PITTSFIELD, MASS. — Although GE Plastics has the confidence you'd expect from a company that posted almost $1.5 billion in operating profit and sales of $6.7 billion last year, there remain some key issues that could affect its fortunes in 1998.
Gary Rogers, GE Plastics' president and chief executive officer, and Ferdinando Beccalli, vice president and general manager of GE Plastics Americas, tackled some of these topics at the company's annual press event, held April 20-21 in Pittsfield.
The issue that has drawn the most attention is the Environmental Protection Agency's recent decision to designate an area that includes a former General Electric Co. transformer plant in Pittsfield as a Superfund site because of polychlorinated biphenyl contamination. A Superfund listing would rank the site as one of the most polluted locations in the United States.
GE Plastics employs 700 at its world headquarters in Pittsfield, where parent GE operated major manufacturing facilities for several decades. GE officials have expressed concern that a Superfund listing seriously would damage GE Plastics' ability to recruit employees to Pittsfield.
Rogers said that though the company has not made any decisions about the issue, it would have to consider relocating if its recruiting efforts suffer too much.
``We've got a lot of concerns ... about being able to recruit people to lead a successful global business,'' said Rogers, a 32-year GE veteran who has led GE Plastics since 1992.
Rogers did not buy into an EPA statement that GE Plastics' long-term recruiting would not be impacted if cleanup of the plant site is wrapped up by 2002, as EPA has planned.
``2002 is an eternity if you're a bright, young Ph.D. getting out of college and looking for your first job,'' he said.
GE plans to fight the Superfund label, which will not be up for final approval until later this year.
Rogers and Beccalli also addressed the healthy polycarbonate market, the ailing ABS market and the economic crisis in Asia. GE is the North American production leader in both PC and ABS and does 25 percent of its business in Asia.
The company anticipates continued growth in PC markets, which grew 10-15 percent in 1997. GE has adjusted as PC use has shifted in the last decade.
In 1990, automotive uses led the way, consuming 46 percent of GE's Lexan-brand product. By 1996, however, automotive had dropped to 30 percent, surpassed by electronic and telecommunications applications, which had a 35 percent share. Those markets were fueled by growth in compact discs and digital versatile discs.
A new world-scale plant in Cartagena, Spain, will help meet burgeoning PC demand. The plant, with more than 280 million pounds of annual capacity, is scheduled to come on line early next year. Rogers said the Cartagena plant will be comparable to GE's Mount Vernon, Ind., site, which is its largest PC production facility.
Asia is expected to play a big role in PC demand, according to Rogers.
``How many people in Asia have telephones?'' he asked. ``Not very many. And fewer still have [personal computers]. There's tons of growth out there.''
GE and other polycarbonate makers are attempting to raise prices 6 cents per pound May 1 to meet the industry's reinvestment needs.
The ABS story is not nearly as pretty, although GE had a very promising first quarter this year in spite of continuing overcapacity in the industry.
ABS prices suffered in 1997, as North American production dropped 7 percent and North American sales and captive use slipped almost 7 percent as well.
``ABS cannot be said to be the healthiest industry there is in the plastics industry,'' said Beccalli, who joined GE Plastics in 1977. ``But we're restructuring the business without spending. We've been able to simplify processes and come up with production that's the best in the world.''
``We're producing more, better and at a lower price than a few years ago,'' he added.
GE will focus on the higher end of the ABS value range, Rogers said, since overcapacity has driven standard ABS prices close to break-even levels.
Asia's economic situation remains a top priority in the wake of stock and currency crashes that hit most of the region last year.
Although GE saw its Asian volume increase by double digits in the first quarter, compared to the end of 1997, but Rogers said there's ``more pain left'' in the region.
``[South] Korea has yet to see a run-up in inflation resulting from devaluation of its currency,'' he said. ``Japan has some banking issues to deal with and Indonesia hasn't come out of its trouble yet. It's going to take a couple of years, but so far we're doing good.''
But none of these concerns are enough to alter GE Plastics' long-term strategy, including its Six Sigma quality improvement program, which officials said created $137 million in benefits for GE Plastics last year.
``Every time there's a bidding war [for materials] we could say we're not going to invest in helping customers and supporting new technology and go out and be the cheapest,'' Beccalli said. ``But our decision has always been and will be that we're not going to do that.''
``We grew in profitability last year and we're going to grow this year,'' Rogers said. ``It's degrees of wonderful.''