The Colors of PPG
CEO Charles Bunch’s vision for one of the world’s largest coatings companies has him looking beyond borders.
Michael Lavine
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E-mailThe 40th floor at One PPG Place, the downtown Pittsburgh headquarters of PPG Industries Inc. (PPG), provides a stunning view. From that vantage point, you can see precisely where the Allegheny and Monongahela rivers flow together to form the mighty Ohio River. This crossroads is a fitting symbol for a company that reports it is a world leader in the coatings industry — the paints and sealants that cover nearly every item you can think of from golf balls, cell phones and houses to cars, airplanes and bridges, PPG says.
Yet it wasn’t long ago, points out Chairman and CEO Charles (Chuck) Bunch, 59, that PPG was better known as a sprawling, diversified industrial company with operations that encompassed coatings, glass, chemicals and optical products. The now 126-year-old company had grown from its 19th-century beginnings as the Pittsburgh Plate Glass Co. But such diversification no longer played to the company’s strengths, explains Bunch, who joined PPG in 1979 fresh out of Harvard Business School. “We had businesses in lots of segments, but not all of them had the same growth prospects,” he says from PPG’s boardroom atop its glass and aluminum cathedral-like headquarters. “We viewed coatings as our strongest suit and the business in which we could be the industry leader.”
When a wave of consolidation rippled through the global coatings industry in the late 1990s, PPG faced its own crossroads, says Bunch. It could continue to define itself as it had for well over a century, or it could map out a new destiny in the $85 billion global paint and coatings industry. The business carries higher margins than any of PPG’s other segments and isn’t nearly as capital intensive, says Bunch. So the company embarked on a multiyear transformation to strengthen its coatings business and narrow its other offerings. Says Bunch: “If we could be a leader and drive the consolidation trend, we decided we could bolster our position as a coatings company.”
and narrow its other offerings. Says Bunch: “We decided if we could be an industry leader and drive the consolidation trend, we could bolster our position as a coatings company.”By 2000, PPG had spent nearly $2 billion snapping up about 20 of the most desirable coatings companies on the market, recalls Bunch. The company took the next few years to digest those purchases. When Bunch took over as CEO in 2005, he resumed PPG’s buying strategy, spending nearly $700 million in 2006 and 2007 on an additional 17 coatings acquisitions, according to the company. In January 2008, PPG completed what was reported as its biggest deal ever, paying $3.2 billion for SigmaKalon Group, the Dutch-based coatings company, doubling PPG’s European sales (see “Coating the World,” page 34). Today, PPG’s coatings brands include Pittsburgh, Olympic and Porter paints, as well as Sigma Coatings, Seigneurie, Johnstone’s and others for the European market.
The acquisitions — and divestitures of parts of its slower-growth chemical and glass operations — have dramatically reshaped PPG. The company reports that nearly 70 per cent of its $15.8 billion 2008 revenues came from its coatings business, up from 42 percent of its $7.2 billion 1997 revenues. Further, the company notes that more than half of its sales are from outside the U.S., compared with just 30 percent in 2002. According to Bunch: “We didn’t want to wait for organic growth to get us a bigger piece of the market.”
Despite the company’s global footprint, most consumers would be hard-pressed to notice its products in their everyday lives, the CEO acknowledges. In addition to paint brands for houses and commercial buildings, PPG makes coatings for new cars and for use by thousands of body shops that repair and repaint cars after they’ve been damaged, says the company. Dishwashers, washing machines, dryers and coffeemakers can come in colors other than white because of coatings PPG produces, it notes. Those eyeglass lenses that darken when you step into the sunlight? Their brand name is Transitions, and PPG says it makes them too. And the next time you grab a soda or beer, consider that PPG’s coatings may have been used to give the can its sleek look and to help maintain the beverage’s fizz.
“Our products go into lots of other things,” adds Senior Vice President of Finance and CFO William Hernandez. In fact, he says, the company invests heavily to increase its presence across a wide variety of products. In 2008, PPG reports, it spent $468 million on research and development.
