UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

FOR THE QUARTER ENDED March 31, 2004

Commission file number1-1463

UNION CARBIDE CORPORATION(Exact name of registrant as specified in its charter)

|New York(State or other jurisdiction of
incorporation or organization)                                                    |  |  |  | 13-1421730(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------------------------
|400 West Sam Houston Parkway South, Houston, Texas    77042(Address of principal executive offices)            (Zip Code)
|713-798-2016(Registrant's telephone number, including area code:)                                                        
|Not applicable(Former name, former address and former fiscal year, if changed since last report)                         
|                                                                                                                          |  |  |  |                                               

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. Yes ý No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes o No ý.

At March 31, 2004, 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.



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Union Carbide Corporation  Table of Contents

|                             |                                                                                               | PAGE                                            
|---------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------
|PART IFINANCIAL INFORMATION |                                                                                               |                                                 
|                             | Item 1. Financial Statements                                                                  |                                                 
|                             |                                                                                               | Consolidated Statements of Income               
|                             |                                                                                               | Consolidated Balance Sheets                     
|                             |                                                                                               | Consolidated Statements of Cash Flows           
|                             |                                                                                               | Consolidated Statements of Comprehensive Income 
|                             |                                                                                               | Notes to the Consolidated Financial Statements  
|                             | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                 
|                             |                                                                                               | Disclosure Regarding Forward-Looking Information
|                             |                                                                                               | Results of Operations                           
|                             |                                                                                               | Other Matters                                   
|                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                 
|                             | Item 4. Controls and Procedures                                                               |                                                 
|PART IIOTHER INFORMATION    |                                                                                               |                                                 
|                             | Item 1. Legal Proceedings                                                                     |                                                 
|                             | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                 
|SIGNATURES                   |                                                                                               | 21                                              
|EXHIBIT INDEX                |                                                                                               | 22                                              

2

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PART I.  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Income

|                                                   |                                                    | Three Months Ended |      
|-------------------------------------------------- | -------------------------------------------------- | ------------------ | -----
|
|                                                   | Net trade sales                                    |                    | $    
|                                                   | Net sales to related companies                     |                    |      
|                                                   |                                                    |                    |      
|Total Net Sales                                    |                                                    |                    | 1,311
|                                                   |                                                    |                    |      
|                                                   | Cost of sales                                      |                    |      
|                                                   | Research and development expenses                  |                    |      
|                                                   | Selling, general and administrative expenses       |                    |      
|                                                   | Amortization of intangibles                        |                    |      
|                                                   | Equity in earnings of nonconsolidated affiliates   |                    |      
|                                                   | Sundry income (expense)net                        |                    |      
|                                                   | Interest income                                    |                    |      
|                                                   | Interest expense and amortization of debt discount |                    |      
|                                                   |                                                    |                    |      
|Income (Loss) before Income Taxes                  |                                                    |                    | 141  
|                                                   |                                                    |                    |      
|                                                   | Provision (Credit) for income taxes                |                    |      
|                                                   |                                                    |                    |      
|Net Income (Loss) Available for Common Stockholder |                                                    | $                  | 91   
|                                                   |                                                    |                    |      
|Depreciation                                       |                                                    | $                  | 78   
|                                                   |                                                    |                    |      
|Capital Expenditures                               |                                                    | $                  | 26   
|                                                   |                                                    |                    |      

See Notes to the Consolidated Financial Statements.

3

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Union Carbide Corporation and Subsidiaries  Consolidated Balance Sheets

|In millions (Unaudited) |                                                                                  | March 31,
2004                                                       |       | Dec. 31,
2003
|----------------------- | -------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----- | -------------
|Assets                  |                                                                                  |                                                                      |       |              
|Current Assets          |                                                                                  |                                                                      |       |              
|                        | Cash and cash equivalents                                                        |                                                                      | $     | 22           
|                        | Accounts receivable:                                                             |                                                                      |       |              
|                        |                                                                                  | Trade (net of allowance for doubtful receivables2004: $4; 2003: $4) |       |              
|                        |                                                                                  | Related companies                                                    |       |              
|                        |                                                                                  | Other                                                                |       |              
|                        | Notes receivable from related companies                                          |                                                                      |       | 246          
|                        | Inventories                                                                      |                                                                      |       | 210          
|                        | Deferred income tax assetscurrent                                               |                                                                      |       | 55           
|                        | Asbestos-related insurance receivablescurrent                                   |                                                                      |       | 225          
|                        |                                                                                  |                                                                      |       |              
|                        | Total current assets                                                             |                                                                      |       | 1,205        
|                        |                                                                                  |                                                                      |       |              
|Investments             |                                                                                  |                                                                      |       |              
|                        | Investments in related companies                                                 |                                                                      |       | 461          
|                        | Investments in nonconsolidated affiliates                                        |                                                                      |       | 594          
|                        | Other investments                                                                |                                                                      |       | 32           
|                        | Noncurrent receivables                                                           |                                                                      |       | 17           
|                        |                                                                                  |                                                                      |       |              
|                        | Total investments                                                                |                                                                      |       | 1,104        
|                        |                                                                                  |                                                                      |       |              
|Property                |                                                                                  |                                                                      |       |              
|                        | Property                                                                         |                                                                      |       | 7,376        
|                        | Less accumulated depreciation                                                    |                                                                      |       | 5,175        
|                        |                                                                                  |                                                                      |       |              
|                        | Net property                                                                     |                                                                      |       | 2,201        
|                        |                                                                                  |                                                                      |       |              
|Other Assets            |                                                                                  |                                                                      |       |              
|                        | Goodwill                                                                         |                                                                      |       | 26           
|                        | Other intangible assets (net of accumulated amortization2004: $119; 2003: $118) |                                                                      |       | 16           
|                        | Deferred income tax assetsnoncurrent                                            |                                                                      |       | 745          
|                        | Asbestos-related insurance receivablesnoncurrent                                |                                                                      |       | 1,117        
|                        | Deferred charges and other assets                                                |                                                                      |       | 110          
|                        |                                                                                  |                                                                      |       |              
|                        | Total other assets                                                               |                                                                      |       | 2,014        
|                        |                                                                                  |                                                                      |       |              
|Total Assets            |                                                                                  | $                                                                    | 6,524 |              
|                        |                                                                                  |                                                                      |       |              

