Allied Signal

1. What challenges have environmental regulations posed for Allied-Signal?

In 1970s a number of acts were imposed on Allied Signal. These acts were:

• The Clean Air Act

• The Clean water act

• The Marine Protection, Research, and Sanctuaries Act

• The Safe drinking water act

All these acts require compliance and pollution control expenditures by Allied. But the two later laws were more significant.

• The Resource Conservation and Recovery Act (RCRA)

• Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, Superfund)

The RCRA covered newly generated waste and Superfund focused mainly on old waste. All these acts compelled the company to:

 register toxicity of their wastes with the Environmental Protection Agencies (EPA)

 be extremely cautious with in waste’s transport, treatment and disposal

 be heavily taxed for the old sites that had hazardous waste

 reduce waste by changing manufacturing practices

 recognize new waste disposal sites

As a result Allied signals expenditures involved compliance with these acts. As we can see in the table below, the expenditures of Allied increased from $16 million to $50 million over a period of 5 years.

Few challenges that were lying ahead for the company were:

• AS had to spend close to $50 million to comply to Superfund

• This figure is only for US and it was expected the in future, outside US sites will also pose similar costs

• Another challenge was to cut down on this liability risk outside US due to the lack of safe disposal infrastructure

2. Has this been all bad news? Does Allied have any competitive advantage?

Despite the fact that all the regulations that we talked about in question 1 seems to be causing a lot of trouble to Allied, there was a silver-lining for the company. The motivations for complying with all the environmental acts were:

• “GREEN” image for the company.

• Allied-Signal needed an extremely environmental friendly image as its reputation...