DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ýx Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes ýx No

At ~~March 31,~~June 30, 2007, 1,000 shares of common stock were outstanding, all of which were held by the registrant’s parent, The Dow Chemical Company.

The registrant meets the conditions set forth in General Instructions H(1)(a) and (b) for Form 10-Q and is therefore filing this form with a reduced disclosure format.

PART I.I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL ~~STATEMENTS~~ STATEMENTS.

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Income

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
In millions (Unaudited)	2007			2006			2007			2006
Net trade sales	$	49		$	56		$	102		$	374
Net sales to related companies	1,850			1,720			3,523			3,455
Total Net Sales	1,899			1,776			3,625			3,829
Cost of sales	1,730			1,603			3,328			3,239
Research and development expenses	21			19			41			40
Selling, general and administrative expenses	4			1			11			12
Equity in earnings of nonconsolidated affiliates	115			83			239			144
Sundry expense - net	(17		)	(23		)	(27		)	(44		)
Interest income	43			35			80			58
Interest expense and amortization of debt discount	11			13			26			26
Income before Income Taxes	274			235			511			670
Provision for income taxes	79			80			130			232
Net Income Available for Common Stockholder	$	195		$	155		$	381		$	438
Depreciation	$	70		$	71		$	138		$	139
Capital Expenditures	$	54		$	54		$	100		$	95

See Notes to the Consolidated Financial Statements.

Three Months Ended

In millions (Unaudited)

March 31,
2007

March 31,
2006

Net trade sales

$
53

$
318

Net sales to related companies

1,673

1,735

Total Net Sales

1,726

2,053

Cost of sales

1,598

1,636

Research and development expenses

20

21

Selling, general and administrative expenses

7

11

Equity in earnings of nonconsolidated affiliates

124

61

Sundry expense - net

(10
)
(21
)
Interest income

37

23

Interest expense and amortization of debt discount

15

13

Income before Income Taxes

237

435

Provision for income taxes

51

152

Net Income Available for Common Stockholder

$
186

$
283

Depreciation

$
68

$
68

Capital Expenditures

$
46

$
41

Union Carbide Corporation and Subsidiaries
Consolidated Balance Sheets

	June 30,		Dec. 31,
In millions (Unaudited)	2007		2006
Assets
Current Assets
Cash and cash equivalents	$	79	$	71
Accounts receivable:
Trade (net of allowance for doubtful receivables - 2007: $2; 2006: $2)	23		33
Related companies	443		449
Other	150		145
Notes receivable from related companies	3,004		2,547
Inventories	204		199
Deferred income tax assets - current	84		41
Total current assets	3,987		3,485
Investments
Investments in related companies	297		297
Investments in nonconsolidated affiliates	897		896
Other investments	19		23
Noncurrent receivables	56		58
Noncurrent receivable from related company	201		187
Total investments	1,470		1,461
Property
Property	7,379		7,459
Less accumulated depreciation	5,448		5,489
Net property	1,931		1,970
Other Assets
Goodwill	26		26
Other intangible assets (net of accumulated amortization - 2007: $124; 2006: $122)	23		25
Deferred income tax assets - noncurrent	156		115
Asbestos-related insurance receivables - noncurrent	693		725
Deferred charges and other assets	408		383
Total other assets	1,306		1,274
Total Assets	$	8,694	$	8,190

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries

Consolidated Balance Sheets

In millions (Unaudited)

March 31,
2007

Dec. 31,
2006

Assets

Current Assets

Cash and cash equivalents

$
77

$
71

Accounts receivable:

Trade (net of allowance for doubtful receivables - 2007: $8; 2006: $2)

26

33

Related companies

373

449

Other

132

145

Notes receivable from related companies

2,867

2,547

Inventories

206

199

Deferred income tax assets - current

67

41

Total current assets

3,748

3,485

Investments

Investments in related companies

297

297

Investments in nonconsolidated affiliates

799

896

Other investments

20

23

Noncurrent receivables

56

58

Noncurrent receivable from related company

207

187

Total investments

1,379

1,461

Property

Property

7,470

7,459

Less accumulated depreciation

5,523

5,489

Net property

1,947

1,970

Other Assets

Goodwill

26

26

Other intangible assets (net of accumulated amortization - 2007: $124; 2006: $122)