See Notes to the Consolidated Financial Statements.

4

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Union Carbide Corporation and Subsidiaries  Consolidated Balance Sheets

|In millions (Unaudited)                    |                                                      | March 31,
2004    |       | Dec. 31,
2003 |    
|------------------------------------------ | ---------------------------------------------------- | ----------------- | ----- | ------------- | ---
|Liabilities and Stockholder's Equity       |                                                      |                   |       |               |    
|Current Liabilities                        |                                                      |                   |       |               |    
|                                           | Notes payable:                                       |                   |       |               |    
|                                           |                                                      | Related companies |       | $             | 12 
|                                           |                                                      | Other             |       |               | 4  
|                                           | Long-term debt due within one year                   |                   |       | 16            |    
|                                           | Accounts payable:                                    |                   |       |               |    
|                                           |                                                      | Trade             |       |               | 233
|                                           |                                                      | Related companies |       |               | 326
|                                           |                                                      | Other             |       |               | 48 
|                                           | Income taxes payable                                 |                   |       | 81            |    
|                                           | Asbestos-related liabilitiescurrent                 |                   |       | 123           |    
|                                           | Accrued and other current liabilities                |                   |       | 219           |    
|                                           |                                                      |                   |       |               |    
|                                           | Total current liabilities                            |                   |       | 1,062         |    
|                                           |                                                      |                   |       |               |    
|Long-Term Debt                             |                                                      |                   | 1,272 |               |    
|                                           |                                                      |                   |       |               |    
|Other Noncurrent Liabilities               |                                                      |                   |       |               |    
|                                           | Pension and other postretirement benefitsnoncurrent |                   |       | 505           |    
|                                           | Asbestos-related liabilitiesnoncurrent              |                   |       | 1,739         |    
|                                           | Other noncurrent obligations                         |                   |       | 461           |    
|                                           |                                                      |                   |       |               |    
|                                           | Total other noncurrent liabilities                   |                   |       | 2,705         |    
|                                           |                                                      |                   |       |               |    
|Minority Interest in Subsidiaries          |                                                      |                   | 3     |               |    
|                                           |                                                      |                   |       |               |    
|Stockholder's Equity                       |                                                      |                   |       |               |    
|                                           | Common stock (1,000 shares authorized and issued)    |                   |       |              |    
|                                           | Additional paid-in capital                           |                   |       |              |    
|                                           | Retained earnings                                    |                   |       | 1,837         |    
|                                           | Accumulated other comprehensive loss                 |                   |       | (355          | )  
|                                           |                                                      |                   |       |               |    
|                                           | Net stockholder's equity                             |                   |       | 1,482         |    
|                                           |                                                      |                   |       |               |    
|Total Liabilities and Stockholder's Equity |                                                      | $                 | 6,524 |               | $  
|                                           |                                                      |                   |       |               |    

See Notes to the Consolidated Financial Statements.

5

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Union Carbide Corporation and Subsidiaries  Consolidated Statements of Cash Flows

