The paint and coatings industry may be feeling the stresses and strains exerted by the weight of lead-paint lawsuits piling up around the nation as fee-hungry plaintiffs' attorneys pile on. But if the key messages conveyed at the National Paint & Coatings Association's recent Annual Meeting are any indication, the NPCA and coatings companies are not about to let the well-oiled lawyers' juggernaut sink the industry in a sea of litigation.
That much was made clear at the NPCA Annual Meeting in New Orleans, as association President Andrew Doyle and Chairman Thomas C. Sullivan outlined the NPCA's ongoing campaign to meet the lead-paint litigation challenge head-on.
"This issue became less and less a genuine concern over public health, and more and more a greed-driven contest to see how much cash could be transferred from our industry's pockets to those of plaintiffs' attorneys," Sullivan, of RPM Inc., said of the lead-paint lawsuits that have flooded the courts from coast to coast.
Sullivan urged NPCA member companies to help the association lead the fight against lead-paint lawsuits by supporting the association's efforts to enact legislation based on a "model lead bill" that emphasizes prevention as opposed to litigation. The lead issue, he said, remains a top industry concern despite the fact that the industry hasn't used lead pigments in architectural paints for nearly half a century - and despite the industry's efforts to educate consumers about old lead paint and ways to prevent exposure.
The coatings industry has recently won key rulings in several court cases, and a mistrial in the landmark Rhode Island lead-paint lawsuit is being cited as another example of how litigation is not the answer to the lead hazard. But Sullivan said the NPCA, realizing that legal actions are continuing to mount, is campaigning for action by lawmakers to deter additional suits.
The association's model state bill seeks to provide incentives to landlords to keep properties lead-safe and also would help educate parents and children about the dangers of lead poisoning.
The NPCA's immediate goal is adoption of the model lead bill in 10 states by 2005, with adoption in the majority of the remaining states sought in the subsequent five-year period. The NPCA is asking member companies to help finance this campaign with contributions to a special "Lead Activities Fund."
Other actions being taken include the development of an online lead-education program for paint-store personnel, with the program expected to be available in mid-2003, Sullivan said.
On the wider political stage, Sullivan said the NPCA is launching a political action committee, called PaintPAC, to allow contributions to political candidates who are viewed as being sympathetic to industry positions on various important issues. A recently enacted federal law, he said, limits so-called "soft money" contributions and "effectively limits our ability to contribute to the election and reelection of candidates who understand our critical issues."
Asbestos Litigation Looms as 'Emerging' Industry Issue
As if the lead-paint lawsuit headache weren't painful enough, Doyle raised the specter of another potential threat that also could come the industry's way courtesy of the plaintiffs' bar - in the form of asbestos litigation. This threat could arise from allegations of past use of asbestos-type materials in coatings, he said.The NPCA is supporting a U.S. Chamber of Commerce campaign for federal legislation that would result in a more "fair and reasonable" solution designed to ensure "that only those who are truly sick retain their legitimate rights," Doyle said. At the same time, the legislation would ensure that companies "which had neither sold nor manufactured asbestos are not caught up in this expanding web of liability."
Asbestos claims, which have already forced several major companies into bankruptcy, are expected to eventually run as high as $275 billion, Doyle said. "This is an emerging issue, and certainly an issue that NPCA will continue to follow and work on for many years to come," he said.
The Annual Meeting also offered a diverse lineup of forum-session topics and speakers, including programs on coatings-industry predictions for the rest of the decade; the effect of financial buyouts of supplier companies; directions in e-business programs; and executive leadership. The meeting also featured a lively, inspiring Opening-Session appearance by Kevin Carroll, the energizing "Katalyst" for athletic-shoe maker Nike, and the proceedings concluded with an insightful and often witty analysis of "America's Post-Cold War Political Outlook" by the noted political analyst David Brooks. Some Annual Meeting highlights are reviewed here.
Coming into View: 2010 and the eBusiness Evolution
Survival and prosperity for coatings companies in the early 21st century aren't getting any easier than in the latter years of the 20th century, but the successful businesses will focus on core strengths and markets.That was one of the key messages conveyed by Stephen Einhorn, president of Einhorn Associates, at an early-morning breakfast forum of the NPCA's Owner-Manager Committee.
Einhorn, discussing "The Paint and Coatings Industry: Predictions for 2010," said continued industry consolidation is inevitable as the century's first decade proceeds. To compete, he said small companies must focus on their strengths and emphasize advanced technologies and enhanced customer service while focusing on specialized markets.
For major companies, the strategic approaches anticipated as 2010 comes into view include a concentration on distribution strengths, reducing risk with long-term supply contracts, and serving markets based on worldwide connections, Einhorn said. These companies will offer worldwide formulation and application technology and at the same time will expand "outsourcing" of manufacturing for specialized products, products seen as being more "risky," and small batches. As a result, smaller coatings manufacturers could actually benefit by exploiting this "outsourcing" opportunity.
The major companies are looking to expand geographically into new markets, he said, citing the recent sale of Ferro's powder-coatings business to Akzo Nobel and Rohm and Haas Co.
Offering an overview of anticipated industry directions, Einhorn said companies must continue to reduce container and shipping costs and simplify product use.
The e-business "revolution" widely heralded prior to the deflation of the dot-com bubble didn't completely disappear - it simply morphed into a more realistic growth curve and an evolution crafted by the nature of business realities.
