NEWTOWN SQUARE, Pa., May 8 /PRNewswire/-- ARCO Chemical (NYSE: RCM) issued
the following:

    Highlights
    --  Facing more intense competition, ARCO Chemical pursues long-term
         profitable growth in its core PO-related businesses.

    --  Company advances to No. 2 worldwide market position in TDI with
         successful integration of Olin business.

    --  New "step-out" products are accelerating the company's downstream
         growth in PO derivatives; acquisitions also will be key to future
         earnings growth.

    --  Major initiative targets double-digit percentage reduction in overall
         structural costs.

    --  As part of $2.6 billion capital program, major projects move forward
         in Europe with focus on capital efficiency.

    --  Company adopts expanded shareholder value initiative that includes a
         new financial measure and sets requirements for stock ownership by
         executives, directors, and employees.

    ARCO Chemical "continues to pursue long-term profitable growth by
investing in its core propylene oxide (PO)-related businesses," said Alan R.
Hirsig, ARCO Chemical President and Chief Executive Officer, in an address
this morning at the company's annual meeting of stockholders. Significant
efforts in 1996 included approval of a $2.6 billion five-year capital program,
as well as cost reduction and shareholder value initiatives.
    In reviewing 1996 financial performance, Hirsig cited net income of $348
compared to 1995 earnings of $508 million, or $3.60 per share.  Lower margins
in the company's co-products businesses, styrene monomer and MTBE, were the
major factors in lower 1996 earnings compared to 1995, a year of record
profits, Hirsig said.
    Although the company anticipated that 1997 would be challenging due to the
expiration in 1996 of fixed margin MTBE contracts, Hirsig said first quarter
1997 performance was "not satisfactory."  Net income for the first quarter was
$48 million compared to $106 million in the first quarter of 1996. "Although
we saw strong sales volumes in PO and derivatives, high raw material costs,
coupled with weak product pricing, compressed margins in virtually all of our
businesses," Hirsig explained.
    Hirsig reviewed actions taken to focus and further strengthen the
company's business portfolio.  "We sold our plastics business last September,
a decision that allows us to concentrate on the growth of our core businesses
related to propylene oxide.  In late 1996 we acquired Olin Corporation's TDI
and ADI businesses."  Within three months these businesses were fully
integrated into ARCO Chemical's worldwide structure, "achieving targeted cost
reductions in excess of $15 million a year," Hirsig said.
    He added: "We have now achieved the No. 2 worldwide market position in
TDI.  Clearly we've strengthened our effort to become a worldwide leader in
urethanes.  We're also pleased that the ADI business shows real synergy with
our efforts to grow in coatings markets, a key target for our performance
chemicals segment."
    Reviewing ARCO Chemical's 1996 commercial progress, Hirsig cited the
importance of accelerating growth downstream into PO derivatives in both the
urethanes and performance chemicals areas.  He noted the development of
several high-performance "step out" products, including:  Actaclear(TM)
automotive fuel additive carriers, which reduce engine deposits; Flexure(TM)
energy managing safety foam for auto interiors; Stylex(TM) latex foam
replacement for bedding and furniture; Accuflex(TM) midsole systems for
athletic shoes; Atlantis(TM) carpet backing technology; Acclaim(TM) polyols
for use in coatings, adhesives, sealants and elastomers; and Hyperlite(R) II
molded foams for automotive seating.
    Hirsig emphasized, however, that to achieve earnings growth, the company
must focus beyond commercial development.
    "These development programs are vital, but may need to be augmented to
achieve our ambitious growth objectives.  This will involve acquisitions to
give us muscle to leverage our core competencies and accelerate our growth
downstream.  And we must get down to fighting weight in this highly
competitive business."
    Hirsig continued, "To that end, we are now looking at all aspects of our
operations to streamline our business processes -- to find ways to do things
better, and where possible, to do more with less."
    ARCO Chemical 2000, Hirsig explained, is a broad initiative designed to
increase efficiency and to achieve a substantial reduction in the company's
overall structural costs, which are roughly $750 million, including plant
operations, corporate staff functions, R&D, and commercial activities.
    He added: "The drive is to simplify the organization and to eliminate non-
productive  assets and activities. Our target is a double-digit percentage
reduction in costs that will  position the company to outperform our
competitors and deliver value to our shareholders. This is something we have
to do to meet heightened competition in our core PO business and in other
businesses."
    Hirsig called the company's Manufacturing Excellence initiative "the
template for all that we've done to make us more efficient, while upgrading
our safety and environmental performance."  He added that capital efficiency
remains a top priority in implementing ARCO Chemical's $2.6 billion capital
program.  Capital efficiency, he continued, is being applied to PO 11, the
world-scale PO plant now being built in Rotterdam, and to BDO II, a butanediol
plant to be built adjacent to PO 11. Both projects are part of the company's
strategy to expand PO and derivatives capacity by the turn of the century.
    Hirsig said attention must now be focused on other opportunities to
provide long-term value to shareholders, including these components of the
company's expanded shareholder value initiative:

    --  Adoption of a new financial measure, Return on Capital Managed (RCM).
    --  Stock ownership by employees, executives and directors; for executive
         management, ownership will range from one to four times base salary.
    --  An increase in the percentage of employee compensation linked to
         company performance.

    "These new measures help us to focus on the challenge of higher
shareholder expectations," Hirsig said.
    For a menu of ARCO Chemical's news releases and to retrieve a specific
release, visit ARCO Chemical's website at http://www.arcochem.com on the
Internet.  To receive a press release by fax, call 800-758-5804; use code
062063.

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