24

25

Deferred income tax assets - noncurrent

192

115

Asbestos-related insurance receivables - noncurrent

725

725

Deferred charges and other assets

399

383

Total other assets

1,366

1,274

Total Assets

$
8,440

$
8,190

	June 30,			Dec. 31,
In millions (Unaudited)	2007			2006
Liabilities and Stockholder’s Equity
Current Liabilities
Notes payable:
Related companies	$	4		$	8
Other	—			1
Accounts payable:
Trade	250			292
Related companies	284			252
Other	33			40
Income taxes payable	192			49
Asbestos-related liabilities - current	115			129
Pension and other postretirement benefits - current	56			56
Accrued and other current liabilities	136			116
Total current liabilities	1,070			943
Long-Term Debt	820			820
Other Noncurrent Liabilities
Pension and other postretirement benefits - noncurrent	505			518
Asbestos-related liabilities - noncurrent	1,071			1,079
Other noncurrent obligations	486			407
Total other noncurrent liabilities	2,062			2,004
Minority Interest in Subsidiaries	2			3
Stockholder’s Equity
Common stock (1,000 shares authorized and issued)	—			—
Additional paid-in capital	121			121
Retained earnings (includes cumulative effect of adopting FIN No. 48 of $(67))	5,096			4,782
Accumulated other comprehensive loss	(477		)	(483		)
Net stockholder’s equity	4,740			4,420
Total Liabilities and Stockholder’s Equity	$	8,694		$	8,190

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Cash Flows

Union Carbide Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE A CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements of Union Carbide Corporation and its subsidiaries (the “Corporation” or “UCC”) were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented.

The Corporation is a wholly owned subsidiary of The Dow Chemical Company (“Dow”). In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.

The Corporation’s business activities comprise components of Dow’s global operations rather than stand-alone operations. Dow conducts its worldwide operations through global businesses. Because there are no separable reportable business segments for UCC under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.

Intercompany transactions and balances are eliminated in consolidation. Transactions with the Corporation’s parent company, Dow, or other Dow subsidiaries have been reflected as related company transactions in the consolidated financial statements. See Note G for further discussion.

Certain reclassifications of prior year’s amounts have been made to conform to the presentation adopted for 2007. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006.

NOTE B RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 was effective for fiscal years beginning after December 15, 2006.

On January 1, 2007, the Corporation adopted the provisions of FIN No. 48. The cumulative effect of adoption was a $67 million reduction of retained earnings. At January 1, 2007, the total amount of unrecognized tax benefits was $251 million, of which $217 million would impact the effective tax rate, if recognized. Interest and penalties associated with uncertain tax positions are recognized as components of the “Provision for income taxes.” The Corporation’s accrual for interest and penalties was $36 million upon adoption of FIN No. 48.

The Corporation is included in Dow’s consolidated federal income tax group and consolidated tax return. For Dow, the tax years 1998-2003 are currently under audit by the U.S. Internal Revenue Service and the review of these years is expected to be completed during 2007. It is reasonably possible that a reduction in the unrecognized tax benefits may occur (which may impact UCC’s unrecognized tax benefits); however, quantification of an estimated range cannot be made at this time.

While the Corporation is subject to taxation in certain foreign jurisdictions, its major tax jurisdictions are in the United States. The tax years that remain subject to examination in the United States are 1998 through 2006 for federal income taxes and 2002 through 2006 for state and local income taxes.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R).” This Statement, which was effective December 31, 2006 for the Corporation, required employers to recognize the funded status of defined benefit postretirement plans as an asset or liability on the balance sheet and to recognize changes in that funded status through comprehensive income. See Note F for the Corporation’s disclosures related to pension and other postretirement benefits.

SAB No. 74 Disclosures for Accounting Standards Issued But Not Yet Adopted

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. The Corporation is currently evaluating the impact of adopting this Statement.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115,” which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year

that begins after November 15, 2007. The Corporation is currently evaluating if it will elect the fair value option for any of its eligible financial instruments and other items.

In April 2007, the FASB issued FASB Staff Position (“FSP”) No. FIN 39-1, “Amendment of FASB Interpretation No. 39.” This FSP replaces certain terms in FIN No. 39 with “derivative instruments” (as defined in SFAS No. 133) and permits the offsetting of fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. The FSP is effective for fiscal years beginning after November 15, 2007. The Corporation is currently evaluating the impact of applying the guidance in this FSP.

NOTE C INVENTORIES

The following table provides a breakdown of inventories:

Inventories In millions	March 31, 2007		Dec. 31, 2006		June 30, 2007		Dec. 31, 2006
Finished goods	$	30	$	35	$	37	$	35
Work in process	45		40		42		40
Raw materials	45		37		44		37
Supplies	86		87		81		87
Total inventories	$	206	$	199	$	204	$	199

The reserves reducing inventories from the first-in, first-out (“FIFO”) basis to the last-in, first-out (“LIFO”) basis amounted to ~~$142~~$156 million at ~~March 31,~~June 30, 2007 and $160 million at December 31, 2006.

