Kagan Sounds Alarm about Rift
Between United States, European Allies

"Despite the claims of candidates that they would do things differently," he said, history shows that U.S. foreign policy has historically held to a steady course despite who's in charge.

But Kagan, senior associate of the Carnegie Endowment for International Peace, reserved his primary message for an analysis of the divisions between the United States and its traditional NATO allies in Europe. "The differences that divide Americans pale next to the differences that divide Americans from Europeans," he said, citing polls showing that most Europeans oppose war even in situations where military action is viewed as "justified," while Americans overwhelmingly voice support for such "just war" action.

Kagan explained this divergence of opinion by noting the vastly different historic perspectives of Europeans and Americans, chiefly with regard to Europe's experiences in two horrific world wars in the 20th century. Most European nations are motivated to avoid conflict at all costs and don't view "tin-pot" dictators such as Saddam Hussein in the same light as an Adolf Hitler, Kagan said. Americans, by contrast, believe Europe has failed to learn from its unwillingness to check aggressors. The experience of Sept. 11 also figures prominently in the minds of Americans, he said.

Europeans are staking their fortunes to international agreements and organizations, and are seeking to export this approach to the rest of the world, Kagan said. "America has emerged as the great obstacle, in European eyes, to the accomplishment of their global mission to change the world, because America does not share this view," he said. Most Americans, he suggested, "do not view military power as something that should be set aside as a tool of international relations, and particularly not after Sept. 11."

Still, Kagan said the United States would be making a mistake if it ignores the views of its traditional allies in pursuing its policies overseas. That, he said, would "weaken our capacity to do what needs to be done," and "corrode our will to act" by "a sense of isolationism." Under either George Bush or John Kerry as president, Kagan said, the United States "needs to look a little more like we are concerned about the interests of others" if "we want others to grant us the kind of legitimacy that we once enjoyed."

At the same time, Kagan said his message to Europe is, "You have to take the threats that are out there seriously" and realize that "under some circumstances, the methods you use in Europe will not be sufficient for dealing with these problems; that you can't deal with Saddam Hussein the way Chirac deals with Schroeder."

Without such compromise and bargaining between the United States and its European allies, Kagan warned, "the ability of the West to respond to threats will be diminished, and the beneficiaries will be the enemies of all of us."

China: Promise or Threat?

Other Forum sessions addressed the topics of outsourcing, e-business programs and the raw-material price and supply outlook. The Annual Meeting's Owner-Manager Steering Committee session featured a discussion of "Intangible Values and How to Achieve Them," by Stephen Einhorn, Einhorn Associates Inc.

China, Colopy said, is unusually monolithic in terms of its ethnic makeup and heritage, and thus is characterized by a firm sense of self. To the Chinese, the most significant event in world history is the existence of China itself. This perspective colors a myriad of Chinese attitudes and business practices, he said, citing examples such as the memorandum of understanding (MOU), which in China signals only that the grounds exist for the beginnings of a "relationship" that could at some point evolve into a business agreement.

Colopy explained that China's view of itself and the outside world is the result of centuries of conflict and abuse at the hands of western nations dating back to the 18th and 19th centuries.

China, Colopy said, views the rest of the world as intellectual and financial resources that can help it to accomplish what it wants to do for itself. At the same time, the country is acutely aware that political stability is essential to ensure economic success, due to its dependence on foreign trade and investment. Thus, stability is pursued at all costs.

When a business executive negotiates in China, the Chinese businessperson is not in it for a deal, but a relationship, which leads to stability, which in turn provides the circumstances necessary for a business agreement. Only then can the "deal" be concluded - at some point. This approach is a reflection of another Chinese trait - a different sense of time than Americans are accustomed to. "This is central to the way of thinking in China, to wait for the relationship to develop," Colopy said. Again, China's heritage and its roots in agriculture are evident in this view of the gradual flowering of a relationship, an "organic" course of evolution of the deal.

The MOU and the obligatory photo session, Colopy said, represent only the start of the relationship. The substance of negotiations comes later, sometimes long after the "signing ceremony."

Still, the West can do business with the Chinese, because, like Americans, the Chinese are highly flexible and entrepreneurial.

