8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 19, 2005

LYONDELL CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

1-10145 95-4160558

(Commission File Number) (I.R.S. Employer Identification No.)

1221 McKinney Street, Suite 700, Houston, Texas 77010

(Address of principal executive offices) (Zip Code)

(713) 652-7200

(Registrant's telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.05 Costs Associated with Exit or Disposal Activities

On October 19, 2005, Lyondell Chemical Company (the "Company") issued a press release announcing that it will permanently cease toluene diisocyanate ("TDI") production at its Lake Charles, Louisiana plant, as approved by its Board of Directors. Previously, on September 20, 2005, the Company had announced an indefinite suspension of production at the 300 million pound per year TDI facility while the Company evaluated the long-term prospects for the plant. Since production ceased soon after the September 20, 2005 announcement, the permanent decommissioning of the Lake Charles TDI facility is expected to be complete by the end of 2005.

The decision to cease production at the Company's Lake Charles TDI facility was taken in response to poor financial profitability. Based on the Company's evaluation of future plant capital requirements, high energy and raw material costs and poor projected industry utilization, the Company does not expect that the Lake Charles TDI business will return to profitability. Hurricane Rita contributed to the decision, as it damaged the plant and contributed to increased energy costs.

The Company has approximately 280 employees at the Lake Charles TDI facility. Efforts will be made to reduce the impact to employees, which is expected to include redeployment opportunities or severance benefits.

In the third quarter of 2005, the Company will recognize a pre-tax, non-cash charge of $195 million for impairment of the carrying value of the plant and related assets. In addition, in subsequent periods, the Company expects to incur various costs, including employee termination benefits of approximately $20 million, approximately $35 million associated with plant decommissioning and demolition, and approximately $10 million for contract terminations. The Company's preliminary estimate of pre-tax, cash and non-cash charges that may be associated with this action is approximately $260 million. In addition, there are multiple commercial arrangements associated with the TDI facility for which the cost of resolution cannot be determined at this time. It is possible that the Company may face litigation associated with the shut down, which, depending on the outcome, may or may not be material.

The Company's October 19, 2005 press release regarding the matter is being filed with this Current Report on Form 8-K as Exhibit 99.1.

Item 2.06 Material Impairments

See "Costs Associated with Exit or Disposal Activities" in Item 2.05.

Item 8.01 Other Events

On October 19, 2005, the Company issued a press release announcing a number of third-quarter earnings impacts and providing an update on hurricane-related events. The Company's October 19, 2005 press release regarding the matters is being filed with this Current Report on Form 8-K as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

99.1 Press Release regarding the Lake Charles TDI facility

99.2 Press Release regarding third-quarter earnings impacts and hurricane update

FORWARD-LOOKING STATEMENTS

The statements in this Current Report on Form 8-K relating to matters that are not historical facts are forward-looking statements.  These forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties.  Actual results could differ materially based on factors including, but not limited to, costs associated with changes in plant status and related matters; supply/demand balances; industry production capacities and operating rates; operating interruptions; availability, cost and price volatility of raw materials and utilities; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; risks of doing business outside of the U.S.; access to capital markets; t echnological developments; and other risk factors.  Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell, Equistar and Millennium Annual Reports on Form 10-K for the year ended December 31, 2004, and the Lyondell, Equistar and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2005 which will be filed with the SEC in November 2005.  

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

LYONDELL CHEMICAL COMPANY

By: /s/ Kerry A. Galvin

Name: Kerry A. Galvin

Title: Senior Vice President, General Counsel & Secretary

Date: October 19, 2005

INDEX TO EXHIBITS

Exhibit

Number Description

99.1 Press Release regarding the Lake Charles TDI facility

99.2 Press Release regarding third-quarter earnings impacts and hurricane update

EX-99.1

Exhibit 99.1

For information, contact:

Investors -- Doug Pike (713) 309-7141

Media -- Aaron Woods (337) 491-3293

David Harpole (713) 652-4125

Lyondell to Permanently Cease TDI Production at Lake Charles Plant

HOUSTON (October 19, 2005) -- Lyondell Chemical Company (NYSE: LYO) announced today that it will permanently cease toluene diisocyanate (TDI) production at its Lake Charles, La., plant. On September 20, 2005, Lyondell announced an indefinite suspension of production at the 300 million pound per year TDI facility while the company evaluated the long-term prospects for the plant.

"Based on our evaluation of future plant capital requirements, high energy and raw materials costs and poor projected industry utilization, we do not expect the Lake Charles TDI business will return to profitability," said Ed Dineen, senior vice president, Chemicals and Polymers. "Hurricane Rita contributed to the decision, as it damaged the plant and contributed to increased energy costs."

Lyondell has approximately 280 employees at this plant. Efforts will be made to reduce the impact to employees, which is expected to include redeployment opportunities or severance benefits.

In the third quarter 2005, the company will recognize a pre-tax, non-cash charge of $195 million for impairment of the carrying value of the plant and related assets. In addition, in subsequent periods, the company expects to incur various costs, including employee termination benefits of approximately $20 million, approximately $35 million associated with plant decommissioning and demolition, and approximately $10 million for contract terminations.

Lyondell acquired the TDI plant as part of its 1998 acquisition of ARCO Chemical Company. ARCO Chemical had purchased the plant from Olin Corporation in December 1996.

