WEB EXCLUSIVE: NPCA Annual Meeting
The agreement gives the industry a great opportunity to lead the way in addressing the health hazards posed by old lead-based paint and avoid the costly and ill-advised litigation that primarily benefits trial lawyers, Doyle said in remarks during the Annual Meeting's opening session.
Other highlights of the Annual Meeting in Orlando included an incisive and energetic keynote address by former Ohio Congressman John Kasich, a key architect of the first balanced federal budget in decades, and an offbeat and humorous closing-session presentation by communications guru Amanda Gore.
The NPCA's highest honor, the George Baugh Heckel Award, was presented to RPM International Inc. Chairman Thomas C. Sullivan, who also has served as NPCA chairman for the past two years.
The meeting's forum sessions, meanwhile, offered perspectives on international business alliances for small and medium-sized coatings companies; strategies designed to anticipate market trends; and how industry suppliers are attempting to cope with rising raw-material and energy costs.
At another forum session, the NPCA's Management Information Committee provided preview of the association's comprehensive new industry study, "U.S. Paint & Coatings Market Analysis (2002-2007)." Also, key association staff members delivered a wide-ranging update on a host of key regulatory and legislative issues.
Sullivan concluded his two-year term as NPCA chairman at the meeting, and turned the leadership of the association over to new Chairman Thomas C. Osborne, president and CEO of Tnemec Co. Inc., who was elected to a two-year term. Edward J. Donnelly Jr., Group vice president, DuPont Coatings & Color Technologies, has been elected vice chairman and treasurer.
Doyle Reviews Array of Key Issues, ChallengesThe NPCA's launch of the lead-hazards labeling and education program ranks at the top of an extensive list of significant NPCA accomplishments over the past year, Doyle told Annual-Meeting participants.
The lead-hazards labeling and education program represents a "serious commitment by our industry," Doyle said, adding that the training program alone will cost the industry $4 million. But he said the historic agreement "easily saved the industry hundreds of millions of dollars over the next few years, by resisting efforts by the AGs to establish a punitive tobacco-styled fund."
In addition, Doyle said, the "reservoir of good will generated by this agreement will go a long way toward reinforcing a favorable public perception of the industry and toward creating a climate in which attorneys-general can point to the agreement as a reason not to rush into court."
Doyle, in a review of major issues faced by the industry and association, also said the NPCA is working to meet the challenge of crucial regulatory and legislative initiatives involving air-quality issues in California and the northeastern United States, and at the federal level in Washington.
Other pressing issues, Doyle said, are NPCA and industry involvement in a project aimed at devising programs to deal with post-consumer paint; participation in the response of an alliance of industry groups to the sweeping REACH chemicals-policy initiative in Europe; industry response to increased restrictions on marine antifoulant coatings; and efforts in Congress to enact legislation aimed at addressing the threat to the industry posed by runaway asbestos litigation.
But Doyle was able to point to several significant successes achieved by the NPCA to deter lead-paint litigation and legislation that could target the industry. In addition to the agreement with the attorneys general from nearly all the states, the industry has scored several victories with the dismissal of lead-paint lawsuits in Milwaukee, California, New Jersey, and Chicago. Also, he said an NPCA "model lead bill," which emphasizes landlord responsibility in preventing old lead-paint hazards, is moving close to passage in at least two states. The NPCA is targeting 11 key states in working to gain legislative enactment of the bill, he said.
In addition, Doyle said legislation has been introduced in the U.S. Senate that would provide a $1,500 annual tax credit for homeowners and landlords who pay for in-place management of lead paint on their properties.
‘U.S. Paint & Coatings Analysis' Report Offers Forecasts, Examines Key Issues, TrendsThe U.S. paint and coatings industry is forecast to post a compound annual growth rate of 1.3% over the next several years, raising the consumption level to 1.305 billion gallons in 2007, according to the comprehensive NPCA market report, "U.S. Paint & Coatings Analysis (2002-2007)."
