On the Rise -- A. Schulman Inc.: Molding a Global Strategy

On a tour of A. Schulman's state-of-the-art Akron (Ohio) Polybatch Plant, Delrod Hines, the plant manager, proudly takes a visitor around the clean, high-tech facility, a complete remodeling of an existing distribution warehouse and the site of the company's first plant dating back to 1929. The plant features two production lines, as well as an R&D laboratory and pilot lines for product evaluation and development. Computer monitors throughout the facility provide the highly trained workforce a continuous view of processing taking place.

Along the way, Hines notes that the pace is quick when Joseph Gingo, A. Schulman's chairman, president and CEO, visits the facility. That comes as little surprise, for Gingo has moved swiftly to shape the manufacturer of plastic compounds and resins since becoming CEO in January 2008. In just over two years, he has forged a global strategy, strengthened the top management team and executed a series of plant expansions, closings and acquisitions. He also has set ambitious goals for the company, planning to take it from current sales of approximately $1.3 billion to $5 billion within the decade.

Gingo was no stranger to A. Schulman before taking over its reins. While employed at Goodyear Tire & Rubber Co., where he finished his 41-year career as an executive vice president for quality systems and chief technical officer, Gingo joined A. Schulman's board of directors in 2000. Moreover, his father had joined the company in 1933 as a factory worker and rose up to become plant manager of the firm's largest factory in Akron.

Despite the familiarity, Gingo says there were surprises when he moved from board member to employee and began to examine the company's operations. While he was pleasantly surprised by the high caliber of the operational leaders, he found that A. Schulman operated very much on a regional basis despite having had extensive global operations for many years. The company was profitable in Europe and Mexico, but not in the United States, where it historically had been very dependent on the automotive market.

Joseph M. Gingo, Chairman, CEO and president, A. Schulman Inc.

With the assistance of consultant Charles River Associates, Gingo developed a global strategy for A. Schulman focused on four key elements:

Be the industry leader in masterbatch, thermoplastic additives and color concentrates that are added to resins to improve their appearance or performance.
Be the industry leader in niche engineered plastics for high-end markets such as durable goods, appliances, toys and select automotive applications.
Be the No. 1 developer of compounded resins for rotationally molded products such as gas and water tanks, kayaks and playground equipment.
Use its distribution network not only to support its own businesses but also outside customers.

Since becoming CEO, Gingo has taken a number of steps to reduce overcapacity and restore profitability in the company's North American operations while pursuing these strategic goals. In February 2008, the company announced it was closing its plant in St. Thomas, Ontario. A month later, it announced the sale of its Orange, Texas, plant to Alloy Polymers Inc. In December 2008, the company took steps to reduce capacity in its North American and European plants, idling or shutting engineered plastics lines and laying off approximately 130 employees.

Because Gingo began these actions before the recession hit, A. Schulman had reduced costs and established a war chest that could be used for acquisitions in the market areas it had targeted. That led to the announced purchase in December 2009 of ICO Inc., a $300 million producer of custom polymer powders for rotational molding and other polymer businesses. While A. Schulman was addressing the high-end part of the masterbatch market in the United State, ICO was addressing the commodity segment.

"There is a division of ICO called Bayshore, a major player in the commodity masterbatch business. In one move, Bayshore provides us the base of the pyramid in the United States, which is where we wanted to be. We're already No. 1 in Mexico and in Europe," Gingo tells IndustryWeek. Moreover, ICO's roto-compounding business in Europe complemented A. Schulman's existing business in the United States.

In March, A. Schulman acquired McCann Color Inc., a small color concentrate producer in North Canton, Ohio. "McCann Color is a perfect fit with our strategy to be a leading global manufacturer in the masterbatch business and, specifically, to advance the profitable growth of our North American color operations," says Gingo. "This strategic move allows us to gain a high-quality, custom color operation that has the capacity, flexibility and efficiency to advance our growth in our targeted markets and reduce our dependence on the automotive market." With the acquisition, A. Schulman announced that it was closing its polybatch facility in Sharon Center, Ohio.

While Gingo's disciplined moves to execute the company's strategy have looked good to date, he claims no prescience. He points out that while the company reduced capacity by 30%, the market fell 60% during the recession. "Now that the market is recovering, we are getting the second half of our benefit," he says, noting that the company's stock held up last year "because investors looked at our balance sheet and knew we were going to survive." For the company's fiscal 2010 first quarter that ended Nov. 10, net income doubled to $17 million, gross margins improved to 17.4% and North America earned $2.9 million compared with a loss of $2.3 million in the prior corresponding quarter.

Gingo expects 2010 to be a year of slow recovery, but he is optimistic that the company is on the right path. With an emphasis on global expansion, exploiting the company's market strengths and developing an open but accountable corporate culture, Gingo is making the most of the opportunity to be a CEO he waited 40 years to have.