Can a plastics firm innovate its way out of a recession? PolyOne Corp. is trying to do just that.
Based on its armada of new products, the Avon Lake, Ohio-based compounder and distributor (Booth W113021) has more than a fighting chance.
We've radically changed our portfolio since the last NPE, Steve Newlin, PolyOne chairman, president and CEO, said at a June 23 news conference. Our customers said they wanted value in a variety of forms.
PolyOne's NPE new-product focus includes:
* Resound-brand biopolymer compounds for durable applications.
* Versaflex Bio-brand thermoplastic elastomers, with up to 70 percent renewable content, offering designers new options for creating products that reduce environmental impact.
* Geon-brand vinyl compounds with metallic special effects.
* Eccoh-brand compounds for optical-fiber applications in wire and cable sheathing, offering non-halogenated flame retardance.
* Smartbatch WPC-brand colorant and additive formulations for natural-fiber composites.
Michael Kahler, the firm's senior vice president of commercial development, cited recent examples of PolyOne innovations. The firm saved an appliance maker almost $600,000 per year by devising a metallic effect for a washing machine that eliminated the need for paint. PolyOne also developed a thermoplastic elastomer for Brooks-brand running shoes that adjusts to a runner's pace and weight.
Cecil Chappelow, PolyOne's chief innovation officer, added that Resound biopolymers and similar new products respond to the challenge of sustainability. The materials can be used in cell phones and other hand-held devices.
PolyOne also received a rousing endorsement from Tom Duffey, owner and president of injection molder Plastic Components Inc. in Germantown, Wis. PCI began moving most of its material needs to PolyOne's distribution unit five years ago, and now does 65-70 percent of its resin business with PolyOne.
Even in today's challenging hand-to-hand combat, there are models of collaborative relationships that create genuine value, Duffey said.
We had been in an adversarial position with our resin suppliers, and would spend three hours negotiating in order to save $66 on a transaction. I realized this was a very dysfunctional way to run a company.
Working extensively with PolyOne has allowed PCI the winner of Plastics News' 2008 Processor of the Year award to consolidate its number of resins used from 73 to 59. The firm also was able to cut its material inventory space in half, creating enough area for a 3,500-square-foot toolroom. The alliance also allowed PCI to free up 1,700 press hours for new projects.
It's a cultural change, and not everyone may embrace this kind of collaborative approach, Duffey said. But it's been a very good thing for PCI.
In an interview after the news conference, Newlin touched on a number of topics vital to PolyOne. The firm is working to recover from its January decision to cut 8 percent of its global workforce about 400 jobs and to close a PVC compounding plant in Niagara, Ontario. And, like many plastics and chemical firms, PolyOne had a rough first quarter in 2009, losing $9 million as sales fell 35 percent to $463 million.
Yet Newlin is optimistic.
I think we're on the cusp of a new era for plastics, he said. Whether they're bio-derived or to meet automotive regulations for lighter vehicles, there's a need for new materials.
There are signs that inventory destocking may be over, and the Asian market has come back sooner than we expected. And there could be some good news on the horizon in construction if the government gets some bills passed for housing.
Building and construction is one of PolyOne's two largest markets, tied with wire and cable at 17 percent of 2008 sales.
We don't believe that a 500,000 build rate [for U.S. housing starts] is sustainable, Newlin said. That's an off-the-chart anomaly. We don't see it rebounding to 2 million, but the real number may end up being 1.6 million.
A trend toward smaller homes with more energy-efficient features such as PVC windows could help PolyOne, as well as increased renovations and repairs.
The North American compounding market which PolyOne leads with a market share estimated at 9-10 percent also is facing overcapacity.
We're almost through our own capacity reduction right now, and we've got a good balance between current and anticipated demand, he said. We had been talked into some bad deals before just because we had a lot of capacity. We had some deals where we were losing money on every pound of material we made. I'm not going to let that happen anymore.
Newlin said he also expects some processors to change their strategies and work with outside compounders.
I think we'll see fewer people doing in-house compounding because of the cost involved, he said. A lot of [chief financial officers] are saying they should just get out of it and write it off.
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