The NPCA's Management Information Committee, which directed the report's content and publication, provided an initial look at the report during an Annual Meeting Forum session. The session was addressed by Management Information Committee member Larry Culver, Eastman Chemical Co., and Chuck Bangert and Scott Detiveaux of Orr & Boss, the industry consulting form that produced the report.
The report estimates total U.S. paint and coatings consumption at 1.239 billion gallons in 2003, with a dollar value of $16.997 billion. The value of coatings consumption will increase by an average of 1.8% per year, to a total of $18.228 billion in 2007, the report forecasts.
The forecast growth rates, though modest, would represent an overall improvement for the industry following a decline in consumption in 2000 and 2001 and a return to positive growth in 2002, the report says. But the expansion in demand seen last year and anticipated for this year has been fueled primarily by growth for the architectural-coatings segment, while the OEM-coatings segment has continued to experience declining demand.
The OEM segment, however, is forecast to record an average annual growth rate of 1.6% in coatings volume between 2003 and 2007, while the dollar value of OEM coatings is predicted to increase by an average of 2.0% per year. Architectural-coatings demand is forecast to rise an average of 1.1% in volume and 1.6% in value annually during the period, while special-purpose coatings demand is forecast to rise by 1.6% in volume and 1.7% in value per year during the period.
For many coatings companies, the report suggests that achieving increased sales in a relatively slow-growth, mature market will demand a focus on core markets, an approach that generates "a level of customer intimacy that is critical to being able to increase market penetration in a slow-growth industry." Some coatings companies also are exploiting growth opportunities by developing innovative technologies and new and different applications for coatings; through geographic expansion; with acquisitions; and by providing value-added services to customers, the report notes.
T he market study, described as "the definitive coatings-industry information resource," also includes recent U.S. Census Bureau figures on shipments of coatings, profiles of market segments, and in-depth discussions of the fundamental drivers of the market. Special chapters focus on the challenges and opportunities for small and mid-sized paint companies, as well as the impact and direction of e-business. Other chapters examine in detail the architectural, OEM and special-purpose coatings markets.
The report is offered in print and CD-ROM versions. More information is available from the NPCA website, located at www.paint.org, or by calling 202/462-6272.
Partners Tout Advantages of AlliancesA first-hand account of a global alliance involving medium-size coatings companies on three continents was provided during a Forum session presented by the NPCA's Owner-Manager Steering Committee. The session featured observations by Charles Storms, Red Spot Paint & Varnish Co., and Peter Rieck of Sonneborn & Rieck of the U.K.
Storms essentially reviewed the history of the Evansville, IN-based company founded by his great-grandfather and its evolution as a pioneer in the development of coatings for plastics, particularly automotive plastics. Storms peppered his discussion with lively and entertaining anecdotes about the company's origins and expansion, a saga that includes a nearly miraculous recovery from a devastating fire several decades ago and serious financial difficulties in more recent years.
Reminiscing about one early chapter in Red Spot's storied past as a plastics-coatings innovator, Storms said longtime company executive Milton Z. Thorson was once asked by a plastics manufacturer if Red Spot could supply coatings for methacrylate, butyrate and polystyrene surfaces. "Sure," Thorson is said to have replied. What he didn't say was that Red Spot's formulators first had to find out what those words meant.
Rieck, meanwhile, detailed the nuts and bolts of the alliance forged by his company in tandem with Red Spot and a third partner, the Japanese coatings company Fujikura Kasei. Rieck said his company, which also makes coatings for automotive plastics, saw the alliance as a way to transform itself from a small business to a medium-sized coatings maker.
Rieck warned, however, that successfully pursuing such an endeavor is "very hard work. You must be extremely adaptable and agile." Still, he said the alliance has helped the partners to expand into new markets while retaining their existing core business.
Strategic alliances, Rieck said, offer an attractive alternative to a merger or sale.
"I love multinationals and consolidation," Rieck said. "It leaves holes" - opportunities where smaller companies can cultivate profitable relationships with customers that might not register on the big companies' radar screens. With the strategic alliance, Rieck said the three partners essentially offer a single source for the same technologies worldwide, as well as technical expertise.