NOTE D OTHER INTANGIBLE ASSETS

The following table provides information regarding the Corporation’s other intangible assets:

Other Intangible Assets

	At March 31, 2007							At December 31, 2006							At June 30, 2007							At December 31, 2006
In millions	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible assets with finite lives:
Licenses and intellectual property	$	33	$	(32	)	$	1	$	33	$	(32	)	$	1	$	33	$	(32	)	$	1	$	33	$	(32	)	$	1
Patents	3		(2		)	1		3		(2		)	1		2		(1		)	1		3		(2		)	1
Software	112		(90		)	22		111		(88		)	23		112		(91		)	21		111		(88		)	23
Total	$	148	$	(124	)	$	24	$	147	$	(122	)	$	25	$	147	$	(124	)	$	23	$	147	$	(122	)	$	25

Amortization expense for software, which is included in “Cost of sales,” was $1 million in the first quarter of 2007 and the first quarter of 2006. Amortization expense for other intangible assets (not including software) was immaterial in the first quarter of 2007 and the first quarter of 2006. Total estimated amortization expense for 2007 and the next five fiscal years is as follows:

Estimated Amortization Expense
for Next Five Years

In millions	In millions
2007		$	5	$	5
2008		$	5	$	6
2009		$	5	$	6
2010		$	5	$	6
2011		$	3	$	2
2012		—		—

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At ~~March 31,~~June 30, 2007, the Corporation had accrued obligations of ~~$81~~$75 million for environmental remediation and restoration costs, including ~~$28~~$26 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Corporation has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. At December 31, 2006, the Corporation had accrued obligations of $77 million for environmental remediation and restoration costs, including $25 million for the remediation of Superfund sites. It is the opinion of the Corporation’s management that the possibility is remote that costs in excess of those disclosed will have a material adverse impact on the Corporation’s consolidated financial statements.

The Corporation and its subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to: product liability; trade regulation; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts; taxes; and commercial disputes.

Separately, the Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that UCC sold in the past, alleged exposure to asbestos-containing products located on UCC’s premises, and UCC’s responsibility for asbestos suits filed against a former subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to the Corporation’s products.

Influenced by the bankruptcy filings of numerous defendants in asbestos-related litigation and the prospects of various forms of state and national legislative reform, the rate at which plaintiffs filed asbestos-related suits against various companies, including the Corporation and Amchem, increased in 2001, 2002 and the first half of 2003. Since then, the rate of filing has significantly abated. The Corporation expects more asbestos-related suits to be filed against it and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

Based on a study completed by Analysis, Research & Planning Corporation (“ARPC”) in January 2003, the Corporation increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. Since then, the Corporation has compared current asbestos claim and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine whether the accrual continues to be appropriate.

In November 2004, the Corporation requested ARPC to review the Corporation’s historical asbestos claim and resolution activity and determine the appropriateness of updating its January 2003 study. In January 2005, ARPC provided the Corporation with a report summarizing the results of its study. At December 31, 2004, the recorded asbestos-related liability for pending and future claims was $1.6 billion. Based on the low end of the range in the January 2005 study, the recorded asbestos-related liability for pending and future claims at December 31, 2004 would be sufficient to resolve asbestos-related claims against UCC and Amchem into 2019. As in its January 2003 study, ARPC did provide estimates for a longer period of time in its January 2005 study, but also reaffirmed its prior advice that forecasts for shorter periods of time are more accurate than those for longer periods of time.

In November 2005, the Corporation requested ARPC to review the Corporation’s 2005 asbestos claim and resolution activity and determine the appropriateness of updating its January 2005 study. In response to that request, ARPC reviewed and analyzed data through October 31, 2005. In January 2006, ARPC stated that an update of its study would not provide a more likely estimate of future events than the estimate reflected in its study of the previous year and, therefore, the estimate in that study remained applicable. Based on the Corporation’s own review of the asbestos claim and resolution activity and ARPC’s response, the Corporation determined that no change to the accrual was required. At December 31, 2005, the recorded asbestos-related liability for pending and future claims was $1.5 billion.

place of previous assumptions to update its January 2005 study. The resulting study, completed by ARPC in December 2006, stated that the undiscounted cost of resolving pending and future asbestos-related claims against UCC and Amchem, excluding future defense and processing costs, through 2021 was estimated to be between approximately $1.2 billion and $1.5 billion. As in its January 2005 study, ARPC provided estimates for a longer period of time in its December 2006 study, but also reaffirmed its prior advice that forecasts for shorter periods of time are more accurate than those for longer periods of time.

