Constar International Inc. President Grant Beard pulled no punches in a Feb. 8 speech to plastics executives including many of his firm's customers and suppliers.
The reality is the old Constar, making billions of [PET bottles] for carbonated beverages, is the past. It may have had its time, but it's not our future, he said.
Instead of being commodity-based, the blow molder's future lies in engineered products, filling specialty niches with technologically superior products, according to Beard.
Beard has been on the job at Constar since Sept. 13. During his presentation at The Packaging Conference, held Feb. 7-9 in Las Vegas, he bluntly described steps he has taken to reverse the company's declining revenues, including January's Chapter 11 filing, the firm's second bankruptcy reorganization in three years.
Initially, Beard got rid of several senior management figures at Constar. I felt like I needed to bring in people who had energy, who had grown global companies and who knew how to bridge commercial and technical attitudes and aptitudes together to get back out into the market, he said.
Including shutdowns at Constar's blow molding plants in Orlando, Fla., and Kansas City, Kan., Beard reduced the company's workforce by 25 percent. We have to remove the legacy costs of our past and get ourselves focused, he said.
Beard's industry experience includes being a partner at private equity firm Anderson Group Inc. in Bloomfield Hills, Mich. Prior to that, from 2001-09, he was president, CEO and director of TriMas Corp., an industrial holding company in Ann Arbor, Mich.
I've spent my career fixing, building and driving companies into engineered products. At the end of the day the only way you can be sustainable is to be technically relevant, Beard said.
Our customers are telling us 'We just don't want you guys to be Chrysler Corp., where every couple of years you're having a near-death experience. So get your act together, show you can walk the talk, and we will provide you support,' he said.
Beard said that over the past five months, he has visited every major supplier and customer to assure them that despite all the change, Constar will come out of bankruptcy strong, better focused and moving away from selling me-too PET products.
When we emerge in a couple of months, we will be leaner. We will have not our past in our way, but our future in front of us. We will have removed and lowered our fixed costs so we'll be more competitive, he said.
Constar recently announced that on Feb. 1, the U.S. Bankruptcy Court for the District of Delaware granted final approval of the company's $55 million debtor-in-possession financing. The court also granted authorization for Constar to enter into a commitment letter with Wells Fargo Capital Finance LLC for a $60 million senior secured, asset-based revolving loan facility for exit financing.
One of the things you do when you lower fixed costs is you drive up free cash flow: You get cash. That cash needs to go into technology, it needs to go into broadening sales and marketing and it needs to go into the very equipment that will make us relevant, Beard said.
In a first for Constar, it will put its blow molding machinery in customers' plants and will more readily share technology, he said.
We're like the Rasputin of the PET world we're not going away, he said jokingly.
He added that Constar's transition into specialized products mirrors a larger trend in the packaging industry, where size matters less than making money and being technically relevant.