The companies essentially divided the global marketplace up three ways - the Americas for Red Spot, Europe and Africa for Sonneborn & Rieck and Japan and Asia for Fujikura Kasei. The companies supply a range of industrial markets, Rieck said.
"We don't tread on each other's bootlaces," he remarked, making the point that there is plenty of growth potential in each of the three massive territories.
A key to success of the alliance is the work of project teams, exchanges of technical personnel, and "underlying trust" built around a core agreement, Rieck said. Other crucial elements include satellite agreements and joint projects, although the partners retain the freedom to pursue projects on their own. The alliance allows the companies to enter regional or niche markets and offer specialty solutions, and provides for the introduction of new technologies, Rieck said.
"It requires special partners," he said. "It's easy to underestimate the effort and sacrifice needed to make it work. The key is suppressing your own commercial interests in favor of playing to each partner's strengths."
Asked how the companies avoid a "takeover" of their markets by an alliance partner, Rieck said a critical element of the alliance is an understanding that each partner will focus on its own geographic territory.
The Latest Market Trend: Gone in 60 Seconds?Brand-marketing wizard Sam Hill, in a Forum session on market directions in the 21st century, called "interconnectedness" the most pervasive and important characteristic of consumer populations early in the new millennium. With the cost of.this universal connectivity falling to near zero thanks to the internet and other communication capabilities, countries are getting smaller while companies are getting bigger, he said.
Hill, the author of a book titled "Sixty Trends in Sixty Seconds," also mentioned the strange-sounding term "servicialization" as an important new area of market focus for companies, even traditional manufacturing businesses. He defined the term as the transformation of a service into an industry in itself, with a market value of its own aside from the business's traditional core.
Hill said the breakneck speed of change in the current marketplace also is resulting in "instantaneous obsolescence," where products can literally be obsolete before the development process can deliver the new technology.
Painting a picture of life in the 21st century - one that might be perceived as disturbing in some ways - Hill said life expectancy will continue to rise; populations will continue to move to more southern, warmer climates; big cities will continue to grow into "megalopoli," particularly in the developing world; and fewer people will live in the traditional "nuclear" family. Individuals will live increasingly "fragmented" lives, making diverse lifestyle choices that extend even to "polytheism," or multiple religious practices and beliefs.
Hill said the key challenge facing businesses in this highly connected, fragmented, fluid, and hyper-speed environment is successfully delivering the market message to a hugely complex potential market population. At the same time, businesses must deal with what he called "escalating expectations" of the marketplace.
One approach that Hill said companies might pursue is what he called "self segmentation," where marketers must be quick to seize on emerging but mercurial market segments. By contrast, companies also can successfully trade on tradition, using familiarity to provide some semblance of stability and familiarity amid the chaos. "Trade on those roots," Hill advised. In a similar vein was a seemingly contradictory concept Hill called "mass personalization," where the seller seeks to treat each customer individually, no matter the size of the total market population.
Spiraling Energy, Feedstock Prices Present Stark ChoicesBill Forester of Bayer Corp., in a Forum session sponsored by the NPCA's Industry Supplier Committee, examined the dilemma faced by suppliers of coatings raw materials that have been buffeted by skyrocketing cost increases for energy and key chemical feedstocks.
Forester, Bayer vice president of Procurement, said costs have created such havoc in the chemicals and downstream industries that the industry faces the real threat of losing production to overseas manufacturers of chemicals.
In an analysis of the supply chain, he showed how energy companies and some major retail businesses have been successful in boosting profits in the current economic climate, while feedstock-chemical and specialty chemical manufacturers and their customers have been squeezed. As an example, he cited polyurethane materials, where product sales prices have remained essentially constant over the past five years, while higher energy costs have cut into margins by the tune of more than 40%.
Following the supply chain further downstream, Forester said architectural-paint prices edged up just 2% between 1994 and 2002, while product pricing actually declined in real terms.