Based on ARPC’s December 2006 study and the Corporation’s own review of the asbestos claim and resolution activity, the Corporation decreased its asbestos-related liability for pending and future claims to $1.2 billion at December 31, 2006 which covers the 15-year period ending in 2021 (excluding future defense and processing costs). The reduction was $177 million and was shown as “Asbestos-related credit” in the consolidated statements of income for 2006. At December 31, 2006, approximately 25 percent of the recorded liability related to pending claims and approximately 75 percent related to future claims.

Based on the Corporation’s review of 2007 activity, the Corporation determined that no adjustment to the accrual was required at ~~March 31,~~June 30, 2007. The asbestos-related liability for pending and future claims was $1.2 billion at ~~March 31,~~June 30, 2007. Approximately 2829 percent of the recorded liability related to pending claims and approximately 7271 percent related to future claims.

At December 31, 2002, the Corporation increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially exhausting its asbestos product liability coverage. The insurance receivable related to the asbestos liability was determined after a thorough review of applicable insurance policies and the 1985 Wellington Agreement, to which the Corporation and many of its liability insurers are signatory parties, as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the solvency and historical payment experience of various insurance carriers. The Wellington Agreement and other agreements with insurers are designed to facilitate an orderly resolution and collection of the Corporation’s insurance policies and to resolve issues that the insurance carriers may raise.

In September 2003, the Corporation filed a comprehensive insurance coverage case, now proceeding in the Supreme Court of the State of New York, County of New York, seeking to confirm its rights to insurance for various asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. This lawsuit was filed against insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place with the Corporation regarding their asbestos-related insurance coverage, in order to facilitate an orderly resolution and collection of such insurance policies and to resolve issues that the insurance carriers may raise. Although the lawsuit is continuing, through the end of the ~~first~~second quarter of 2007, the Corporation had reached settlements with several of the carriers involved in this litigation.

The Corporation’s receivable for insurance recoveries related to its asbestos liability was ~~$484~~$478 million at ~~March 31,~~June 30, 2007 and $495 million at December 31, 2006. At ~~March 31,~~June 30, 2007 and December 31, 2006, all of the receivable for insurance recoveries was related to insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place regarding their asbestos-related insurance coverage.

In addition to the receivable for insurance recoveries related to its asbestos liability, the Corporation had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

The Corporation expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was ~~$17~~$25 million in the second quarter of 2007 ($14 million in the second quarter of 2006) and $42 million in the first ~~quarter~~six months of 2007 ~~and $14~~($28 million in the first ~~quarter~~six months of ~~2006,~~2006), and was reflected in “Cost of sales.”

After a review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits, after taking into account the solvency and historical payment experience of various insurance carriers; existing insurance settlements; and the advice of outside counsel with respect to the applicable insurance coverage law relating to the terms and conditions of its insurance policies, the Corporation continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is probable of collection.

insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries to be higher or lower than those projected or those recorded.

Because of the uncertainties described above, management cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing the Corporation and Amchem. Management believes that it is reasonably possible that the cost of disposing of the Corporation’s asbestos-related claims, including future defense costs, could have a material adverse impact on the results of operations and cash flows for a particular period and on the consolidated financial position of the Corporation.

While it is not possible at this time to determine with certainty the ultimate outcome of any of the legal proceedings and claims referred to in this filing, management believes that adequate provisions have been made for probable losses with respect to pending claims and proceedings, and that, except for the asbestos-related matters described above, the ultimate outcome of all known and future claims, after provisions for insurance, will not have a material adverse impact on the results of operations, cash flows and consolidated financial position of the Corporation. Should any losses be sustained in connection with any of such legal proceedings and claims in excess of provisions provided and available insurance, they will be charged to income when determinable.

At December 31, 2006, the Corporation had various outstanding commitments for take or pay agreements, with terms extending from one to ten years. Such commitments were not in excess of current market prices. The fixed and determinable portion of obligations under purchase commitments at December 31, 2006 is presented in the following table:

The Corporation has undertaken obligations to guarantee the performance of certain nonconsolidated affiliates (including the OPTIMAL Group and Nippon Unicar Company Limited) and a former subsidiary of the Corporation (via delivery of cash or other assets) if specified triggering events occur. Non-performance under a contract for commercial and/or financial obligations by the guaranteed party would trigger the obligation of the Corporation to make payments to the beneficiary of the guarantees. Financial obligations include debt and lease arrangements. The guarantee related to a former subsidiary of the Corporation expired in the second quarter of 2007.