Toluene diisocyanate is used in the production of polyurethanes for flexible foam applications, including consumer goods, transportation and packaging. TDI also is used in the manufacture of coatings, sealants, adhesives and elastomers.

ABOUT LYONDELL

Lyondell Chemical Company, headquartered in Houston, Texas, is North America's third-largest independent, publicly traded chemical company. Lyondell is a major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline blending components. The company has a 58.75 percent interest in Lyondell-Citgo Refining LP, a refiner of heavy, high-sulfur crude oil. As a result of Lyondell's November 30, 2004, acquisition of Millennium Chemicals Inc., Millennium and Equistar Chemicals, LP are wholly owned subsidiaries of Lyondell. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide.

FORWARD-LOOKING STATEMENTS

The statements in this release relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties.  Actual results could differ materially based on factors including, but not limited to, the information regarding the shut down, impairment and other related matters discussed in this release. Other factors that may affect actual results include the following: availability, cost and price volatility of raw materials and utilities; supply/demand balances; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; operating interruptions; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; industry production capacities and operating rates; ris ks of doing business outside of the U.S.; access to capital markets; technological developments; and other risk factors.  All of such forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell Annual Report on Form 10-K for the year ended December 31, 2004, the Lyondell Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, and the Lyondell Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, which will be filed with the SEC in November 2005.

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SOURCE: Lyondell Chemical Company

EX-99.2

Exhibit 99.2

For information, contact:

Media -- Susan Moore (713) 309-4645

Investors -- Doug Pike (713) 309-7141

Lyondell Announces Impacts to Third-Quarter Earnings

and Provides Hurricane Update

HOUSTON (October 19, 2005) -- Lyondell Chemical Company (NYSE:LYO) today announced a number of third-quarter earnings impacts, and provided an update on hurricane-related events.

Third-Quarter Impacts

The third quarter 2005 will include a pre-tax charge of $195 million, or 49 cents per share (after tax), for impairment of the carrying value of Lyondell's Lake Charles, La., toluene diisocyanate (TDI) plant. As separately announced, Lyondell will permanently cease TDI production at the facility.

Additionally, the company incurred pre-tax charges of $30 million, or 8 cents per share (after tax), related to participation in a mutual insurance consortium. These charges represent Lyondell's exposure to claims by other members of the consortium related primarily to Hurricanes Katrina and Rita.

Based on August 2005 prices and costs as reported by industry consultants, as well as internal estimates, the pre-tax value of Lyondell's lost production in late September 2005 caused by Hurricane Rita is approximately $75 million to $100 million, or 19 cents to 25 cents per share (after tax).

Hurricane Update

All of Lyondell's major Gulf Coast chemical plants have returned to full rates with the exception of a propylene oxide facility that was previously scheduled for maintenance turnaround activity.

Lyondell is continuing to assess the damage to its Gulf Coast chemical facilities caused by Hurricane Rita, but any resulting costs in excess of related insurance claims is not expected to have a material effect on fourth-quarter 2005 results.

The company's joint venture, Lyondell-Citgo Refining (LCR), continues to operate at reduced rates following hurricane-related equipment issues and problems encountered in its fluid catalytic cracking unit during start-up. The refinery is expected to operate at 30 percent to 50 percent of its 268,000 barrel-per-day capacity until mid- to late-November.

"The third quarter was impacted by a temporary loss of sales and production, but the fact that our chemical facilities were minimally impacted by the hurricanes and quickly returned to full production puts Lyondell in a good position in a tight market," said Dan Smith, Lyondell president and CEO. "Unfortunately, problems at LCR will impact our fourth quarter, but all of our major Gulf Coast chemical plants are operating as planned."

Lyondell To Announce Q3 Earnings on October 27

Lyondell will host a conference call on Thursday, October 27, 2005, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, President and CEO, Morris Gelb, Executive Vice President and COO, T. Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Vice President of Investor Relations. The dial-in numbers are 888-391-2385 (U.S. -- toll free) and 517-645-6239 (international). The passcode for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site, www.lyondell.com/earnings.

A replay of the call will be available from 1:30 p.m. ET October 27 to 5 p.m. ET on November 5. The dial-in numbers are 866-435-1326 (U.S.) and 203-369-1022 (international). The passcode for each is 5549. Web replay will be available at 2:30 p.m. ET October 27 on the Investor Relations page of the company's web site, www.lyondell.com/earnings.

Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including the earnings release, will be available at 11:30 a.m. ET October 27 at www.lyondell.com/earnings.

ABOUT LYONDELL

Lyondell Chemical Company, headquartered in Houston, Texas, is North America's third-largest independent, publicly traded chemical company. Lyondell is a major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline blending components. The company has a 58.75 percent interest in Lyondell-Citgo Refining LP, a refiner of heavy, high-sulfur crude oil. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide.

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The statements in this release relating to matters that are not historical facts are forward-looking statements.  These forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties.  Actual results could differ materially based on factors including, but not limited to, costs associated with changes in plant status and related matters; supply/demand balances; industry production capacities and operating rates; operating interruptions; availability, cost and price volatility of raw materials and utilities; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; risks of doing business outside of the U.S.; access to capital markets; technological developments; and other risk factors.  Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell, Equistar and Millennium Annual Reports on Form 10-K for the year ended December 31, 2004, and the Lyondell, Equistar and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2005 which will be filed with the SEC in November 2005.  

SOURCE: Lyondell Chemical Company