For suppliers of coatings raw materials and other chemical products, Forester said the choices available to soften price shock are limited and sometimes daunting. These include:
- A reduction in the high dependency on natural gas and oil by looking to alternative sources such as coal and ethanol;
- Mitigation and risk management, or employing practices such as hedge buying to deal with raw-material and energy market volatility;
- Moves to increase supplies by developing liquified natural gas and other sources; and
- Lobbying for regulatory intervention to control price volatility, chiefly through industry organizations and associations.
Regulatory Roundup Surveys Major IssuesIn a review of a range of regulatory and legislative issues, NPCA staff members discussed a number of regional and national issues. A summary follows.
The fee plan, which also affects certain other consumer products, was railroaded to approval earlier this year as part of a desperate state program to deal with a multibillion-dollar budget crisis.
McAuliffe said the industry is pursuing various strategies to mitigate the impact of the measure, including a campaign for a sunset provision that would end the fee program when the state budget is balanced. Another option being considered is a request for an audit of the California Air Resources Board to determine if the regulation is charging too much, or possibly litigation challenging the legality of the fee program.
Companies also have the option of attempting to show that emissions from their products are different than the state's data suggest.
In California, the NPCA also is arguing against new, lower VOC limits enacted by the South Coast Air Quality Management District (SCAQMD).
Sell also reviewed recently passed federal rules on hazardous air pollutant emissions from a number of industrial coating processes. While the rules don't directly affect manufacturing, they are forcing reformulation in many cases. Among the challenges generated by the rules are very low HAP limits that cause questions about the accuracy of measurement methods. As a result, the industry is asking that the EPA allow formulation data to serve as documentation on HAP content.
While requiring an investment of several million dollars by the industry for labeling and education programs, the agreement will generate "a great deal of goodwill" for the industry, Graves said.
Meanwhile, companies that once manufactured lead paint or lead-based pigments have continued to win one court ruling after another, with the most recent victories occurring in Milwuakee, Santa Clara County, California, and Chicago. The courts are finding "no evidence of conspiracy to defraud," Graves said, while judges are also citing statutes of limitations in dismissing suits. Graves called the judge's written opinion in the recent dismissal of the Chicago lawsuit "quite stinging" in its rebuke of the plaintiffs.
Sides discussed specific elements of the landmark NPCA-attorneys general agreement, including labeling requirements, the distribution of educational materials by way of paint retailers, and training sessions to be conducted over the next three years for the benefit of contractors involved in repair and remodeling of properties where old lead paint could be present.
Lloyd discussed industry efforts to lobby for passage of the NPCA's model lead bill, which emphasizes property-owner responsibility as the most effective safeguard against exposure to old lead paint. The NPCA is targeting states in the Midwest, South and East, as well as Washington and Oregon, in its campaign for passage of the bill.
Lloyd said the association is seeking legislative sponsors who will energetically work for passage of the lead proposal, and is not simply lining up the first lawmaker willing to put a signature on a bill.
Thomas Sullivan Receives NPCA's Heckel AwardORLANDO, FL - Thomas C. Sullivan, chairman and retired CEO of RPM International Inc., received the NPCA's highest honor, the George Baugh Heckel Award, at the NPCA's recent Annual Meeting. The award recognizes "contributions towards a major industry success for the advancement of an NPCA goal."
The Heckel Award presentation highlighted the Annual Meeting's Honors Luncheon, which also featured the presentation of the NPCA's Industry Statesman and Industry Achievement Awards.
During Sullivan's two-year term as NPCA chairman, the association negotiated a landmark industry agreement with the attorneys general of most of the states that establishes a lead-exposure container-label and sticker program and an education and training program involving potential lead hazards from remodeling and painting activities. The NPCA says the agreement "removed the impetus for state-sponsored litigation on the lead-paint issue."
Also under Sullivan's leadership, the NPCA has energetically joined the campaign for asbestos-litigation reform.
Sullivan joined RPM's predecessor company, Republic Powder Metals, in 1961 as a divisional sales manager after two years of military service aboard the U.S.S. Braine. He was elected RPM vice president in 1967, executive vice president in 1969, and was president and CEO from 1971 until retiring from those positions in 2002. RPM grew to become a major global manufacturer of specialty coatings under Sullivan's direction.