|                     |  |                                                                                              |  | Three Months Ended |     
|-------------------- |  | -------------------------------------------------------------------------------------------- |  | ------------------ | ----
|
|Operating Activities |  |                                                                                              |  |                    |     
|                     |  | Net Income (Loss) Available for Common Stockholder                                           |  | $                  | 91  
|                     |  | Adjustments to reconcile net income (loss) to net cash
    provided by operating activities: |  |                    |     
|                     |  | Depreciation and amortization                                                                |  |                    | 83  
|                     |  | Provision (Credit) for deferred income tax                                                   |  |                    | 39  
|                     |  | Earnings/losses of nonconsolidated affiliates less than
                dividends received   |  |                    | 34  
|                     |  | Net (gain) loss on sales of property                                                         |  |                    | (1  
|                     |  | Other net (gain) loss                                                                        |  |                    | (1  
|                     |  | Changes in assets and liabilities that provided (used) cash:                                 |  |                    |     
|                     |  | Accounts and notes receivable                                                                |  |                    | 46  
|                     |  | Related company receivables                                                                  |  |                    | (129
|                     |  | Inventories                                                                                  |  |                    | (28 
|                     |  | Accounts payable                                                                             |  |                    | 11  
|                     |  | Related company payables                                                                     |  |                    | 39  
|                     |  | Other assets and liabilities                                                                 |  |                    | (152
|                     |  |                                                                                              |  |                    |     
|                     |  | Cash provided by operating activities                                                        |  |                    | 32  
|                     |  |                                                                                              |  |                    |     
|Investing Activities |  |                                                                                              |  |                    |     
|                     |  | Capital expenditures                                                                         |  |                    | (26 
|                     |  | Proceeds from sales of property                                                              |  |                    | 2   
|                     |  | Investments in nonconsolidated affiliates                                                    |  |                    | (1  
|                     |  | Collection of noncurrent note receivable from related company                                |  |                    |    
|                     |  | Proceeds from sales of investments                                                           |  |                    | 3   
|                     |  |                                                                                              |  |                    |     
|                     |  | Cash used in investing activities                                                            |  |                    | (22 
|                     |  |                                                                                              |  |                    |     
|Financing Activities |  |                                                                                              |  |                    |     
|                     |  | Changes in short-term notes payable                                                          |  |                    | 2   
|                     |  | Changes in notes payable to related companies                                                |  |                    | (11 
|                     |  |                                                                                              |  |                    |     
|                     |  | Cash used in financing activities                                                            |  |                    | (9  
|                     |  |                                                                                              |  |                    |     
|Summary              |  |                                                                                              |  |                    |     
|                     |  | Increase in cash and cash equivalents                                                        |  |                    | 1   
|                     |  | Cash and cash equivalents at beginning of year                                               |  |                    | 21  
|                     |  |                                                                                              |  |                    |     
|                     |  | Cash and cash equivalents at end of period                                                   |  | $                  | 22  
|                     |  |                                                                                              |  |                    |     

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income

|                                                   |                                  |   |    | Three Months Ended |  
|-------------------------------------------------- | -------------------------------- | - | -- | ------------------ | -
|
|Net Income (Loss) Available for Common Stockholder |                                  | $ | 91 |                    | $
|                                                   |                                  |   |    |                    |  
|Other Comprehensive Income, Net of Tax             |                                  |   |    |                    |  
|                                                   | Unrealized gains on investments  |   |    |                   |  
|                                                   | Translation adjustments          |   |    | 3                  |  
|                                                   |                                  |   |    |                    |  
|                                                   | Total other comprehensive income |   |    | 3                  |  
|                                                   |                                  |   |    |                    |  
|Comprehensive Income (Loss)                        |                                  | $ | 94 |                    | $
|                                                   |                                  |   |    |                    |  

See Notes to the Consolidated Financial Statements.

6

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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 (consisting of normal recurring accruals) which, in the opinion of management, are
considered necessary for a fair presentation of the results for the periods covered.

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 H for further discussion.

Certain
reclassifications of prior year's amounts have been made to conform to the presentation adopted for 2004. 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, 2003.

NOTE B    ACCOUNTING CHANGES

In December 2003, the Financial Accounting Standards Board ("FASB") revised SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." The revised standard requires new disclosures in addition to those required by the original standard about the assets, obligations, cash flows and net periodic benefit cost
of defined benefit pension plans and other defined benefit postretirement plans. As revised, SFAS No. 132 was effective for financial statements with fiscal years ending after
December 15, 2003. The interim-period disclosures required by this standard are effective for interim periods beginning after December 15, 2003. See Note G for the required
disclosures.

In
January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003." The FSP permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer
accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Regardless of whether a sponsor elects that deferral, the FSP requires certain disclosures
pending further consideration of the underlying accounting issues. The Corporation has elected to defer financial recognition of this legislation. See Note G for the required disclosures.

In
March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force ("EITF") with respect to EITF Issue No. 03-16, "Accounting for
Investments in Limited Liability Companies." According to EITF Issue No. 03-16, a limited liability company ("LLC") that maintains a "specific ownership account" for each investor
should be viewed similar to a limited partnership for determining whether a noncontrolling investment in an LLC should be accounted for using the cost or equity method. The consensus applies to all
investment in LLCs (except those required to be accounted for as debt securities) and is effective for reporting periods beginning after June 15, 2004. The Corporation is currently assessing
the impact of adopting EITF Issue No. 03-16.

