As U.S. automakers began shifting production to outposts such as China and South America, leaders in PPG Industries’ executive suite knew they had to follow their top automotive customers — Ford, General Motors and Chrysler — on the road to globalization.
But as PPG weighed its options, said Charles Bunch, the company’s chairman and chief executive who was leading strategic planning in the late 1990s, the executive team also had tough decisions to make about which of its businesses would deliver the best long-term payoff.
Of its three longtime manufacturing segments — glass, chemicals and coatings — coatings was selected as the focal point of a plan that in the past 15 years has led to the Downtown-based company shedding most of its chemical and glass operations, and growing coatings to more than 90 percent of its product portfolio.
Revenues topped $15 billion last year and, even before June when PPG announced plans to buy Mexican paints giant Consorcio Comex for $2.3 billion, Mr. Bunch at the April shareholders meeting confidently referred to PPG as the largest coatings company in the world in a segment where key players also include Sherwin-Williams, DuPont and AkzoNobel.
Reflecting on the transformation of PPG — which traces its roots to glassmaking in the Allegheny River Valley in the 1880s and which for decades was known as Pittsburgh Plate Glass — Mr. Bunch last week called it “an evolutionary process, not a revolution.”
“We didn’t just say we will get rid of all the businesses we can’t support fully and go all in to coatings. We focused on what we felt were our best businesses,” he said of the deliberate decision to capitalize on the leadership positions PPG already held in automotive and industrial coatings.
Also weighing heavily into the plan, he said, was the fact that the coatings industry was far less capital-intensive than glass and chemicals, and less subject to cyclical conditions and recessionary pressures.
Coatings — which includes paints used by contractors and homeowners, and paints and sealants used to coat packages, airplanes, ships and automobiles — also were part of a more “relatively fragmented” industry, Mr. Bunch said, that provided wide opportunity for acquisitions.
“There were hundreds of coatings companies around the world: regional, local. So we felt we could grow organically by following our customers and make acquisitions to get bigger.”
During his stint leading strategic planning and mergers and acquisitions from 1997 to 2000, Mr. Bunch estimated PPG scooped up about 20 coatings businesses as well as a couple specialty chemical and optical businesses, while it sold off a couple of its glass units in Europe and Asia.
Those moves “really positioned our portfolio as it is today,” he said.
But he doesn’t take full credit.
“I was a participant in the strategy process” along with Raymond LeBoeuf, then chairman and CEO, and “all the senior executives participating in strategic reviews.”
When Mr. LeBoeuf tapped Mr. Bunch to become executive vice president of coatings in 2000, “He told me, ‘Fine. You bought them. Now integrate them and run them and try to make them successful.’ ”
By the time Mr. Bunch succeeded Mr. LeBoeuf as chairman and CEO in 2005, coatings accounted for about 56 percent of PPG’s portfolio and its biggest acquisitions were yet to come.
Those were SigmaKalon, the Dutch paints company it bought in 2008 for about $3.2 billion; and the North American architectural paints unit of AkzoNobel, which it picked up last year for $1.05 billion.
“We accelerated the strategy after I became CEO,” Mr. Bunch acknowledged. “We made bigger acquisitions and some key divestitures.”
Those include the spinoff last year of its commodity chemicals business to Georgia Gulf Corp. in a $2.1 billion deal; and the sale in April of its stake in the Transitions Optical joint venture to partner Essilor for $1.7 billion.
Some of the sales were tougher calls, he acknowledged, because of PPG’s long history in old-line glass and chemicals sector.
Among the segments sold was automotive glass, which included the company’s original plant in the town of Creighton in East Deer. PPG retains a one-third stake in the venture that now owns it, Pittsburgh Glass Works.
“I started my career with PPG in the glass business,” said Mr. Bunch, who joined the company in 1979. “So making some decisions around divestitures in the businesses I worked in was always a little difficult.
”In almost every case, the team would’ve preferred to stay with PPG. We have a good corporate culture and we like each other and people come here and tend to stay.”
The trade-off, he said, has been building a stronger business and adding employees through acquisitions.
Locally, the company is touting its new North American architectural paints center in Cranberry where 500 employees will be in place by the end of the year. They include those who already worked for PPG as well as some relocating as a result of the AkzoNobel acquisition. A research center in Harmar is also being expanded to accommodate more coatings employees.
“I think we’ve been able to say we still have a commitment here,” Mr. Bunch said of the Pittsburgh region where PPG employs about 2,200. Worldwide employment in 70 countries is more than 42,000.
Since he became chief executive, the only real lag in the business transformation came after the economic crash in 2008.
“We kind of hunkered down and got through it successfully,” said Mr. Bunch. “We didn’t focus on doing deals or selling businesses. We said, let’s just run the businesses we have.”
Now with about $4 billion in cash on hand to deploy on stock buybacks and acquisitions, he said, “We still have additional firepower to do a number of acquisitions over the next one-and-a-half years.”
None is likely to be as large as Comex, “but we’re working on a number of smaller or medium-sized ones.”
He’s also presided over the company during a period in which its stock has seen record run-ups and recently traded above $200 a share.
“It’s been rewarding,” said Mr. Bunch, who was ranked the top-paid executive at publicly-held companies in the Pittsburgh region in 2013 with a compensation package valued at $16.9 million including stock options.
“We’ve done our job at really focusing on the businesses and operating them well and driving sales and earnings growth. And that’s reflected in the stock price.”
In a July report, Bank of America analyst Kevin McCarthy raised the target price of the stock from $218 to $223 per share saying, “We expect shares to continue to grind higher as earnings grow.”
Though he is 65, Mr. Bunch is not talking retirement dates.
Earlier this month, Michael McGarry, 56, became chief operating officer in a move Mr. Bunch called, “a very positive step in our succession planning process.”
He stopped short of confirming that Mr. McGarry would be the next CEO. “It’s fair to say he has a good opportunity. I think he’s well-positioned.”
There is little that Mr. Bunch second-guesses about how PPG carried out the business decisions that drove its portfolio shift.
“We were what I’d call patient executioners of the strategy,” he said. “We tried to wait and get good value for what we were divesting.
“That’s why we’re still here talking about it 15 years later.”
Joyce Gannon: firstname.lastname@example.org or 412-263-1580.