WASHINGTON — The contentious merger talks between the industry's two largest trade groups — the Society of the Plastics Industry Inc. and the American Plastics Council — have been shelved, for at least two years.
APC's leaders officially announced Nov. 18 that they would not return to the bargaining table, rejecting an appeal from SPI that the talks continue. The yearlong effort began as a way to cut costs and build a more politically powerful, single trade group, but got bogged down in fights over leadership and nagging questions about whether a merger would alter SPI's focus.
``APC has concluded that the time is not now ripe for further unification and has decided to set the issue aside for at least two years,'' APC said in a statement. ``Both SPI and APC have initiated significant reorganizations, and it is the desire of the APC leadership to give both organizations the opportunity to realize the benefits of fully implementing their respective plans.''
For SPI, the reorganization is bringing with it financial problems — including possible layoffs — as the group looks to close a deficit of $1 million to $1.5 million, said SPI President Larry Thomas. Any layoffs will be limited, and the deficit, which amounts to about 10 percent of its core budget, could be closed by eliminating programs or through attrition, he said.
``It's not a disaster by any stretch of the imagination,'' Thomas said.
Previously, SPI officials discounted the need for cuts and said the deficit would be no larger than $1 million.
The deficit was caused by the group's dues cuts earlier this year and overestimation of industry sales revenue that is used to calculate dues. Though it was offset by a strong NPE 1997 in Chicago, that revenue is spread over three years, he said.
SPI cut its maximum core dues for processors from $164,000 to $10,000 to get more members.
Leaders of both groups insisted that continuing the merger talks would be too difficult, given the internal restructuring both are undertaking. APC has seen its budget cut 10 percent this year, to $38 million.
Some loose estimates said the two groups could save as much as $5 million a year if they merged, Thomas said.
``We just think there is so much turmoil right now [that] if we stop to do this we could lose momentum,'' APC Chairman Ron Yocum said in a telephone interview. ``I don't detect that either side has any real problem with the other. I believe it was a timing issue.''
APC also told SPI its ability to find a new president to replace Red Cavaney, who left in September to head the larger American Petroleum Institute, would be hurt if it continued to talk about merging, Thomas said.
Thomas said the SPI board's September decision to continue talks ``reflected a belief that further progress could be made.''
SPI, he said, will continue to coordinate with APC as SPI ``fulfills its role as the national trade association for the broad-based plastics industry.''
APC said it will work aggressively to identify further areas for cooperation and it praised the joint SPI/APC State Government Affairs unit formed early this year.
``The process of discussing unification already has resulted in our identifying potential areas for increased cooperation and synergy,'' said Yocum, who is also chairman, president and chief executive officer of Millennium Petrochemicals Inc. in Cincinnati.
``It is in the best interest of the plastics industry for APC to dedicate itself to its mission during this period of heightened issue volatility,'' he said.
Thomas said the groups could cooperate more closely on issues such as global warming, chemicals that may mimic estrogen, and regulatory reform. But, he said, the two sides have not discussed combining any units, similar to their state-government efforts.
The talks between the two Washington-based associations were first suspended in late summer, in what some sources said was a dispute over who would lead any combined group. APC members reportedly wanted that left open, while SPI negotiators apparently favored current SPI President Larry Thomas.
Both Yocum and Thomas said leadership questions did not come up in discussions since September, though Thomas said SPI does want some issues left open, including leadership, governance of any new group, issues management and control of efforts like APC's ad campaign and NPE.
After that breakdown, SPI's board asked in late September that talks continue, but it chose different negotiators. The board named resin suppliers to the negotiating group, after those firms were left off the earlier SPI team.
Tensions between resin makers and other members of SPI surfaced in several places during the talks, with some SPI processor units saying they wanted SPI to remain processor-focused and former officers writing that they feared a merger would give chemical companies too much influence in SPI.
Other SPI leaders, however, rejected those characterizations and said negotiators agreed to maintain SPI's balance.
APC consists entirely of resin makers, while SPI's membership is broad-based, including resin makers, processors and equipment manufacturers.