On his first day in charge at PolyOne Corp. in 2006, Stephen Newlin wore a red tie. He wore the same tie on his last day — May 15. That might have been the only thing that was unchanged at the Avon Lake, Ohio-based firm in the eight years that Newlin ran the show.
“Conditions weren’t attractive when I got here,” he said on May 15, just a few hours after officially retiring from the firm and handing over the job titles of president and CEO to Robert Patterson. “It wasn’t a home for happy employees,” added Newlin, who will continue to serve as chairman of the firm’s board of directors.
The 2000 merger of materials firms Geon Co. and M.A. Hanna Co. that created PolyOne had not gone according to plan for a variety of reasons. As a result, the firm had lost almost $300 million in its first five years of operation. Annual sales fell from $3.1 billion to $2.2 billion in that span.
“I knew I was expected to change the culture here, and, coming from a customer-focused background, I knew you had to treat customers well,” said Newlin, who had spent 23 years with water treatment chemicals firm Nalco Chemical Co., as well as a shorter stint at sanitizing products supplier Ecolab Inc.
“Your culture starts around the customer,” he explained. “There had been a desire here to please customers, but there wasn’t the know-how. We were creating orders but not value.”
Newlin got his first impression of the size of the challenge when a customer survey showed that PolyOne was making on-time deliveries only 81.2 percent of the time. That number might seem low, but it was right in line with the industry average of 81.6 percent.
“People were OK with that delivery rate, because we were right in there with our competition,” Newlin said. “I said we could fix it. We set a goal of 95 percent and we got there. We made people accountable.”
Another problem Newlin identified at the outset was a lack of defined roles for PolyOne’s executives and employees.
“We had to change the mindset from being a volume house to value creation,” he said. “You would walk around our locations and still see people wearing different logos [from Geon and Hanna] six years later.
“It wasn’t a good self-image. We were making things difficult for ourselves. There was no vision or plan, and we weren’t working for a defined purpose.”
Early on, Newlin made the tough decision to sell PolyOne’s minority stake in PVC maker Oxy Vinyls LP to partner Occidental Chemical Corp., and to use some of the $261 million in proceeds from the sale to pay down some of PolyOne’s large debt load.
“The cost of money was high, and we didn’t have a good credit rating,” Newlin said of that move. “We had better things to do with our money.”
He added that PolyOne’s board was very supportive of the sale of the Oxy Vinyls stake.
“Some of them asked why we hadn’t done it sooner,” Newlin recalled.
But Newlin pointed out that paying down debt wasn’t the only thing that PolyOne did with the Oxy Vinyls money in 2007 — the firm also used some of that amount to purchase GLS Corp., a thermoplastic elastomer compounder based in McHenry, Ill. That move allowed PolyOne to take its first step toward having a specialty focus in the materials market.
Shortly after those deals, however, markets worldwide were hit by the recession of 2008. That kind of event hadn’t been listed in Newlin’s PolyOne CEO manual. The ensuing tough times led to PolyOne closing nine plants and eliminating more than 500 jobs between mid-2008 and the end of 2009.
“We had just gained some confidence, just got some momentum and then we had the recession,” he said. “Housing was our biggest market and it was collapsing.
“Things were scary. It was a good thing we paid down debt and bought GLS when we did,” he said.
In hindsight, Newlin said that the recession was “more of a hiccup” for PolyOne, even as it drove the firm’s per-share stock price down under $2. It had been near $9 when Newlin took the job. The recession “ended up allowing us to take time for innovation — we turned it into an opportunity to move faster.”
Newlin credited Patterson, now his replacement as CEO, for working with PolyOne’s suppliers during the recession.
“If Bob Patterson hadn’t been here, we’d have been in trouble,” he said. PolyOne’s board also “stuck by us as we focused on specialties and our customers,” Newlin added.
PolyOne indeed recovered quickly, and by late 2011 was healthy enough to pay almost $500 million for ColorMatrix Inc., a maker of liquid colorants, additives and fluoropolymers based in Berea, Ohio.
