Lori J. Ryerkerk
Chairman of the Board and Chief Executive Officer at Celanese
Thanks for the question, Josh. That's actually a lot of questions. So let me see if I can navigate all that. So on third quarter performance, I mean, DuPont will be reporting shortly. Obviously, what they report, not apples-to-apples necessarily because it does include Delrin as well. But I think it's fair to say in third quarter, much like the first two quarters, M&M is not performing in line with our expectations of the business or even in line with how they performed in 2021. And I think you saw that in the numbers we called out for fourth quarter. And I think if you think about fourth quarter, I mean fourth quarter is typically a low quarter for us as well. We do get seasonality in the fourth quarter. We expect DuPont to see the same seasonality.
I think we see some of the concerns we've had on DuPont's performance continuing with the M&M asset in the fourth quarter as well. So it's -- again, it's only been three days. But I would say, as we've gotten to get a clear view of M&M's performance I think there's a couple of reasons we see for their underperformance this year. So overall poor demand backdrop in Asia and Europe, not dissimilar, I think, in Europe from what we've seen, but I think we've had a little bit more upside in Asia on auto than they have seen. Competitive dynamics, that is really impacting more of the standard business of which we believe they've had a bit more than versus the differentiated business. And I would say also insufficient commercial flexibility to really pivot and respond to the market and the need to do different things in the market maybe as quickly as we have.
I think also their current contract for sourcing for nylon has been a bit challenging in this economic environment. And I think it boils down to, there's really been a margin compression that's occurred especially in the nylon area. And surprisingly, in some cases they've -- it's thought that they haven't raised price. It's actually the fact that they didn't adjust price downward, stay competitive and they've lost volume. They've also had some pretty significant foreign currency headwinds, which are different than we've experienced due to the fact that therefore in current -- they're a bit more exposed than we are with the way they write their contracts.
So if we think about moving forward now into the rest of the fourth quarter that we've closed and moving into next year, I'll talk a little bit about how we'll address each of these. So on the foreign currency headwind that's an impact of almost over $20 million for us alone in November and December on the M&M assets. And so I think we really -- we're looking at how do we optimize our commercial practices to address the sales currency exposures. So what's denominated in local currency and what's in U.S. dollars. We also can use some of our debt to look at converting more of our U.S. dollar debt to lower rate currencies like the euro or the yuan or the yen which will help us lower our borrowing rate, so it will help the overall financial condition of the company.
I think when we look at key raw materials and the purchasing requirement, we will be able to exercise some of the flexibility we have within Celanese to really utilize some of the M&M polymer capacity. So if you think about it, M&M has a fairly large take-or-pay contract currently for raw materials for nylon. And so they've been producing a lot of material, but they've been building inventory. We can actually start buying that -- using that inventory, using that excess production for Celanese, which will be net-net better for both companies together. I think also, remember, we called out at the time of the deal, there is actually -- the contract for raws has been renegotiated and a new contract will come in place at the first of 2023.
This new contract has less take-or-pay requirements, so that will give us more flexibility and optionality going forward. So let us -- I think about it as it will really let us start -- it's one element of starting to run this larger nylon portfolio in a more integrated, flexible, commercially agile way, much like the transition we went through with POM a few years ago, much like the transition we went through with acetyls some year before that. On the volume side, I think we have a lot of opportunities between M&M and the heritage selling these assets to really deploy our combined commercial team to cross-sell not just online but other products, including other selling these products.
So as we've gotten to really look at where all of our products are going, there's only about a 20% overlap in terms of the companies that are buying from us. So that was a really large space for us to go into the companies that each other has been in and really start cross-selling the entire portfolio versus just what we had traditionally. Pricing, again, margin compression there. We actually think there's some opportunity in pricing to do it in a more differentiated way. So if you really look, our analysis so far is M&M took a fairly common response on pricing to everything. Whereas we like to look at it in a couple of different tranches. So for really differentiated products, we will always push pricing because we have the opportunity to do that.
For more standard-grade products, there may be places where you, in fact, have to reduce pricing in the current environment in order to maintain the same volume. And I think for us -- and then cross-selling is another opportunity. But I think for us, it's really instead of having one rule about we want to maximize margin percent or we want to maximize revenue or maximize volume, for us it is always looking at value. How do we maximize the margin dollars being achieved from the products that we have out there. And then finally -- I don't know this is one answer. Finally, on inventory, M&M has built a pretty large excess of finished goods in inventory over 2022 as they've seen some drop-off in market share.
And as they've continued to produce because of their raw material contract, that is burdening our November and December EBITDA as we start trying to take measures to get that inventory more in line. But longer term, it will allow us to manage our inventory levels, again, more like POM so that our pricing and our cost becomes more contemporary with each other. So we don't see as much kind of disconnect between cost and pricing as we go forward. So again, we'll take these actions now. We've already started all of that. But it will take some time, I'd say, to get the business performing to our expectations. So if we look at next year, if we look at the, I'd say, $800 million of EBITDA that we aspire to for next year and that we're really pushing the team to achieve on the M&M asset.
I mean it is a big lift. I mean it's coming from about what we think is going to be around $500 million this year, for the M&M assets in EBITDA to $800 million, that looks really big. I would remind you though that with the Celanese EM portfolio, we went from $571 million last year in 2021 to $800 million this year. So it's not that much bigger than we've already demonstrated that we know how to do. And we already have a lot of actions underway and how we're going to do that. We're going to be helped by 4% higher auto builds next year.
I think that's pretty consistently called out by everyone. And we've already been prequalifying the M&M nylon into our applications, our heritage selling these applications. So we have a great start on that. Tom has already been meeting with all of the business teams in M&M to really do the deep dive, so we really can understand the nature of underperformance, what the opportunities are for next year. So I'd say we're off to a very strong start. Yes, $800 million is a lift, but again, not unachievable given our demonstrated performance in our own portfolio.