The following table provides a summary of the final expiration, maximum future payments, and recorded liability reflected in the consolidated balance sheets for these guarantees.

In accordance with FIN No. 47, the Corporation has recognized conditional asset retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at manufacturing and administrative sites in the United States. The aggregate carrying amount of conditional asset retirement obligations was $13 million at ~~March 31,~~June 30, 2007 and December 31, 2006. The discount rate used to calculate the Corporation’s asset retirement obligations was 4.6 percent. These obligations are included in the consolidated balance sheets as “Accrued and other current liabilities.”

The Corporation has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated in its consolidated financial statements. It is the opinion of management that the possibility is remote that such conditional asset retirement obligations, when estimable, will have a material adverse impact on the Corporation’s consolidated financial statements based on current costs.

The Corporation sells products to Dow to simplify the customer interface process. Products are sold to and purchased from Dow at market-based prices in accordance with the terms of Dow’s long-standing intercompany pricing policies. The Corporation also procures certain commodities and raw materials through a Dow subsidiary and pays a commission to that Dow subsidiary based on the volume and type of commodities and raw materials purchased. The commission expense is included in “Sundry income (expense) — net” in the consolidated statements of income. Purchases from that Dow subsidiary were approximately ~~$693~~$825 million in the second quarter of 2007 ($725 million in the second quarter of 2006) and $1,518 million in the first ~~quarter~~half of 2007 ~~and $805~~($1,530 million in the first ~~quarter~~half of ~~2006.~~2006).

The Corporation has a master services agreement with Dow whereby Dow provides services, including, but not limited to, accounting, legal, treasury (investments, cash management, risk management, insurance), procurement, human resources, environmental, health and safety, and business management for UCC. Under the master services agreement with Dow, for general administrative and overhead type services that Dow routinely allocates to various businesses, UCC is charged the cost of those services based on the Corporation’s and Dow’s relative manufacturing conversion costs. This arrangement results in a quarterly charge of approximately $5$6 million (included in “Sundry income (expense) — net”).

For services that Dow routinely charges based on effort, UCC is charged the cost of such services on a fully absorbed basis, which includes direct and indirect costs. Additionally, certain Dow employees are contracted to UCC and Dow is reimbursed for all direct employment costs of such employees. Management believes the method used for determining expenses charged by Dow is reasonable. Dow provides these services by leveraging its centralized functional service centers to provide services at a cost that management believes provides an advantage to the Corporation.

The monitoring and execution of risk management policies related to interest rate and foreign currency risks, which are based on Dow’s risk management philosophy, are provided as a service to UCC.

As part of Dow’s cash management process, UCC is a party to revolving loans with Dow that have LIBOR-based interest rates with varying maturities. At ~~March 31,~~June 30, 2007, the Corporation had a note receivable of ~~$2.8~~$2.9 billion from Dow under a revolving loan agreement. The Corporation may draw from this note receivable in support of its daily working capital requirements and, as such, the net effect of cash inflows and outflows under this revolving loan agreement is presented in the consolidated statements of cash flows as an operating activity.

The Corporation also has a separate revolving credit agreement with Dow that allows the Corporation to borrow or obtain credit enhancements up to an aggregate of $1 billion that matures December 30, 2007 pursuant to an amendment effective as of September 30, 2006; however, Dow may demand repayment with a 30-day written notice to the Corporation, subject to certain restrictions. A related collateral agreement provides for the replacement of certain existing pledged assets, primarily equity interests in various subsidiaries and joint ventures, with cash collateral. At ~~March 31,~~June 30, 2007, ~~$809~~$808 million was

available under the revolving credit agreement. The cash collateral was reported as “Noncurrent receivable from related company” in the consolidated balance sheets.

The losses and additional costs incurred by the Corporation in 2005 due to hurricane Katrina were covered by the Corporation’s insurance program. The Corporation has an insurance receivable for losses incurred of $105 million at ~~March 31,~~June 30, 2007 from its insurer (an affiliate of Dow). Additionally, the Corporation has insurance coverage for lost sales and margins caused by hurricane Katrina. No amount of recovery for lost sales and margins had been recognized at ~~March 31,~~June 30, 2007, and will only be recognized when the amount of recovery is realized through agreement among the insurers.

Union Carbide Corporation and Subsidiaries

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Pursuant to General Instruction H of Form 10-Q “Omission of Information by Certain Wholly-Owned Subsidiaries,” this section includes only management’s narrative analysis of the results of operations for the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2007, the most recent ~~period,~~periods, compared with the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2006, the corresponding ~~period~~periods in the preceding fiscal year.