NOTE C    IMPAIRMENT OF LONG-LIVED ASSETS

In the first quarter of 2003, certain studies regarding non-strategic or under-performing assets were completed and management made decisions relative
to certain assets. These decisions resulted in the write-off of the net book value of three manufacturing facilities totaling $24 million and included in "Cost of sales" (the
largest of which was $16 million associated with the impairment of the ethylene production facilities in Seadrift, Texas, which was shut down in the third quarter of 2003), and the impairment
of a chemical transport vessel (sold in the second quarter of 2003) of $11 million included in "Sundry income (expense)net".

7

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NOTE D    INVENTORIES

The following table provides a breakdown of inventories at March 31, 2004 and December 31, 2003:

Inventories(in millions)

March 31,
2004

December 31,
2003Finished goods

$
75

$
59Work in process


25


25Raw materials


35


25Supplies


75


73Total inventories

$
210

$
182


The
reserves reducing inventories from the first-in, first-out ("FIFO") basis to the last-in, first-out ("LIFO") basis amounted to
$84 million at March 31, 2004 and $96 million at December 31, 2003.

NOTE E    OTHER INTANGIBLE ASSETS

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

|                                     |                                    | At March 31, 2004 |   | At December 31, 2003
|------------------------------------ | ---------------------------------- | ----------------- | - | --------------------
|
|Intangible assets with finite lives: |                                    |                   |   |                     
|                                     | Licenses and intellectual property |                   | $ | 36                  
|                                     | Patents                            |                   |   | 5                   
|                                     | Software                           |                   |   | 93                  
|                                     | Other                              |                   |   | 1                   
|                                     |                                    |                   |   |                     
|                                     | Total                              |                   | $ | 135                 
|                                     |                                    |                   |   |                     

Amortization
expense for other intangible assets (not including software) was $1 million in the first quarter of 2004, compared with $1 million for the same period last
year. Amortization expense for software, which is included in cost of sales, totaled $0.3 million in the first quarter of 2004, compared with $1 million in the first quarter of 2003.
Total estimated amortization expense for 2004 and the five succeeding fiscal years is as follows:

|(in millions) |  | Estimated
Amortization
Expense
|------------- |  | ------------------------------
|2004          |  | $                             
|2005          |  |                               
|2006          |  |                               
|2007          |  |                               
|2008          |  |                               
|2009          |  |                               



NOTE F    COMMITMENTS AND CONTINGENT LIABILITIES

Environmental

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. The Corporation had accrued obligations of $109 million at December 31, 2003 for environmental remediation and restoration
costs, including $33 million for the remediation of Superfund sites. At March 31, 2004, the Corporation had accrued obligations of $107 million for environmental remediation and
restoration costs, including $30 million for the remediation of Superfund sites. This is

8

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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. It is the opinion of the Corporation's management that the possibility is remote that costs in
excess of those accrued or disclosed will have a material adverse impact on the Corporation's consolidated financial statements.

Litigation

The following disclosure should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended December 31,
2003.

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. The rate of filing significantly abated in
the second half of 2003 and the first quarter of 2004. 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.

At
the end of 2001 and through the third quarter of 2002, the Corporation had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be
filed against it and Amchem in the future due to a number of reasons. During the third and fourth quarters of 2002, the Corporation worked with Analysis, Research & Planning Corporation
("ARPC"), a consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to explore whether it would be possible to estimate the cost
of disposing of pending and future asbestos-related claims that have been, and could reasonably be expected to be, filed against the Corporation and Amchem. ARPC concluded that it was not possible to
estimate the full range of the cost of resolving future asbestos-related claims against UCC and Amchem because of various uncertainties associated with the litigation of those claims. Despite its
inability to estimate the full range of the cost of resolving future asbestos-related claims, ARPC advised the Corporation that it would be possible to determine an estimate of a reasonable forecast
of the cost of resolving pending and future asbestos-related claims likely to face UCC and Amchem if the following assumptions were made:



Based
on the resulting study completed by 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. Approximately 28 percent of the recorded liability related to pending claims
and approximately 72 percent related to future claims.

At
each balance sheet date, the Corporation compares current asbestos claim and resolution activity to the assumptions in the ARPC study to determine whether the accrual continues to be
appropriate. In addition, in November 2003, the Corporation requested ARPC to review the asbestos claim and resolution activity during 2003 and determine the appropriateness of updating its
study. In its response to that request, ARPC reviewed and analyzed data through November 25, 2003 to determine the number of asbestos-related filings and costs associated with 2003 activity. In
January

9

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2004,
ARPC stated that an update at that time would not provide a more likely estimate of future events than that 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
that time. Management noted, however, that the total number of claims filed in 2003 did exceed the number of claims assumed to be filed in the ARPC study. After consultation with outside counsel and
other consultants, management believes this fact was strongly influenced by the pending national legislation and tort reform initiatives in key states. The total number of claims filed in the first
quarter of 2004 also exceeded the number of claims assumed to be filed in the ARPC study. However, based on the Corporation's review of 2004 activity, the Corporation determined that no change to the
accrual was required at March 31, 2004.

