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Solutia's Quinn Directs Drive on Road Back

Posted on: Sunday, 11 September 2005, 12:00 CDT

Sep. 11--For Chief Executive Jeffry Quinn, steering the bankruptcy reorganization of Solutia Inc. is a lot like running a race, being unable to control the pace and reaching for a finish that's really a starting line.

"You can't see emergence as a goal, but as a new beginning," he said.

The Maryland Heights chemical company spun out of the old Monsanto Co. in 1997, bearing a load of liabilities that helped drive it into Chapter 11 bankruptcy in 2003. Quinn said he expects to emerge by year's end or in first quarter 2006.

"It's a frustrating process," Quinn said. "You wish you could make more happen sooner, faster, quicker."

Quinn has spent much of the last 20 months: appointing executive managers he likes, revving up unit performance and employee morale and setting strategies for the future.

"There are great opportunities here . . . with people I enjoy being around," he said. "It just doesn't get any better than that."

Quinn and his generals -- Luc De Temmerman, president of the performance products division, and Jonathon Wright, president of integrated nylon -- see the reorganization as the chance to remake the business. They hope to dispel the stodgy corporate culture, inefficiencies and morale problems that came from being the cast-off chemicals division of the old Monsanto.

For too long, they said, Solutia let itself be defined by the past and others' visions of what it should be. The nylon division was seen as a boring but dependable cash cow -- until cyclical economic changes and escalating energy and raw-material costs affected profits, beginning in 2000.

The performance products unit was viewed as the growth engine, with an asset base to exploit but not necessarily expand.

Now, each division is setting its own course, with an overarching imperative.

"We will be a thrilling, vibrant business . . . and not a wounded duck sort of company with a lot of issues," Quinn said. "We will come out (of bankruptcy) as a very aggressive, nimble company, looking to do great things for our employees and shareholders."

For Wright, that means reinvigorating the lackluster $1.6 billion nylon business, one production line at a time. The former consultant, brought in by Quinn to assess the unit's potential, then was hired in March to prove out his glowing report.

"I don't think the people who ran this business before really believed in it. . . . It's a forgotten jewel, because it doesn't have all the sizzle and it's not been seen for what it is, or can be," he said.

The division makes products that feed into many types of plastic and artificial fiber. Its basic chemicals are processed into nylon "salt," which then is made into resin or fibers for use in everything from carpets and car parts to rope and rugged outdoor wear. The unit both sells and further processes products each step of the way.

"We process the widget that everybody does need. It's a building block," Wright said.

Yet producing that widget requires a lot of energy and petroleum-based raw materials --at a time when oil and energy prices are hitting record highs.

A partial solution, Wright contends, is to stop producing every possible pound of material simply because the capacity exists. The chemical industry, which held that mentality when inputs were cheap, must accept that oil costs $60, or even $70 a barrel and restructure accordingly, he said.

At Solutia, that has meant hiking prices, making production more efficient and targeting growth markets, such as the Asian auto industry. In the wake of Hurricane Katrina, which drove oil and energy prices even higher, the company said Sept. 2 it is considering temporary surcharges.

Quinn said the nylon business is a challenge, because of its cyclical nature and exposure to raw-material price fluctuations, "but some of the issues in the business were self-inflicted."

"The key is to transform the business so that . . . in the worst economic times you can imagine, (it) can break even or make a little cash. And in good times, it can be a solid performer," he said.

The division has a strong manufacturing capacity base and little need for capital investment, Wright said. That, combined with inexpensive shipping from the United States to China, makes expansion in Asia a natural move.

Wright is touring all the division's sites to tap employees' ideas and get them excited about the future. In conversations that sometimes stretch into late night or start in the wee hours, he is telling them their work matters.

His success could mean the nylon division returns to being a cash cow for the performance products unit, which is pursuing new products and rapid growth.

"It's the why -- why is what we do valuable? -- that you have to answer," he said. And his answer is that the division "makes a material that allows the world to function" and not that it exists to provide money for the corporation.

In the $1.1 billion performance products division, De Temmerman's priority is living up to its name and reputation.

"This division was always labeled as the growth engine," he said. So, his goal is to continue to invest and pursue opportunities, even in bankruptcy.

Last spring, Solutia expanded a Martinsville, Va., plant that makes solar-control window films for cars and buildings. This month, it decided to spend up to $50 million to build a glass interlayer plant in China -- again, targeting the expanding Asian auto market.

Demand has been strong for the division's films and interlayers. They enhance the characteristics of glass by making it shatter-proof, sound-dampening, sun-blocking or colored.

That has been achieved by exploiting new markets and uses for decades-old technology, De Temmerman said.

He also is anxious to emerge from bankruptcy and pursue new products. Mergers and acquisitions of companies and technology are a possibility, he said. But he is most excited about launching an "intrepreneurial" program to exploit employees' ideas and talents.

He wants to build product and service lines that exploit Solutia's core competencies, but go in potentially high-growth directions. The company would invest only in ventures with potential for positive cash flow and income within three years, he said.

A similar concept led Solutia to invest in a pharmaceutical services business five years ago. But the company ran into financial trouble and wasn't able to invest enough to grow it, De Temmerman said.

It unsuccessfully sought a buyer for nine months before deciding in April to keep the small, but profitable unit. Despite that experience, "we have to go after these high-growth businesses," he said.

Entrepreneurial ventures offer "a different level of risk and a different level of reward." They may lead Solutia on some tangents, he said, but "the alternative is that you remain very narrowly focused and miss opportunities."

Quinn said his goal for both divisions is to "put them in the position that they can be all that they can be." He'll know the company is healthy when it's able to take advantage of any opportunity to grow and create value.

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SOLUQ,

Source: St. Louis Post-Dispatch

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