GE Plastics chief Yoshiaki Fujimori isn't complaining, but his first year on the job could have been a little easier.
The Pittsfield firm - which ranks as one of the world's largest engineering resin makers, as well as a major North American resin and shapes distributor and sheet maker - saw sales tumble around 10 percent and profit drop about 15 percent in 2001.
The first quarter of 2002 wasn't much kinder to the unit, which is part of industrial conglomerate General Electric Co. First-quarter sales dropped 19 percent compared with the same period in 2001, and profit skidded 39 percent.
Demand for GE Plastics' market-leading polycarbonate and ABS resins was sluggish as telecommunications, electronics and automotive sales each receded.
In spite of those storm clouds, Fujimori, a 16-year GE veteran and native of Japan, sees promise ahead in the second half of 2002.
``We'll come back strongly in the second half of the year,'' Fujimori said during a recent interview in Pittsfield. ``If it's a sustained comeback or not depends on the overall economic growth rate.''
The drop wasn't as bad as it looked, Fujimori said, because it largely was tied to a lack of backlog orders from late 2001 as the economy slowed and customers cut inventory. By comparison, the first quarter of 2001 benefited from more-normal backlog business in late 2000.
Orders taken in the first quarter of 2002 could end up having a positive impact on GE Plastics' bottom line in the third or fourth quarters of the year, he said.
Fujimori, or Fuji as he likes to be called, has spent most of his GE career in medical businesses and is bringing the global product organization used by GE Medical Systems into GE Plastics, which had been run regionally.
``It's easier to translate ideas when there are no boundaries,'' said the GE Plastics president and chief executive officer. ``That way we can decide where to spend the next $1 million, based on where it can do the most global benefit. You might miss an opportunity if you're making a decision that applies only to Asia.''
Lexan looks to rally
On a global basis, John Dineen has been entrusted with getting the unit's Lexan-brand PC business back on track.
``Last year, demand was down across the board, but supply increased because a lot of expansions were planned three to five years in advance,'' Dineen said in Pittsfield. ``But it was the kick in the pants that the polycarbonate market needed so we could see what we can do from a product standpoint.
``For the last few years, every cent was going into capacity because demand was so strong,'' Dineen added. ``When you can't serve your customers, you don't put a lot into auto glazing and new [PC] applications. The [new PC] plants were sucking up all our energy.
``But when you're in a situation like last year, you move your spending into [research and development] and new product development to create new applications.''
However, GE Plastics is not totally turning its back on new capacity. Work continues on its second major plant in Cartagena, Spain, although Dineen said officials are uncertain about when production will start. A major expansion of its Burkville, Ala., PC works should be completed later this year. That move will add 150 million pounds of annual capacity, making the Burkville site nearly equal to Mount Vernon, Ind., in terms of PC capacity.
Although the market is wading through global overcapacity and significant price drops that have hit in the past 18 months, Dineen brushed aside some industry claims that polycarbonate is becoming a commodity product.
``People like to draw commodity curves, but our product is in so many different areas and is so segmented and specialized that it's a long ways away from being a commodity,'' said Dineen, who took the top Lexan post in July.
ABS picking up
The ABS market also is showing strength in 2002 - a good sign for GE Plastics, which ranks as North America's largest ABS maker.
``Orders for ABS are up everywhere in the second quarter,'' Fujimori said. ``Our production is sold out.''
The growth is a sharp change from last year, when North American ABS sales plunged more than 9 percent, according to the American Plastics Council in Arlington, Va., partly resulting from slowdowns in automotive and electronic end markets.
Dineen added that heavy ABS demand has led GE Plastics to convert two production lines in Bay St. Louis, Miss., from PC/ABS production to straight ABS. He estimated that GE's second-quarter demand exceeded production by 20 million pounds.
Toward horizon
Recent struggles have not abated GE Plastics' appetite for acquisitions. Late last year the firm added LNP Engineering Plastics, a well-regarded engineering resins compounder with international operations. GE Plastics also has cornered the shapes distribution market by acquiring Cadillac Plastics and Commercial Plastics & Supply Corp. since mid-2000 and is looking to grow in other areas as well.
``There's no question we can expand our food chain,'' Fujimori said. ``Whether it's in sheet extrusion or high-performance polymers or compounding.''
Somewhat surprisingly, Fujimori said GE Plastics is not interested in adding nylon to its engineering resins mix, although the lack of such a product has been regarded as a gap in its lineup. The company came close to adding nylon in 2000 when GE announced plans to buy Honeywell International Inc., but European regulators nixed the deal.
``Nylon isn't really a high-performance resin anymore,'' he said.
Where LNP is concerned, GE Plastics plans to operate the Exton, Pa.-based firm as a separate business.
``We've kept the [LNP] brand and are transferring our own engineering compounds business to LNP,'' Fujimori explained. ``Even the sales staff will be autonomous.''
In doing so, Fujimori is following the example of General Electric Chief Executive Officer Jeff Immelt, who did a stint in plastics himself. While with GE Medical Systems, Immelt pushed for that unit to keep the cultures of companies it had acquired, reasoning that the culture was part of what made those firms successful, Fujimori said.
In the spotlight
Plastics often have had an outsize impact on GE's profit, compared to their sales. That trend continued in the first quarter, as GE Plastics generated more than 8 percent of the parent firm's profit while accounting for only 4 percent of sales.
The unit also draws some extra attention because it's where former GE CEO Jack Welch, an outsize American legend himself, cut his teeth before going on to lead the company. Immelt's own turn in plastics reinforces the unit's stature.
``It's the opposite of being the red-headed stepchild,'' plastics and chemicals industry consultant Bill Vernon said of GE Plastics' role inside GE. ``Both Welch and Immelt came from this arena and much is expected from it. Thankfully, it's been under good hands for a long time.''
But that extra attention does not shield GE Plastics from hard economic truths, added Vernon, vice president of Houston's Chemical Market Resources Inc. consulting firm.
``GE's resins are high-margin products, but they're sold into big, big markets like automotive and electronics that have taken a hit in demand,'' he said. ``[GE] can say their products are special and different, but in the law of economics if you're not making as many widgets, you don't need as much stuff.''
And although Vernon believes there's long-term wisdom in GE Plastics having ``the whole enchilada'' in plastic services - from resin-making to compounding to resin and shape distribution to sheet making - he said that wisdom might not be evident in the next quarter or two.
``By having a presence through to the end product, [GE Plastics] is able to extract pennies at every one of those positions,'' he said. ``They're very good at it, but in a market like this, there's less to extract at every point. They might not be a star in the parent company's portfolio for the short-term.''
If Fujimori is feeling any pressure - either from recent results or the legacy of the unit he leads - he's not showing it.
``The customers in plastics are different from medical, but the fundamental approach and customer focus are the same,'' he said. ``Now my customers are consumer industries and automotive and electronics companies instead of doctors and hospitals.''
``My focus has been on meeting with customers and sales people,'' Fujimori added. ``In that, it's just like any other GE business.''