The
asbestos-related liability for pending and future claims was $1.8 billion at March 31, 2004 and $1.9 billion at December 31, 2003. At March 31,
2004, approximately 34 percent of the recorded liability related to pending claims and approximately 66 percent related to future claims At December 31, 2003, approximately
33 percent of the recorded liability related to pending claims and approximately 67 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. Combined with the previously mentioned increase in the asbestos-related liability at December 31, 2002, this resulted in a net income statement impact of
$828 million, $522 million on an after-tax basis, in the fourth quarter of 2002. 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
receivable for insurance recoveries related to asbestos liability was $957 million at March 31, 2004 and $1.0 billion at December 31, 2003.

In
addition, the Corporation had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

|Receivables for Costs Submitted to Insurance Carriers |  |  
|----------------------------------------------------- |  | -
|
|Receivables for defense costs                         |  | $
|Receivables for resolution costs                      |  |  
|                                                      |  |  
|Total                                                 |  | $
|                                                      |  |  

The
Corporation's insurance policies generally provide coverage for asbestos liability costs, including coverage for both resolution and defense costs. As previously noted, the
Corporation increased its receivable for insurance recoveries related to its asbestos liability at December 31, 2002, thereby recording the full favorable income statement impact of its
insurance coverage in 2002. Accordingly, defense and resolution costs recovered from insurers reduce the insurance receivable. Prior to increasing the insurance receivable related to the asbestos
liability at December 31, 2002, the impact on results of operations for defense costs was the amount of those costs not covered by insurance. Since the Corporation expenses defense costs as
incurred, defense costs for asbestos-related litigation (net of insurance) have impacted, and will continue to impact results of operations. The pretax impact for defense and resolution costs, net of
insurance, was $25 million in the first quarter of 2004 and $30 million in the first quarter of 2003, and was reflected in "Cost of sales."

In
September 2003, the Corporation filed a comprehensive insurance coverage case in the Circuit Court for Kanawha County in Charleston, West Virginia, seeking to confirm its
rights to insurance for various asbestos claims. Although the Corporation already has settlements in place concerning coverage for asbestos claims with many of its insurers, including those covered by
the 1985 Wellington Agreement, 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. The Corporation continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is collectible. The
Corporation reached this conclusion after a further 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
amounts recorded for the asbestos-related liability and related insurance receivable described above were based upon currently known facts. However, projecting future events, such as
the number of new claims to be filed each year, the

10

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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.

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.

Purchase Commitments

The Corporation has various purchase agreements. In December 2003, the Corporation assigned its rights and obligations under a purchase agreement for
ethylene-related products to a wholly owned subsidiary of Dow. Total purchases under the ethylene-related agreement were $93 million in 2003.

The
fixed and determinable portion of obligations under take or pay and throughput agreements at December 31, 2003 is presented in the following table:

|Fixed and Determinable Portion of Take or Pay and
Throughput Obligations at December 31, 2003(in millions)
|----------------------------------------------------------------------------------------------------------
|2004                                                                                                      
|2005                                                                                                      
|2006                                                                                                      
|2007                                                                                                      
|2008                                                                                                      
|2009 through expiration of contracts                                                                      
|                                                                                                          
|Total                                                                                                     
|                                                                                                          

Guarantees

The Corporation has undertaken obligations to guarantee the performance of a nonconsolidated affiliate 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 obligations by the guaranteed party triggers the obligation of the Corporation.

The
following table provides a summary of the aggregate terms, maximum future payments, and associated liability reflected in the consolidated balance sheet for these guarantees.

|Guarantees at March 31, 2004 and December 31, 2003 |  |      |  |   |    | 
|-------------------------------------------------- |  | ---- |  | - | -- | 
|
|Guarantees                                         |  | 2007 |  | $ | 11 | 

11

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NOTE G    PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

|Net Periodic Benefit Cost for All Significant Plans |  |   |     |   |   |     |  
|--------------------------------------------------- |  | - | --- | - | - | --- | -
|
|
|Service cost                                        |  | $ | 7   |   | $ | 7   |  
|Interest cost                                       |  |   | 56  |   |   | 58  |  
|Expected return on plan assets                      |  |   | (88 | ) |   | (93 | )
|Amortization of prior service cost (credit)         |  |   | 1   |   |   | 1   |  
|Amortization of net loss                            |  |   |    |   |   |    |  
|                                                    |  |   |     |   |   |     |  
|Net periodic benefit cost (credit)                  |  | $ | (24 | ) | $ | (27 | )
|                                                    |  |   |     |   |   |     |  

Employer Contributions

Pension Plans

The Corporation has a defined benefit pension plan that covers substantially all employees in the United States. Benefits are based on length of service and the
employee's three highest consecutive years of compensation.

The
Corporation's funding policy is to contribute to the plan when pension laws and economics either require or encourage funding. As previously disclosed in the Corporation's financial
statements for the year ended December 31, 2003, UCC does not expect to contribute assets to its qualified pension plan trust in 2004. No contributions were made in the first quarter of 2004.
The Corporation also has a non-qualified supplemental pension plan. As previously disclosed, benefit payments to retirees under this plan are expected to be $5 million in 2004. In
the first quarter of 2004, benefit payments of $1.0 million were made.