"E-business is alive and well in the coatings industry, there's no question about it," declared Nick Mittica, Air Products and Chemicals Inc., at the start of an eBusiness Forum session that asked the questions: "What is it Today? Where is it Headed?"
Mittica, vice chairman of the NPCA's eBusiness Committee, reviewed the results of an NPCA survey designed to assess the status of e-business programs employed by coatings manufacturers and suppliers. Steve Hurff of DuPont Titanium Technologies began the session with an overview of eBusiness Committee activities, and Chris Caruso of PPG Industries Inc. discussed some specific ideas for e-business development programs.
Mittica said the industry survey indicated that both manufacturer and supplier companies are forging ahead with plans for increased investment in e-business programs. Most companies also expect to increase sales and purchases on the Internet in the years to come, he said.
Caruso said companies have done their homework in seeking to make e-business programs more user friendly, moving well beyond the early days of website launches where the thinking reflected a "build it and they will come" philosophy. Gone or rapidly on the way out are the programs that simply consisted of volumes of information loaded onto a site with little regard for method over madness.
Caruso recommended an e-business strategy process involving development, execution, adaptation, and assessment of the e-business plan. One useful element of such programs is a "digital seminar" feature for customers that includes slide, audio and video training components for e-business transactions, he said.
Caruso also offered a look into the operation of "Glaxis," a PPG e-business for automotive replacement glass that links all the participants in the marketplace, including insurance adjusters, glass manufacturers, glass distributors, point-of-sale locations, and the ultimate consumer. The business expedites the product procurement, delivery, billing, and installation processes at high speed, he said.
Buyout Firms' Reputation as 'Sharks' Called into Question
The image of the so-called "financial buyer" as predatory shark - the buyout artist looking for the fire-sale purchase followed by a draconian cost-cutting campaign and subsequent sale at a steep markup based on a sharply improved profit statement - was described as less than totally accurate by two veterans of such deals.Peter Farmakis, president of the Polymer Specialties Division of Vantico, and Seifi Ghasemi, chairman and CEO of Rockwood Specialties Inc., said buyouts engineered by private investment firms can bring a great deal of energy and focus to businesses that otherwise may languish in the shadows of a parent company's primary, or "core," operations. The two addressed a forum session sponsored by the NPCA's Industry Suppliers Committee on "Venture Capital and the Supplier Community." Also a sponsor of the program was PCI magazine.
Vantico's Polymer Specialties Division was created following Morgan Grenfell's purchase of Ciba's polymers business, and Rockwood Specialties was formed following Kohlberg Kravis Roberts' purchase of portions of the specialty chemicals business of Laporte.
Farmakis and Ghasemi said such leveraged buyouts are being seen more frequently in the chemical industry due to the sector's stiff competition, margin squeezes and pressure on large companies to divest units that are viewed as "underperforming."
The investment firms that are in the hunt for acquisition targets are looking for operations with strong management, stable cash flow, potential for organic growth, and strategic growth potential by means of additional acquisitions, Ghasemi said.
Farmakis and Ghasemi listed a number of benefits offered by financial buyouts, including management participation in ownership, an emphasis on restructuring activities, operational improvements, financial flexibility, capital infusion, management focus, the opportunity to grow by acquisition, a lack of bureaucracy, and nimble decision-making capabilities.
NPCA's Highest Honor Goes to Larry Larison
NEW ORLEANS - The NPCA presented its highest honor, the George Baugh Heckel Award, to H.H. "Larry" Larison, president and CEO of Columbia Paint & Coatings and chairman of the NPCA's board of directors in 1998-99. The award recognizes an individual "who has distinguished himself or herself through contributions towards a major industry success or the advancement of an NPCA goal."Presenting the award to Larison during the NPCA's Annual Meeting was Laurel H. Jamison, president and chief operating officer of the Rudd Co. and the 2001 recipient of the award.
Larison was chairman of the Pacific Northwest Paint Council from 1994 to 1996, and was instrumental in convincing a state recycling task force not to follow the example of British Columbia's recycling program, which required paint manufacturers to take back unused paint and assume responsibility for disposing of it.
The NPCA also honored five individuals with the association's prestigious Industry Statesman Award, and Industry Achievement awards were presented to four individuals.
The Industry Statesman Award, which recognizes "long and devoted service to the paint and coatings industry," was presented to:
- Paul D. Dague, retired chairman and president of Jones-Blair Co.;
- Martin Grourke, retired Global Product Stewardship manager for Performance Polymers at Rohm and Haas Co.;
- James A. Karman, vice chairman of RPM Inc., who has held a series of key executive positions during more than 40 years with the company;
- Peter Lewis, director of Communications and Environmental Affairs for Sun Chemical Corp.'s Colors Group at the time of his death earlier this year; and
- Alfred Sarnotsky, retired from Spraylat Corp.
- Michael Colarossi, Akzo Nobel Coatings, for his contributions to the NPCA's "Coatings Care Community Responsibility Implementation Guide";
- Paul Robinson, The Valspar Corp., chairman of the NPCA's Paint Product Waste Listing Work Group.
- Sherry Walter, BYK-Gardner USA, who played a leadership role in the development and publication of the NPCA's "Coatings Care Community Responsibility Implementation Guide"; and
- Bruce Zwicker, formerly of Millennium Inorganic Chemicals and the first chairman of the NPCA's newly created eBusiness Committee in 2000.
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