References below to “Dow” refer to The Dow Chemical Company and its consolidated subsidiaries, except as the context otherwise indicates.

The Corporation’s business activities comprise components of Dow’s global operations rather than stand-alone operations. Dow conducts its worldwide operations through global businesses. Because there are no separable reportable business segments for UCC under Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.

400 West Sam Houston Parkway South, Houston, Texas

(Address of principal executive offices)

(Zip Code)

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of Union Carbide Corporation (the “Corporation” or “UCC”). This section covers the current performance and outlook of the Corporation. The forward-looking statements contained in this section and in other parts of this document involve risks and uncertainties that may affect the Corporation’s operations, markets, products, services, prices and other factors as more fully discussed elsewhere and in filings with the U.S. Securities and Exchange Commission (SEC). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Corporation’s expectations will be realized. The Corporation assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

RESULTS OF OPERATIONS

Total net sales for the ~~first~~second quarter of 2007 were ~~$1,726~~$1,899 million compared with ~~$2,053~~$1,776 million for the second quarter of 2006, an increase of 7 percent. Total net sales were $3,625 million for the first ~~quarter~~half of 2007 compared with $3,829 million for the first half of 2006, a decrease of 165 percent. Total net sales for the first quarter of last year included significant lump sum technology licensing revenue. Technology licensing revenue varies from period to period due to the nature of the business.

~~Net sales to related companies for the first quarter of 2007 were $1,673 million compared with $1,735 million for the first quarter of 2006, a decrease of 4 percent.~~ Selling prices to Dow are based on market prices for the related products. Average selling prices for most products were higher in the ~~first~~second quarter of 2007 and on a year-to-date basis compared with the ~~first quarter~~same periods of ~~2006,~~last year, led by ethylene glycol (“EG”), ~~vinyl acetate monomer (“VAM”)~~wire and cable compounds and oxo products. Sales volume was mixed with overall volume ~~down~~up in the ~~first~~second quarter of 2007 compared with the ~~first~~second quarter of 2006. Volume growth for several products (led by ~~VAM,~~ethyleneamines, oxo products, and ~~polyethylene) was~~polypropylene) more than offset by declines in a few of the Corporation’s other products, principally ~~EG. The~~EG (due to the restructuring of certain sales agreements in the third quarter of 2006). Polyethylene volume improved slightly. Sales volume on a year-to-date basis was mixed with overall volume down compared with the first half of 2006. On a year-to-date basis, volume was impacted by a decline in EG volume ~~was related~~due to scheduled plant turnarounds in the first quarter of ~~2007.~~2007 and the restructuring of certain sales agreements in the third quarter of 2006. Total net sales for the first half of 2006 included significant lump sum technology licensing revenue. Technology licensing revenue varies from period to period due to the nature of the business.

Cost of sales ~~decreased 2~~increased 8 percent from ~~$1,636~~$1,603 million in the ~~first~~second quarter of 2006 to ~~$1,598~~$1,730 million in the ~~first~~second quarter of 2007 principally due to ~~lower~~higher feedstock and energy costs and ~~lower~~higher sales volume. On a year-to-date basis, cost of sales increased 3 percent from $3,239 million to $3,328 million, reflecting higher feedstock and energy costs.

Equity in earnings of nonconsolidated affiliates increased ~~$63~~$32 million in the ~~first~~second quarter of 2007 compared with the same quarter last year, led by a ~~substantial~~strong improvement in earnings reported by ~~the OPTIMAL Group~~EQUATE Petrochemical Company K.S.C. (“~~OPTIMAL”~~EQUATE”), as well as higher reported earnings from ~~EQUATE Petrochemical Company K.S.C.~~the OPTIMAL Group (“~~EQUATE”~~OPTIMAL”) ~~and Univation Technologies, LLC. Results from~~. Year to date, equity in earnings of nonconsolidated affiliates was $239 million compared with $144 million last year. In addition to the items previously mentioned, results for EQUATE and OPTIMAL for the first half of 2006 were lower due to planned maintenance turnarounds in the first quarter of ~~2006 due to planned~~2006. EQUATE’s maintenance ~~turnarounds at~~turnaround was completed during the ~~joint ventures.~~second quarter of 2006.