Other Postretirement Benefits

The Corporation provides certain health care and life insurance benefits to retired U.S. employees. The plan provides health care benefits, including hospital,
physicians' services, drug and major medical expense coverage, and life insurance benefits. The Corporation and the retiree share the cost of these benefits, with the Corporation portion increasing as
the retiree has increased years of credited service. There is a cap on the Corporation portion. These benefits are subject to change at any time.

The
Corporation funds most of the cost of these health care and life insurance benefits as incurred. As previously disclosed in the Corporation's financial statements for the year ended
December 31, 2003, UCC does not expect to contribute assets to its other postretirement benefit plans in 2004. Consistent with that expectation, no contributions were made in the first quarter
of 2004. As previously disclosed, benefit payments to retirees under
these plans are expected to be $52 million in 2004. In the first quarter of 2004, benefit payments of $26 million were made.

On
December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Act expanded Medicare to include, for the first
time, coverage for prescription drugs. UCC sponsors retiree medical programs. The Corporation expects that this legislation will eventually reduce its costs for some of these programs.

At
this point, the Corporation's analysis regarding the impact of the legislation is preliminary, as it awaits guidance from various governmental and regulatory agencies concerning the
requirements that must be met to obtain these cost reductions, as well as the manner in which such savings should be measured. Based on this preliminary analysis, it appears that some of the
Corporation's retiree medical plans may need to be modified in order to qualify for beneficial treatment under the Act.

Because
of various uncertainties related to UCC's response to this legislation and the appropriate accounting methodology for this event, the Corporation has elected to defer financial
recognition of this legislation until the FASB issues final accounting guidance. When issued, the final guidance could require the Corporation to change previously reported information. This deferral
election is permitted under FSP No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003."

12

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NOTE H    RELATED PARTY TRANSACTIONS

The Corporation sells products to Dow to simplify the customer interface process. Products are sold to and purchased from Dow in accordance with the terms of
Dow's longstanding intercompany pricing policies. The application of these policies results in products being sold to and purchased from Dow at market-based prices. 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 $442 million in the first
quarter of 2004 and $418 million in the first quarter of 2003.

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 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, foreign currency and equity price 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. On March 24, 2003, the revolving
loan agreement with Dow that allowed the Corporation to borrow up to $1.5 billion was terminated and replaced with a new revolving loan agreement with Dow that allows the Corporation to borrow
or obtain credit enhancements up to an aggregate of $1 billion. The new revolving loan agreement is secured, pursuant to a collateral agreement, by various assets, including UCC's deposit
accounts, intercompany obligations, and equity interests in various subsidiaries and joint ventures. In an agreement effective January 1, 2004, the maturity date of the new revolving loan
agreement was extended to March 25, 2005; however, Dow may demand repayment with a 30-day written notice to the Corporation. At March 31, 2004, there was $619 million
available under the revolving loan agreement. The Corporation's note receivable from Dow under a separate revolving loan agreement was $212 million at March 31, 2004 and
$100 million at December 31, 2003.

13

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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 ended March 31, 2004, the most recent period, compared with the three-month period ended March 31,
2003, the corresponding period in the preceding fiscal year.

References
below to "Dow" refer to The Dow Chemical Company and its consolidated subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

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

The Corporation reported net income of $91 million for the first quarter of 2004 compared with a net loss of $59 million for the first quarter of
2003. The substantial improvement was due to higher selling prices, improved operating rates, and a significant increase in earnings from the Corporation's joint ventures compared with last year.

Total
net sales for the first quarter of 2004 were $1,311 million compared with $1,289 million for the first quarter of 2003, an increase of 2 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 quarter of 2004 compared with last year (led by ethylene glycol and
polyethylene, the Corporation's principal products). However, volume was down compared with last year for most products, with the exception of polyethylene. Ethylene glycol volume declined compared
with a year ago due to the restructuring of contracts in Canada.

Cost
of sales decreased $144 million (11 percent) in the first quarter of 2004 compared with the first quarter of 2003. The decrease in cost of sales is primarily due to
the impact of lower sales volume and improved operating rates, which more than offset the impact of higher feedstock and energy costs. Cost of sales in the first quarter of 2003 was unfavorably
impacted by a $24 million asset impairment charge (see Note C to the Consolidated Financial Statements for further information).

Operating
expenses (research and development, and selling, general and administrative expenses) were $30 million in the first quarter of 2004, down 14 percent, from
$35 million in the first quarter of last year. The decline reflects annual adjustments to amounts rebilled to joint ventures for employee-related costs, and continued efforts to control
expenses.

Equity
in earnings of nonconsolidated affiliates increased to $85 million in the first quarter of 2004 from $10 million in the first quarter of 2003. The increase in first
quarter results was due to a substantial improvement in results at the OPTIMAL Group and improved earnings at EQUATE Petrochemical Company K.S.C. and UOP LLC.

