Sunday, November 7, 2004

Formica returns to its roots

Back in Cincinnati, back to famous brand

By Mike Boyer
Enquirer staff writer

Frank A. Riddick, president and CEO of Formica Corp., at the company's downtown headquarters, where the walls and doors are made of Formica products.

Formica Corp. has returned to its roots as it tries to reinvigorate its 92-year-old laminate business.

The company, which emerged from bankruptcy reorganization in June, has moved its 22-member corporate staff from Warren, N.J., to the Chemed Center in downtown Cincinnati.

Formica, which began in Cincinnati in 1912, will show off the $1 million remodeling of the offices that features extensive use of Formica products on walls, cabinets and countertops at a reception Tuesday for local officials.

"This is where the history of the company is and what we're trying to do is bring Formica back to the glory days of old," said Frank A. Riddick, the 47-year-old president and CEO.

Riddick, who joined the company three years ago from Armstrong World Industries, says he hopes the new offices can be a showcase and statement about the new Formica.

"Formica is a global company, but not a lot of people realize that,'' he said. "No one else makes the products we make and is in a position to make them everywhere in the world."

With sales of about $750 million, Formica has four plants in North America.

Its largest is in Evendale, and it has three others in Asia, five in Europe and one in South America.

But Formica, which employs 4,500 worldwide including about 400 in Evendale, has struggled in the face of increased competition and mismanagement as it was bought and sold several times over the last two decades.

"In 20 years nobody's fully realized the company's potential. It's been bought and sold, and it has a bad reputation in the market place as not an easy company to do business with,'' he said.

"I think the only reason Formica survived was that it had a core group of people that spent their lives here, known the industry and are committed to it," Riddick said.

As part of the bankruptcy restructuring, Formica cut its debt from about $524 million to $160 million, closed one plant in France and trimmed about 500 jobs worldwide including about 200 at the Evendale plant.

The company has reduced operations at the Evendale plant to basically one lamination press, Riddick said, because the company has too much capacity in North America and Evendale is the company's highest-cost plant.

"There's nothing fundamentally wrong with the Evendale plant. In fact, in a lot of ways it's our flagship facility,'' Riddick said.

"I think it would be great if we could add production at Evendale, but we can't do that unless market demand is there and we have reasonable cost of producing the product."

The company is working with the International Union of Electrical Workers, which represents hourly employees, to fix two issues: job flexibility and high absenteeism.

Absenteeism runs as high at 15 percent in the plant when most U.S. companies operate at less than 5 percent, Riddick said.

He said the company needs more flexibility to assign workers to jobs and "we need people to show up for work, because when they don't it creates staffing problems and you cannot produce the output."

Riddick said the company is working to improve communication with the Evendale workers but it's slow going. "There's a lot of mistrust that's been built up over the years,'' he said.

Formica's strategy is to capitalize on its well-known name and global reach.

"There's really little new in our strategy,'' he says. "It's really all in the communication and execution to make it happen.''

In the past, he said, most of management's focus was on making the business look good for the next sale rather than investing in long-term growth.

That led to a lot of turnover in management, a lack of accountability and a lack of teamwork.

One example: The company was organized along geographic lines so that managers in North American didn't communicate with their counterparts in South America or Europe.

That led to inefficiencies such as paying more for raw materials than competitors because the company didn't take advantage of its global reach.

To better capitalize on the well-known Formica brand, the company is emphasizing branded products.

It dropped, for example, the Surelle brand name on its solid-surface material and has renamed it Formica Solid Surface.

"Who ever heard of Surelle?" asks Riddick. "What's it stand for, and what does it have to do with Formica?"

Riddick also has refocused Formica's culture away from its old approach of making product and leaving it up to its network of distributors to sell it.

"You have to start with: What is the market asking for? What do the customers want?'' he says.

Formica is also going back to its roots to use its technology to expand the market for its high-pressure laminates.

For example, the company used to offer laminated doors, but gave up that business.

The company is going back to the door market, partnering with two architectural door makers to develop a line of laminated doors.

The company is also looking to expand into other surfacing categories such as wall coverings and ceilings.

Formica sold its laminated flooring business in Washington state because it had a weak position in the market, but could someday return to it someday.


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