“ColorMatrix was another specialty acquisition that we had looked at, but some members of our management team thought it might be too expensive,” Newlin said. “We hadn’t really been involved in liquid color.
“Color can be attained through masterbatch [concentrates] or by liquid color. When I was with a specialty chemical company, we had options like that. The best thing for customers is to let them decide.”
PolyOne’s third major acquisition under Newlin came about a year later, when the firm spent almost $400 million to buy Spartech Corp., a maker of plastic sheet and compounds based in Clayton, Mo.
“With Spartech, it was a totally different strategy, because it wasn’t as much a specialty company [as GLS or ColorMatrix],” Newlin said. “It was kind of like PolyOne had been — they didn’t have a playbook. But they had some good people.”
Just as Newlin’s previous experience outside of the plastics world helped him in the ColorMatrix deal, he thinks it may have helped him throughout his tenure at PolyOne.
“In the hallways, I’m sure there was talk that ‘this guy doesn’t know plastics,’ but maybe I was better off that way,” said Newlin. “I knew how to treat customers and how to lead a commercial organization — sales, marketing and R&D — and how to drive innovation, and I had international experience.
“The mindset before I got here was to run plants at capacity and get customers and hope we can make money somehow. We took deals that lost money. So to change things we had to invest in R&D and infrastructure.”
Newlin’s successful tenure at PolyOne — during which the firm’s sales grew more than 70 percent to $3.8 billion and its per-share stock price shot up more than 300 percent to more than $36 — also was noticed by his peers in the plastics industry.
“I have a great deal of respect for Steve and his significant accomplishments at PolyOne,” said Joseph Gingo, chairman, president and CEO of materials firm A. Schulman Inc. in Fairlawn, Ohio. “He’s been a good competitor, and I believe good competition makes you stronger. I wish him well in his new role and am positive he will contribute further to the company as executive chairman.”
PolyOne’s turnaround under Newlin also drew the attention of Robert DeFalco, president of leading concentrates supplier Ampacet Corp. in Tarrytown, N.Y.
“I haven’t had the pleasure of personally meeting Steve, but I’ve watched PolyOne’s performance improve significantly since he was made CEO,” DeFalco said. “It’s obvious that he set a new company direction and surrounded himself with good people who understood the business as well as Steve’s strategies for success. I wish him good health and happiness in this next chapter of his life.”
Newlin’s history with the GLS, ColorMatrix and Spartech transactions — as well as several smaller ones made during his eight-year tenure — won the admiration of financial industry veteran Bill Ridenour, who has more than 20 years of experience in plastics-related mergers and acquisitions.
PolyOne’s acquisitions of ColorMatrix and GLS under Newlin “were perhaps his masterstrokes,” according to Ridenour, a former Ferro Corp. executive who’s now president of Polymer Transactions Inc. in Newbury, Ohio.
“These were high-priced, but highly synergistic acquisitions that are continuing to grow under PolyOne,” Ridenour said. He described the Spartech deal as “a practical consolidation of a company who was a direct competitor to PolyOne in compounds and masterbatch, and whose corporate headquarters was able to be consolidated into PolyOne at great savings.”
Ridenour also referred to Newlin’s lack of a plastics background. Newlin “was an extremely pleasant surprise to me as the CEO of PolyOne, essentially because he did not come from a thermoplastic background,” Ridenour said. “However, he did come from a background in specialties and he rigorously adhered to a strategy that transformed PolyOne into a supplier of specialty products in growth markets.”
Overall, Ridenour described Newlin as “a great example of a public company CEO who pursued his business strategy zealously and rewarded his shareholders with a resulting company worth well over $3.6 billion.”
Newlin said he’s confident the firm is in good hands with Patterson, who he hired in 2008. When asked what Patterson needs to do to maintain PolyOne’s recent success, Newlin, 61, said that he’d advise Patterson to preserve the firm’s current culture.
“That’s what drove all of this,” he said. “Focus on customers and collaborate with customers. And continue with a strong management team.
“We’ve held steadfast to this strategy, and it got us through some tough times.”