Sabic Innovative Plastics no longer needs quarters to make change.
Since the firm - formerly GE Plastics - was acquired by Saudi Basic Industries Corp. last year, it's been able to take a different approach to how it does business, President and Chief Executive Officer Brian Gladden said at the 2008 Plastics News Executive Forum. The event was held March 10-12 in Tampa.
While Sabic IP's previous owner, American conglomerate General Electric Co., needed to focus on providing quarterly results for investors, Sabic - based in Riyadh, Saudi Arabia, and 70 percent owned by the Saudi government - can take a longer perspective, Gladden said.
``We can look at the polycarbonate market 10 years from now - not just this quarter,'' he said.
``I can't imagine the cultures of GE and Sabic being farther apart. At GE, everything from price increases to inventory balances had to meet a quarterly target. Sabic doesn't care about quarterly commitments and that's good, for the most part.
``We can focus on long-term commitment. That's the biggest visible change in the company since the acquisition.''
But other challenges remain for the 11,000-employee operation, which posted sales of almost $7 billion in 2006. Pittsfield, Mass.-based Sabic IP is a world leader in production of PC, ABS and other engineering resins and also runs a sizable film and sheet unit.
High feedstock costs top the list of concerns. Benzene, in particular, has more than doubled in price in recent years, while prices for Lexan-brand PC - one of Sabic IP's major products - have only been able to rise 30 percent.
``Anyone trying to predict the price of benzene has been miserably wrong,'' Gladden said. ``You can use every input and still miss the ultimate price. It's been devastating to our business and has created a very tough environment.
``Lexan [PC] is a real bargain today, but current feedstock and energy costs are unsustainable for U.S. industry. If we could make polycarbonate with corn or switchgrass, we wouldn't be able to keep up with demand,'' he said.
Since the $11.6 billion acquisition, the business also has increased its investment in employee development. Gladden estimates that he now spends 30 percent of his time on people issues.
Research and development will remain a core area for Sabic IP, but Gladden said the firm will have a ``more focused, more return-on-investment'' approach to product development. Currently, Sabic IP generates about 30 percent of its sales from 60 products that have been developed since 2003.
Sabic IP also may serve as a platform that would allow its parent to import polyethylene and polypropylene into North America. The entire Middle Eastern region is adding massive amounts of resin capacity, to capitalize on its low-priced crude oil and natural gas feedstocks.
``Sabic is bringing on two large polyolefin assets in the next six months,'' Gladden said. ``They need to find a market for that material. Right now, they have limited logistics and distribution to service the U.S. market. We're looking at helping them move material and interface with customers.''
Dow Chemical Co.'s unexpected exit from the nonautomotive market for ABS resin also has created an opportunity for Sabic IP.
``There's [ABS] demand that's trying to find a home,'' Gladden said. ``We've been active in the market to fulfill some of those needs and we've been able to get some of that business.''
The recent triumph of Blu-ray Disc technology over High-Definition DVD in the DVD market may be a boon for Sabic IP as well.
``It's great that [the DVD market] picked one,'' Gladden said. ``This is very positive for us, because we're positioned with technology for Blu-ray, but not for hi-def.''
In spite of the decision, Gladden pointed out that optical media - including DVDs and CDs - is a slowing market that's been shrinking for several years and likely will continue to do so.
Other post-deal adjustments have been cultural, he added, such as the Thursday-Friday weekend observed in the Middle East, and the preference in that business climate for face-to-face dealings and debate.