Sundry expense — net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, dividends from investments, commissions, charges for management services provided by Dow, and gains and losses on sales of investments and assets. Sundry expense — net for the ~~first~~second quarter of 2007 was ~~$10~~$17 million compared with ~~$21~~$23 million for the second quarter of last year, reflecting lower commission expense. Year to date, sundry expense — net was $27 million compared with $44 million for the first ~~quarter~~six months of last year. Sundry expense for the first ~~quarter~~six months of 2007 was favorably impacted by a higher level of dividend income and lower commission expense.

Interest income was ~~$37~~$43 million in the ~~first~~second quarter of 2007 compared with ~~$23~~$35 million in the second quarter of 2006, due to an increased level of interest bearing assets. Year to date, interest income was $80 million, up from $58 million in the first ~~quarter~~six months of 2006 due to higher interest rates and ~~an increased~~a significantly higher level of ~~interest bearing~~interest-bearing assets.

Interest expense and amortization of debt discount ~~increased~~decreased $2 million in the ~~first~~second quarter of 2007 compared with the second quarter of 2006. Year to date, interest expense and amortization of debt discount was $26 million, unchanged from the first ~~quarter~~six months of 2006.

The effective tax rate fluctuates based on, among other factors, where income is earned, the level of after-tax income from joint ventures, and the level of income relative to tax credits available. The effective tax rate for the ~~first~~second quarter of 2007 was ~~21.5~~28.8 percent compared with ~~34.9~~34 percent for the same quarter last year. Year to date, the effective tax rate was 25.4 percent versus 34.6 percent last year. Since most of the earnings from nonconsolidated

affiliates are taxed at the joint venture level, the impact of higher equity earnings decreased the Corporation’s overall effective tax rate.

The Corporation reported net income of ~~$186~~$195 million for the ~~first~~second quarter of 2007, compared with ~~$283~~$155 million for the second quarter of 2006, reflecting the favorable impact of higher equity earnings. Net income for the first half of 2007 declined to $381 million from $438 million for the first ~~quarter~~half of ~~2006. While the results for the first quarter of 2007 were favorably impacted by higher equity earnings, this improvement was more than offset by~~last year as a significant decline in technology licensing ~~revenue.~~revenue more than offset the improvement in equity earnings for the first half of 2007.

OTHER MATTERS

Accounting Changes

See Note B to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note A to the Consolidated Financial Statements in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 (“2006 10-K”) describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The Corporation’s critical accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Corporation’s 2006 10-K. Since December 31, 2006, there have been no material changes in the Corporation’s critical accounting policies.

Asbestos-Related Matters

Introduction

The Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that UCC sold in the past, alleged exposure to asbestos-containing products located on UCC’s premises, and UCC’s responsibility for asbestos suits filed against a former subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to the Corporation’s products.

The table below provides information regarding asbestos-related claims filed against the Corporation and Amchem:

	2007		2006		2007		2006
Claims unresolved at January 1	111,887		146,325		111,887		146,325
Claims filed	3,085		5,402		5,839		9,130
Claims settled, dismissed or otherwise resolved	(2,225	)	(7,921	)	(13,486	)	(34,327	)
Claims unresolved at March 31	112,747		143,806
Claims unresolved at June 30					104,240		121,128
Claimants with claims against both UCC and Amchem	38,901		47,779		35,025		42,096
Individual claimants at March 31	73,846		96,027
Individual claimants at June 30					69,215		79,032

Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits on behalf of hundreds or even thousands of claimants. As a result, the damages alleged are not expressly identified as to UCC, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. In fact, there are no personal injury cases in which only the Corporation and/or Amchem are the sole named defendants. For these reasons and based upon the Corporation’s litigation and settlement experience, the Corporation does not consider the damages alleged against it and Amchem to be a meaningful factor in its determination of any potential asbestos liability.

Estimating the Liability

~~Asbestos-Related Matters—Continued~~

2017 to $2.2 billion, excluding future defense and processing costs. Since then, the Corporation has compared current asbestos claim and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine whether the accrual continues to be appropriate.

In November 2006, the Corporation requested ARPC to review the Corporation’s historical asbestos claim and resolution activity and determine the appropriateness of updating its January 2005 study. In response to that request, ARPC reviewed and analyzed data through October 31, 2006 and concluded that the experience from 2004 through 2006 was sufficient for the purpose of forecasting future filings and values of asbestos claims filed against UCC and Amchem, and could be used in place of previous assumptions to update its January 2005 study. The resulting study, completed by ARPC in December 2006, stated that the undiscounted cost of resolving pending and future asbestos-related claims against UCC and Amchem, excluding future defense and processing costs, through 2021 was estimated to be between approximately $1.2 billion and $1.5 billion. As in its January 2005 study, ARPC provided estimates for a longer period of time in its December 2006 study, but also reaffirmed its prior advice that forecasts for shorter periods of time are more accurate than those for longer periods of time.