Sullivan was named "CEO of the decade" by Financial World magazine, and received a Business Statesman Award from the Harvard Business School Club of Cleveland. He also received the Anti-Defamation League's David H. Litter Humanitarian Award for service to his company, his industry and his community. Sullivan and his wife, Sandra, recently formed a philanthropic family foundation that has been transferred to the diocese of their church.
Eight Receive Industry Statesman Honor
The NPCA's Industry Statesman Award, recognizing "long and devoted service to the paint and coatings industry," was presented to:
- Michael Bauer, senior vice president of Technical and Regulatory Affairs at Tnemec Co. Inc. Bauer has held technical and management positions with Tnemec and Cook Paint Co., and has been a member of the NPCA's AIM Steering Committee and Industrial Coatings Committee.
- Eric DeLoach, retired Business director for Coatings at Eastman Chemical Co. He held technical-service, sales, product-management, sales-management, and market-management positions during a 34-year career with Eastman. DeLoach has been a member of the NPCA board of directors, chairman of the NPCA's Industry Suppliers Committee, and a member of the Industrial Coatings and Architectural Coatings committees.
- George DiAmico, retired senior vice president with Aexcel Corp. He is a founding member of the NPCA's Ohio Paint Council and was the council's director for eight years.
- The late Louis Ruckgaber, longtime executive with Egyptian Lacquer Manufacturing Co. and a chairman of the NPCA's Management Information Committee, where he played the lead role in the development of the association's U.S. Paint Industry Data Base and monthly sales index. During 25 years of service to the NPCA, Mr. Ruckgaber also was a member of the association's Industrial Coatings, Budget and Finance, and Bylaws committees. He received the NPCA's highest honor, the George Baugh Heckel Award, in 1992.
- Robert Taylor, president and CEO of Global Coatings Consultants L.L.C., and former president and general manager of The Sherwin-Williams Co.'s Chemical Coatings Division. He was previously president and chief operating officer of Lilly Industries Inc. and also held various positions with Akzo Nobel. Taylor has been chairman of the NPCA's Industrial Coatings Committee and a member of the board of directors.
- Francois Vleugels, chief administrative officer of Resolution Nederland B.V. and a longtime executive with Eastman Chemical Co. A veteran of more than 20 years of the coatings industry in Europe, Vleugels has been a member of the NPCA board of directors and the Budget and Finance and Architectural Coatings committees.
- Lawrence Wigdor, executive vice president and chief operating officer of NL Industries Inc. Wigdor also has held key executive positions with BASF, and was president and CEO of Hüls America Inc. He has been a member of the NPCA Board of Directors and the Executive, Budget and Finance and Membership committees.
- John Williams, retired executive vice president of Bayer Corp. and president of the company's Coatings and Colorants divisions. He has been a member of the NPCA board of directors and Nominating Committee, and is a recipient of the David H. Litter Humanitarian Award.
The Industry Achievement Award, which recognizes specific contributions to the industry, was presented to:
- Ron Hilovsky, PPG Industries Inc. As chairman of the NPCA's Automotive Refinish Coatings Coalition, Hilovsky led the effort that resulted in the enactment of technically feasible government rules affecting refinish-coatings formulation, the NPCA said.
- Kent Raabe, chairman of Raabe Corp. and chairman of the NPCA's Coatings Care Committee for the last two years. Under Raabe's leadership, Coatings Care has achieved nearly full voluntary participation by NPCA member companies.
- P. Kelly Tompkins, vice president and general counsel of RPM Inc. Tompkins, chairman of the NPCA's Corporate Counsels Advisory Council, provided leadership during the development of the Lead Exposure Warnings and Education and Training Programs Agreement of the NPCA, the coatings industry and state attorneys general. The agreement resulted in the first voluntary Industry commitment of its kind aimed at helping consumers avoid lead exposure during remodeling and painting activities.