A combination of rigorous operational discipline, innovative technologies and creative marketing by the Praxair team enabled the company to deliver superior returns to shareholders despite the pressures of sluggish growth in industrial markets.

OPERATIONAL DISCIPLINE
Praxair employees throughout the organization focused on squeezing the maximum value out of every business activity, from the routine to the extraordinary. A combination of initiatives in business operations and procurement reduced costs by $100 million while improving customer-response times, process efficiency and reliability, and transaction-processing speeds. Six-Sigma teams contributed almost half of the savings, reflecting the expanding implementation of this methodology across all Praxair businesses worldwide during the year. By year-end, almost 2,000 employees had received Six Sigma training and 1,000 projects were underway.

Operational efficiencies continued to improve as a result of our global process-automation program, designed to achieve a three-year payback on invest-ment. Eighty percent of the Praxair plants worldwide have been retrofitted and upgraded, resulting in a 15% to 20% reduction in the unit cost of production over the last five years. Benefits also have been realized from computerized maintenance management, improved logistics programming and standardized truck-filling procedures. In 2004, the effort will focus on opportunities for similar significant productivity gains in our packaged-gases operations worldwide.

Safety performance was mixed in 2003. Recordable injuries were up a disappointing 12% after three years of steady improvement, and lost workday cases were up 7%. Programs designed to heighten safety awareness and train employees to avoid risky behavior will be a top priority in 2004. On the positive side, our total vehicle accident rate was down 11%, with high-severity accidents down 23%. The improved vehicle accident rate reflects the success of several programs that have focused on this area over the past two years; the North American bulk-gases distribution team showed the greatest improvement.