Defense and Resolution Costs

The following table provides information regarding defense and resolution costs related to asbestos-related claims filed against the Corporation and Amchem:

Defense and Resolution Costs

	Three Months Ended				Aggregate Costs		Six Months Ended				Aggregate Costs
In millions	March 31, 2007		March 31, 2006		to Date as of March 31, 2007		June 30, 2007		June 30, 2006		to Date as of June 30, 2007
Defense costs	$	17	$	14	$	498	$	42	$	28	$	523
Resolution costs	$	16	$	27	$	1,198	$	28	$	73	$	1,210

The average resolution payment per asbestos claimant and the rate of new claim filings has fluctuated both up and down since the beginning of 2001. Union Carbide’s management expects such fluctuations to continue in the future based upon a number of factors, including the number and type of claims settled in a particular period, the jurisdictions in which such claims arose, and the extent to which any proposed legislative reform related to asbestos litigation is being considered.

The Corporation expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was ~~$17~~$25 million in the ~~first~~second quarter of 2007 ~~and $14~~($14 million in the ~~first~~second quarter of ~~2006,~~2006) and $42 million for the first six months of 2007 ($28 million for the first six months of 2006), and was reflected in “Cost of sales.”

Insurance Receivables

Receivables for Costs Submitted to Insurance Carriers

In millions	March 31, 2007		Dec 31, 2006		June 30, 2007		Dec. 31, 2006
Receivables for defense costs	$	35	$	34	$	37	$	34
Receivables for resolution costs	265		266		257		266
Total	$	300	$	300	$	294	$	300

Summary

The amounts recorded for the asbestos-related liability and related insurance receivable described above were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries to be higher or lower than those projected or those recorded.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s Disclosure Committee and the Corporation’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 15d-15(b); and whether any change has occurred in the Corporation’s internal control over financial reporting pursuant to Exchange Act Rule 15d-15(d). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective and that no change in the Corporation’s internal control over financial reporting occurred during the Corporation’s most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

No material developments in asbestos-related matters occurred during the ~~first~~second quarter of 2007. For a summary of the history and current status of asbestos-related matters, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, Asbestos-Related Matters; and Note E to the Consolidated Financial Statements.

There were no material changes in the Corporation’s risk factors in the ~~first~~second quarter of 2007.

See the Exhibit Index on page 1920 of this Quarterly Report on Form 10-Q for exhibits filed with this report.

New York	~~New York~~		13-1421730
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

		PAGE
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.		3

Consolidated Statements of Income		3

Consolidated Balance Sheets		4

Consolidated Statements of Cash Flows		6

Consolidated Statements of Comprehensive Income		6

Notes to the Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		1314

Disclosure Regarding Forward-Looking Information		1314

Results of Operations		1314

Other Matters		1415

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		1718

Item 4. Controls and Procedures.		1718

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		1718

Item 1A. Risk Factors.		1718

Item 6. Exhibits.		1718

SIGNATURES		1819

EXHIBIT INDEX		1920

In millions	Final Expiration	Maximum Future Payments		Recorded Liability		Final Expiration	Maximum Future Payments		Recorded Liability
Guarantees at March 31, 2007	2014	$	84	$	1
Guarantees at June 30, 2007						2014	$	76	$	1
Guarantees at December 31, 2006	2014	$	84	$	1	2014	$	84	$	1

			UNION CARBIDE CORPORATION
		Registrant



Date: ~~May 1,~~July 30, 2007


	By:	/s/ WILLIAM H. WEIDEMAN
		William H. Weideman
		Vice President and Controller
		The Dow Chemical Company
		Authorized Representative of
		Union Carbide Corporation




	By:	/s/ EDWARD W. RICH
		Edward W. Rich
		Vice President, Treasurer and
		Chief Financial Officer

	Defined Benefit Pension Plans						Other Postretirement Benefits
	Three Months Ended						Three Months Ended
In millions	March 31, 2007			March 31, 2006			March 31, 2007			March 31, 2006
Service cost	$	5		$	6		$	1		$	1
Interest cost	53			53			7			8
Expected return on plan assets	(79		)	(83		)	—			—
Amortization of prior service cost (credit)	1			—			(1		)	(1		)
Amortization of net loss	7			8			1			1
Net periodic benefit cost (credit)	$	(13	)	$	(16	)	$	8		$	9

EXHIBIT NO.		DESCRIPTION

23	Analysis, Research & Planning Corporation’s Consent.

31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.