Sundry
income (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 income (expense) for the first quarter of 2004 was net expense of $38 million
compared with net expense of $15 million for the first quarter last year. Results for the first quarter of 2004 included higher commission expense on feedstock purchases reflecting commission
rate changes implemented in the third quarter of 2003, and an unfavorable litigation settlement related to one of the Corporation's joint ventures.

Interest
income for the first quarter of 2004 was $1 million compared with $2 million for the first quarter of last year. Interest expense and amortization of debt discount
for the first quarter of 2004 was $23 million compared with $34 million in the first quarter of last year. The reduction in interest expense is consistent with the lower debt levels at
March 31, 2004 compared with March 31, 2003.

The
effective tax rate for the first quarter of 2004 was 35.5 percent compared with 35.8 percent for the same quarter last year. 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.

14

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Asbestos-Related Matters

The following disclosure should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended December 31,
2003.

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. The rate of filing significantly abated in
the second half of 2003 and the first quarter of 2004. 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.

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

|                                                                |  | Three Months Ended
March 31, 2004 |   | Twelve Months Ended
December 31, 2003 |  
|--------------------------------------------------------------- |  | --------------------------------- | - | ------------------------------------- | -
|Claims unresolved at beginning of period                        |  | 193,891                           |   | 200,882                               |  
|Claims filed                                                    |  | 12,034                            |   | 122,586                               |  
|Claims settled, dismissed or otherwise resolved                 |  | (7,688                            | ) | (129,577                              | )
|                                                                |  |                                   |   |                                       |  
|Claims unresolved at end of period                              |  | 198,237                           |   | 193,891                               |  
|                                                                |  |                                   |   |                                       |  
|Claimants with claims against both Union
    Carbide and Amchem |  | 68,198                            |   | 66,656                                |  
|                                                                |  |                                   |   |                                       |  
|Individual claimants at end of period                           |  | 130,039                           |   | 127,235                               |  
|                                                                |  |                                   |   |                                       |  

In
more than 98 percent of the cases filed against the Corporation and Amchem no specific amount of damages is alleged or, if an amount is alleged, it merely
represents jurisdictional amounts or amounts to be proven at trial. This percentage has been increasing with more recently filed cases. Even in those situations where specific damages are alleged, the
claims frequently seek the same amount of damages, irrespective of the disease or injury. 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, even when specific damages are alleged with respect to a specific disease or injury, those damages are not expressly identified as to UCC, Amchem
or any other particular defendant. 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.

At
the end of 2001 and through the third quarter of 2002, the Corporation had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be
filed against it and Amchem in the future due to a number of reasons. During the third and fourth quarters of 2002, the Corporation worked with Analysis, Research & Planning Corporation
("ARPC"), a consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to explore whether it would be possible to estimate the cost
of disposing of pending and future asbestos-related claims that have been, and could reasonably be expected to be, filed against the Corporation and Amchem. ARPC concluded that it was not possible to
estimate the full range of the cost of resolving future asbestos-related claims against UCC and Amchem because of various uncertainties associated with the litigation of those claims. Despite its
inability to estimate the full range of the cost of resolving future asbestos-related claims, ARPC advised the Corporation that it would be possible to determine an estimate of a reasonable forecast
of the cost of resolving pending and future asbestos-related claims likely to face UCC and Amchem if the following assumptions were made:



15

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Based
on the resulting study completed by 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. Approximately 28 percent of the recorded liability related to pending claims
and approximately 72 percent related to future claims.

At
each balance sheet date, the Corporation compares current asbestos claim and resolution activity to the assumptions in the ARPC study to determine whether the accrual continues to be
appropriate. In addition, in November 2003, the Corporation requested ARPC to review the asbestos claim and resolution activity during 2003 and determine the appropriateness of updating its
study. In its response to that request, ARPC reviewed and analyzed data through November 25, 2003 to determine the number of asbestos-related filings and costs associated with 2003 activity. In
January 2004, ARPC stated that an update at that time would not provide a more likely estimate of future events than that 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 that time. Management noted, however, that the total number of claims filed in 2003 did exceed the number of claims assumed to be filed in the ARPC study. After consultation
with outside counsel and other consultants, management believes this fact was strongly influenced by the pending national legislation and tort reform initiatives in key states. The total number of
claims filed in the first quarter of 2004 also exceeded the number of claims assumed to be filed in the ARPC study. However, based on the Corporation's review of 2004 activity, the Corporation
determined that no change to the accrual was required at March 31, 2004.

The
annual 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 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
asbestos-related liability for pending and future claims was $1.8 billion at March 31, 2004 and $1.9 billion at December 31, 2003. At March 31,
2004, approximately 34 percent of the recorded liability related to pending claims and approximately 66 percent related to future claims. At December 31, 2003, approximately
33 percent of the recorded liability related to pending claims and approximately 67 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. Combined with the previously mentioned increase in the asbestos-related liability at December 31, 2002, this resulted in a net income statement impact of
$828 million, $522 million on an after-tax basis, in the fourth quarter of 2002. 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. Union
Carbide's receivable for insurance recoveries related to its asbestos liability was $957 million at March 31, 2004 and $1.0 billion at December 31, 2003.