In answer to a question from the audience, Colopy said many Western companies made the mistake of viewing China as simply a "market" of staggering size, thinking, for example, that they could just sell, say, a toothbrush to one in four people and become a "Fortune 500" company. Success in doing business in China is much more complex, and must be approached with the Chinese perspective in mind, he said.

Colopy also said that despite its relative ethnic uniformity and its deeply entrenched historic and cultural traditions, China would appear certain to be buffeted by the emergence of women in the work force and potential conflict with the traditional, male-oriented importance of the family and lineage.

Colopy also issued a caution about the issue of intellectual property, which gets a radically different translation in China than in the West.

An Introspective Look at Outsourcing

"Outsourcing is mainstream. It's part of doing business today," Corbett said. But he warned that its use should not be taken lightly, adding the caveat that "there's no free lunch" in making the choice to take the outsourcing option.

Saving money should not be seen as the only benefit of outsourcing, he said. Other gains can be greater - innovation, increased revenue, access to needed skills, and the freedom to focus the company on core businesses and operations.

Outsourcing has grown to include a variety of functions such as legal, transactional and other services as well as production, Corbett said. He showed how several major corporations have employed outsourcing as a way to optimize core operations.

Microsoft Corp., he said, outsourced production, distribution, finance, and customer-support operations as part of a strategy to focus on product development and design and marketing. Corbett quoted Microsoft Chairman Bill Gates as saying he would "take three programmers over five support staff any day."

Companies considering outsourcing moves should undertake a careful assessment process and ask the questions: "Is it appropriate?", "Can it be done?", "Can it be managed?", and "Would it be subject to challenge?"

The process should begin with a strategic decision model that evaluates the performance of existing operations relative to market benchmarks. The company also should answer the question of whether the candidate for outsourcing is a "core" activity that differentiates the company in the marketplace. Underperforming or none-core activities should be considered for outsourcing, he said.

Good questions to ask in this evaluation, he said are:

• If we were starting the business today, would we do it ourselves;
  
• Would other companies hire us to do this function for them?
  
• Will tomorrow's leaders of our company come from this function?

Other key recommendations he gave on the process:

• Look at the process as hiring, not buying. Determine compensation beforehand; collaborate with the outside provider to determine solutions to issues; choose the outside provider based on competencies.

• Effectively manage the outsourced function

• Support the new organizational realities and redeploy current skills to other objectives.

Raw-Material Supply: A Look Upstream

Meanwhile, concerns about the reliability of global oil supplies are being driven by several factors, including instability in the Middle East, hurricane damage to Gulf of Mexico production facilities and financial problems for the Russian oil giant Yukos. Higher prices are desperately needed to allow energy companies to invest in production of key raw materials such as propylene, he said.

E-Business Directions Charted

Rohm and Haas Co.'s Luis Pereira detailed his company's use of various Internet programs that facilitate Web-based meetings and working sessions. These functions include sharing of documents and other materials by means of programs that allow voice conferencing combined with presentation of materials.

One program, Lotus QuickPlace, enables teams and work groups to create, share and organize information and documents around any project, Pereira said. He added that such Internet programs cannot replace face-to-face interaction, but offer a tool that can be employed to reduce travel costs while accomplishing business goals.

Kathy Wetzel, The Valspar Corp., described the wide range of business activities the company handles with Internet programs and functions, involving customers, suppliers and employees. She said the overall, strategic objective is to make it easier for customers and suppliers to do business with the company; to increase self-service, sales and communication capabilities; and to improve operational results.

Wetzel said future objectives for e-business include further integration of back-office systems; collaboration with suppliers and customers to speed electronic exchange of information; and enhanced response to market-specific needs.

Sarah Scheidt, DuPont Performance Coatings, reviewed the business's current e-business functions, including an order-management system, distributor-interaction management and electronic data interchange. The benefits, she said, include improved customer satisfaction, productivity improvements and streamlined business processes.

BASF's McKulka Receives Heckel Award

The NPCA also presented the Industry Statesman Award, recognizing "long and devoted service to the paint and coatings industry," to six individuals, and honored nine others with the Industry Achievement Award, recognizing specific contributions to the paint and coatings industry. The awards were presented during the Annual Meeting's Awards Luncheon.

