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What a difference a year makes

A little more than a year ago, industry analysts wondered whether additives giant Crompton was on its last legs. Dogged by antitrust, liquidity, and profitability issues, the company had certainly hit a rough patch. Today, such worries are a fading memory, thanks to some smart strategic changes, new leadership, and a new name: Chemtura.

The first thing you notice about Bob Wood is that he''s not wearing a tie. The president, CEO, and chairman of the board of the world''s largest plastics additives manufacturer, with a large, wood-paneled corner office overlooking the verdant and rolling Southwest Connecticut countryside, greets his interviewer with an open collar. "I don''t like ties," he says, shaking hands. And that''s your first clue that this Crompton-cum-Chemtura is not the same one you grew up with.

Wood came to then-Crompton in January 2004 after 27 years of steadily climbing the management ladder at Dow, last holding the title of business group president for Thermosets and Dow Automotive. This solidly built, well-met, former college football player and University of Michigan grad (BA in history) clearly had a strong history and promising future at Dow.

So, why would Wood leave his $5.5 billion portfolio at Dow for a troubled Crompton that in 2004 brought in half that revenue? Well, he says, there is the challenge. And there are perks that come with being the at the top of the org chart: "Here, I don''t have to ask for permission," he says, the implication being that no matter how large your fiefdom at Dow grows, there''s always a gatekeeper. And there''s something about the ethos of a smaller company. "The blame and the credit gets more appropriately distributed here than it can in a larger company."

There had been no shortage of blame at Crompton in recent years. Well-documented raw materials price spikes were plaguing the company. And then, in March of last year, the company agreed to plead guilty and pay a $50 million fine in connection with a rubber chemicals price-fixing investigation by the U.S. Dept. of Justice.

But that''s history. Since then, Wood has slowly brought on board a management team that he thinks can bring the company back to prominence. Part of that drive to prominence entails the name change to Chemtura. The change implies a new beginning, but it also reflects a merger. In July, Crompton merged with Great Lakes Chemicals, one of its competitors in the plastics additives world. The combination is one of complementarity as Great Lakes offers a strong portfolio of fire retardants that Crompton had been lacking. Wood says the company is "building a new brand for a new company." The combined companies under the Chemtura name had 2004 pro forma sales of $3.7 billion. (See sidebar for more.)

There has been some divestiture as well. Earlier this year Chemtura shed its refined products business in a sale to Sun Capital Partners Group. And just recently it placed its Davis-Standard extrusion machinery business in a JV with Hamilton Robinson LLC, owners of Black Clawson Converting Machinery Co. "Black Clawson is in a much better position than we were to serve equipment customers and get the best from these assets," asserts Wood. Strategically, Chemtura is also changing its pricing policy. In the past, says Wood, price was primarily dictated by raw material costs. "We''re attempting now to disconnect the value of the product from the raw materials price." This means pricing is more market-based, and done to promote value and profitability. "That''s the price, and you pay it or you don''t," Wood says matter-of-factly. "And if you don''t, then that''s OK because we have to be profitable."

Looking forward, Wood''s financial goals are relatively simple: Grow revenue 10% each year and maintain 30% gross margins with 15% operating margins. Wood clearly has the support and buy-in he needs to meet those goals. And he has the earmarks of a leader who doesn''t spend much time in his office, likes to break bread with employees in the cafeteria, and has a clear idea of what he expects of the people around him. "It''s important to get people to see how they can cause results, not just analyze them," he says. How? "Keep asking questions and keep challenging people. Business is all about thinking and asking questions."

Jeff Sloan [email protected]

The business of plastics

For the low-down on the plastics additives business, we are ushered into the office of Myles Odaniell, executive VP Performance Chemicals, where we are joined by Sean O''Connor, VP Plastics Additives. Odaniell joined Chemtura (then Crompton) in June 2003 after more than 20 years with Cytec Industries. O''Connor is a 10-year veteran of Chemtura. Plastics additives and fire retardants constitute 40% of Chemtura''s business and, including the Great Lakes business, should generate about $1.6 billion in revenue this year.

With Great Lakes on board, Chemtura finally is adding much-coveted fire retardant (FR) products to its line of additives, as well as a selection of stabilizers and plasticizers. Of particular interest is Great Lakes'' Firemaster 550 product, a penta-free FR recently introduced as an environmentally friendly alternative to traditional FRs based on polybromo diphenyl ethers (PBDE; traces of PBDE have turned up in water supplies, fish, and women''s breast milk, and some tests have shown the chemical to be potentially harmful to humans and animals).

The merger with Great Lakes has consumed much of the attention of these two gentlemen for the last several months, and rightly so. As the new Chemtura name implies, this is not a matter of Crompton simply absorbing Great Lakes. "Rather than putting two houses together, we''ll be building a new one," says Odaniell. "We want to take the positives out of both and make it greater than the sum of the two pieces. We believe that by putting these two businesses together that we will have the strongest supplier of plastics additives in the industry."

O''Connor points, of course, to the FR addition as a plus, and likes having a deeper stabilizer well. Great Lakes also brings a strong Europe and Middle East presence, including a JV with Saudi firm Gulf Stabilizers Industries. "It enormously improves our bench strength," he says. Great Lakes also offers attractive blending technologies that were never a strength of Crompton, he adds

Odaniell and O''Connor also echo Wood''s comments on pricing. Value is key, they say. "We''ve got a real disconnect between what our products are worth and what our customers pay for them," says Odaniell. "We''re not going to be in a business that''s not profitable. We have to do a better job of finding out what it is that our customers are willing to pay for." In the meantime, both men are looking for growth opportunities, which naturally introduces the "C" word. "I think we''re a little behind in China," says Odaniell, "but we''re doing some rapid catch-up." Expect expansion through a mixture or organic and acquisition growth.

And if you''re a customer, don''t go thinking you''ve been forgotten. O''Connor, who''s been around long enough to remember acquisitions of the past, says the merger with Great Lakes is different in a lot of ways. First, it''s organized, thoughtful, and well planned. Second, Chemtura is being created with the needs of the customer front and center. "Our key responsibility is to provide safe, viable products to our customers," Odaniell says emphatically. O''Connor adds: "Reaching out to customers post-merger is critical. It''s so easy to lose sight of the customer, and that''s something we''re absolutely adamant won''t happen this time." JS

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