In
addition, the Corporation had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

Receivables for Costs Submitted to Insurance Carriers

|In millions                      |  | March 31,
2004 |     | December 31,
2003
|-------------------------------- |  | -------------- | --- | -----------------
|Receivables for defense costs    |  | $              | 93  |                  
|Receivables for resolution costs |  |                | 292 |                  
|                                 |  |                |     |                  
|Total                            |  | $              | 385 |                  
|                                 |  |                |     |                  

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

|In millions                        |  | Three Months Ended
March 31, 2004 |     | Twelve Months Ended
December 31, 2003
|---------------------------------- |  | --------------------------------- | --- | -------------------------------------
|Defense costs for the period       |  | $                                 | 24  |                                      
|Aggregate defense costs to date    |  |                                   | 282 |                                      
|Resolution costs for the period    |  |                                   | 59  |                                      
|Aggregate resolution costs to date |  |                                   | 685 |                                      
|                                   |  |                                   |     |                                      

16

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The
Corporation's insurance policies generally provide coverage for asbestos liability costs, including coverage for both resolution and defense costs. As previously noted, the
Corporation increased its receivable for insurance recoveries related to its asbestos liability at December 31, 2002, thereby recording the full favorable income statement impact of its
insurance coverage in 2002. Accordingly, defense and resolution costs recovered from insurers reduce the insurance receivable. Prior to increasing the insurance receivable related to the asbestos
liability at December 31, 2002, the impact on results of operations for defense costs was the amount of those costs not covered by insurance. Since the Corporation expenses defense costs as
incurred, defense costs for asbestos-related litigation (net of insurance) have impacted and will continue to impact results of operations. The pretax impact for defense and resolution costs, net of
insurance, was $25 million in the first quarter of 2004 and $30 million in the first quarter of 2003, and was reflected in "Cost of sales."

In
September 2003, the Corporation filed a comprehensive insurance coverage case in the Circuit Court for Kanawha County in Charleston, West Virginia, seeking to confirm its
rights to insurance for various asbestos claims. Although the Corporation already has settlements in place concerning coverage for asbestos claims with many of its insurers, including those covered by
the 1985 Wellington Agreement, 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. The Corporation continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is collectible. The
Corporation reached this conclusion after a further 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
amounts recorded for the asbestos-related liability and related insurance receivable described above were based upon currently known facts. However, projecting future events, such as
the number of new claims to be filed 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.

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.

OTHER MATTERS

Accounting Changes

See Note B to the Consolidated Financial Statements for a discussion of accounting changes and recently issued 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, 2003, describes the significant accounting policies and
methods used in the preparation of the Consolidated Financial Statements. Following are the Corporation's critical accounting policies impacted by judgments, assumptions and estimates:



17

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18

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| |  | Increase (Decrease) in Market-Related Asset Value
due to Recognition of Prior Asset Gains and LossesIn millions | 
| |  | --------------------------------------------------------------------------------------------------------------- | 
| |  | 2004                                                                                                            | 
| |  | 2005                                                                                                            | 
| |  | 2006                                                                                                            | 
| |  | 2007                                                                                                            | 
| |  |                                                                                                                 | 
| |  | Total                                                                                                           | 
| |  |                                                                                                                 | 



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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted pursuant to General Instruction H of Form 10-Q.

ITEM 4.    CONTROLS AND PROCEDURES

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(e). Based upon that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that the Corporation's disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its
consolidated subsidiaries) required to be included in the Corporation's periodic SEC filings. 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.

PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

No material developments in any legal proceedings, including asbestos-related matters, occurred during the first quarter of 2004. For a summary of the history and
current status of legal proceedings, including asbestos-related matters, see Management's Discussion and Analysis of Financial Condition and Results of Operations, Asbestos-Related Matters; and
Note F to the Consolidated Financial Statements.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K



Exhibit No.

Exhibit Description3.2

Amended and Restated Bylaws of Union Carbide Corporation, amended as of April 22, 2004.23

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.




No
Current Reports on Form 8-K were filed by the Corporation during the first quarter of 2004.

20

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Union Carbide Corporation and Subsidiaries
Signatures

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,
thereunto duly authorized.

|                  |  | UNION CARBIDE CORPORATIONRegistrant
|----------------- |  | -----------------------------------
|Date: May 4, 2004 |  |                                    
|                  |  |                                    
|                  |  | By:                                
|                  |  |                                    
|                  |  | By:                                

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Union Carbide Corporation and Subsidiaries  Exhibit Index

|EXHIBIT NO. |  | DESCRIPTION                                                                             |  | 
|----------- |  | --------------------------------------------------------------------------------------- |  | 
|3.2         |  | Amended and Restated Bylaws of Union Carbide Corporation, amended as of April 22, 2004. |  | 
|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.                |  | 

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