McKulka was recognized for his leadership role in helping the NPCA to launch CLEARCorps - the Community Lead Education and Reduction Corps - a program targeted at reducing lead exposure to at-risk children and educating communities in inner cities most at-risk about the hazards of lead.

The Heckel Award is given to an individual "who has distinguished himself or herself through contributions towards a major industry success or the advancement of an NPCA goal." The award was presented by association President Andy Doyle and Chairman Tom Osborne.

The NPCA said McKulka's foresight and efforts in helping NPCA launch CLEARCorps have been instrumental to its success in cities across the United States. In the mid-1990s, when the NPCA began investigating a joint public-service partnership with the Shriver Center in Baltimore, known for its path-finding work in addressing inner-city problems, McKulka pledged BASF's commitment to undertake a major community project on behalf of Detroit's mayor and business community.

At the time, CLEARCorps was just becoming established as a public-private partnership, with some of its support coming from government sources, some from AmeriCorps volunteers, and a substantial amount from the NPCA and its member companies. Thanks largely to McKulka, his company has dedicated almost $1million dollars to the CLEARCorps program, the NPCA said.

"His extraordinary commitment to CLEARCorps illustrates his leadership and sense of vision and volunteerism on behalf of society at large," the association said.

McKulka held various positions in the housing construction industry before joining the former BASF Wyandotte Corp. in 1978 as manager of Financial Systems and Economic Evaluation, and held a number of executive positions in the company's coatings and colorants, automotive refinish and automotive OEM coatings operations. His current responsibilities include coatings, fine chemicals, engineering plastics, polyurethanes and styrenics, and agricultural products. He also oversees BASF's operations in Mexico.

McKulka is a member of the board of directors for CLEARCorps/USA and the Board of Advisors for Big Brothers/Big Sisters of America. He plans to retire at the end of the year and move with his wife to Seattle to spend more time with the couple's two sons.

Six Receive Industry Statesman Award

• Larry Culver, retired from Eastman Chemical Co.;

• Raymond Frederick, who died earlier this year and was retired from Reynolds Metals Co.;

• Neville D. Peterson, retired as director of Coatings for Akzo Nobel;

• David Porter, vice president of Finance for StanChem Inc.;

• Jean Schoder, secretary general of the European Council of the Paint, Printing Ink and Artists' Colours Industry (CEPE); and

• Richard A. Walton, retired chairman and CEO of Jamestown Paint Co.

The late Mr. Frederick was retired from Reynolds Metals as Regional representative for Aluminum Powders and Pastes for the Midwestern Region, and held research and development, sales/service and product-management positions with the company's Aluminum Powders and Pastes Division for 42 years. He served two terms of active duty in the U.S. Navy, attaining the rank of Lt. Commander in the U.S. Naval Reserve for the intervening four-year period. He was a member of the Kansas City Paint and Coatings Association for more than 50 years.

Petersen retired in 2002 from Akzo Nobel after 43 years in the coatings industry as a lab technician and technical service representative and in sales management. He was named CEO of Plascon South Africa in 1985, and later became CEO of Courtaulds Coatings, which was acquired by Akzo Nobel in 1998. Petersen has served as president of CEPE and the International Paint and Printing Ink Council.

Porter will retire at the end of the year as vice president of Finance for StanChem. He has been a member of the NPCA's Management Information Committee since 1987, and was chairman in 1996-97.

Schoder has held various industry positions in Europe over the past 40 years, and was formerly managing director of ICI Valentine, part of the company's Paints group.

Walton retired as Jamestown Paint chairman in 2004 after a career of more than 50 years in the industry, starting in the laboratory. He also held various positions in manufacturing, sales, purchasing, management, and at the executive level. He has been a member of the NPCA's Industrial Coatings Committee since 1976, and was chairman of the association's Superfund Committee from 1987 to 1996. He also was chairman of the NPCA's Owner/Manager Steering Committee from 1994 to 1999, is a member of the NPCA's 50-Year Club, and has been a member of the Federation of Societies for Coatings Technology for 50 years.

Named to receive the NPCA's Industry Achievement Award recipients are: