executives. The contributions were scrutinized when Dole promoted subsidies for corn-based ethanol, of which ADM is a major producer.
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