How Charles Bunch and PPG Industries are leveraging strengths Featured

7:00pm EDT November 30, 2012
How Charles Bunch and PPG Industries are leveraging strengths

Charles Bunch has seen firsthand the resilience of the Pittsburgh region through both thick and thin. As its local businesses have started to rebound from the recession, so too must the region.

The founders of Pittsburgh Plate Glass, or PPG Industries Inc., as it’s known today, were attracted to the Pittsburgh region because of the coal supply needed as an energy source, the sand and mineral resources, and the river transportation system that were critical for the manufacturing and sales of those first plate glass products.

Today, the 129-year-old company, led by Bunch, who is chairman and CEO, is coming off a record year of nearly $15 billion in revenue and the company is still proud to call Pittsburgh its global headquarters.

However, much like how PPG transformed from strictly a plate glass manufacturer into a manufacturer of glass, coatings and specialty products, Pittsburgh itself has had to transform to continue thriving in an ever-changing business environment.

As part of the Vision Pittsburgh speaker series, Bunch spoke to local businesspeople about what PPG has and is doing to aid the region in the matter and what initiatives Pittsburgh needs to focus on to build up its economic development and attractiveness for new business.

“We have a strong presence in the Pittsburgh area as do many other companies,” Bunch says. “U.S. Steel, PNC, Heinz and Wesco are all Fortune 500 publicly traded companies still headquartered in Pittsburgh. If you include local companies like Mylan, CONSOL and Dick’s Sporting Goods, the Pittsburgh region rises to fifth place on the Fortune list for company headquarters.”

With that said, Pittsburgh still needs to work hard to attract and retain business investment and economic development.

“We need to foster small business, but I believe we also need to foster big business as well,” Bunch says. “Big business provides technology, innovation and supports many of these smaller businesses, leading to a healthier overall ecology for growth and now we’re creating that environment here in our region.”

With the help of the Allegheny Conference and local business leaders looking to keep Pittsburgh on top of its game, Bunch outlined key areas of focus for the region moving forward.

Companies must help the region

In order for a specific region to prosper, its companies and business environment must also be doing well. PPG Industries is a company that has stayed true to Pittsburgh and has helped the region grow as it has grown.

“Over the past several decades, PPG has evolved from a diversified manufacturer of glass, coatings and chemicals and is a more focused leader of paints, coatings and specialty products,” Bunch says.

“We still maintain some of those glass manufacturing roots here, but in the 1980s, through a technological invention developed in our Allison Park Research Center, PPG revolutionized the automotive paint industry with electro-deposition coatings for corrosion protection. Rust is no longer an issue, and that comes from PPG’s invention more than 25 years ago.”

PPG has brought its technologies and products to customers around the world and is now the global leader in automotive OEM and aftermarket coatings and in aerospace, industrial and marine applications for customers such as General Motors, Mercedes-Benz, BMW, Boeing and Caterpillar.

“PPG has strategically chosen to focus on paints, coatings and specialty products due in large part to the global growth potential in those businesses and because we view coatings as our strongest suit where we could best apply our technology and innovation in a business in which we could become an industry leader,” he says.

“More recently, we have accelerated that transformation through organic growth and more than 30 acquisitions around the world to strengthen our global position over the last 15 years.”

Today, PPG is the largest global manufacturer of coatings to all of the industrial end-use markets and is the second-largest manufacturer of paints and coatings in the world. In addition to these coating successes, PPG’s R&D efforts in its chemicals group developed the first plastered photochromic optical lenses, which have grown into a $1 billion optical lens business under the brand name Transitions.

“At the same time that we’ve transformed our business portfolio, we’ve also expanded our geographic footprint,” he says. “In 2001, 74 percent of PPG sales were in the U.S. or Canada. Today, that’s less than 45 percent. Ten years ago our sales in the Asia-Pacific region accounted for 3 percent of our company.

“Now Asia-Pacific has grown to 17 percent of PPG sales. Today, 28 percent of PPG sales are coming from emerging regions such as Asia, Eastern Europe and Latin America. We have developed an improved geographic profile and have truly built PPG into a global enterprise.”

This global growth does not come at the expense of jobs in Pittsburgh or in the U.S. and the explosion of growth PPG has seen is great for the local region.

“Ten years ago, at the end of 2001, PPG posted revenues of $8 billion and net income of $387 million,” Bunch says. “In 2011, we delivered revenues of $15 billion and an all-time record of net income of $1.1 billion with earnings per share last year of $6.87, which was more than a third higher than our previous all-time record. We nearly doubled our sales and tripled our net income in 10 short years.”

As a result of that success, PPG is having a positive effect on Greater Pittsburgh and giving back to the community to help it flourish.

“In 2011, PPG spent some $100 million with vendors, suppliers and consultants in the Pittsburgh area,” Bunch says. “We employ some 2,500 people in the region and our foundation provides more than $5 million in funding for nonprofit organizations, much of it in the Pittsburgh region.

“Our success has enabled us to support key regional assets, and this past year, PPG renewed its commitment to the Pittsburgh Zoo and the PPG Aquarium for another 10 years.”

While much of the company’s recent growth has been overseas, its headquarters and almost all of its research and development activity is taking place in Western Pennsylvania. That commitment is what other businesses need to be willing to do to continue to build Pittsburgh’s economic development.

Identify the challenges

Pittsburgh is far from being down in the dumps, but there are certainly areas of the region that can improve to attract more business and opportunities available to aid in that mission.

“I believe that there are three significant challenges but also opportunities to attracting and retaining businesses in our region,” Bunch says.

“The first is energy. I believe this is a key challenge for most global manufacturers throughout the world, and more pointedly, here in the United States there is growing competition to access abundant, reliable, affordable and environmentally sustainable energy and feedstock sources.

“We’re on the cusp of an energy revolution here in the United States.”

New drilling technologies have enabled access to natural gas and oil reserves that are quickly turning the country into a globally competitive low-cost energy power. The Pittsburgh region has a lot of expertise in this industry.

“We are at ground zero in the shale gas story, but we have important technologies and roles to play in the development of sustainable energy sources like solar, wind and nuclear where our universities and our small and large technology companies are leading the way,” he says. “The expanding energy industry is creating jobs and supporting growth in other sectors from manufacturing to financial services.”

The second challenge for Pittsburgh is the need to continue to invest in the region’s transportation infrastructure and the availability of access to the region by air.

“We’ve clearly seen a reduction in air traffic and flights through the Pittsburgh International Airport,” he says. “As we become more global it’s important that we have an airport that can serve the needs of our employees and our customers.”

In many cities and regions, airports are the most important asset in community development. Pittsburgh has a modern but underutilized airport that is not living up to its potential. As a result, the Allegheny Conference along with the airport authority and the Allegheny county executive formed the Regional Air Service Partnership.

“This joint initiative demonstrates to the airline industry that the airport, the elected leadership and the business community are working together to improve air service,” Bunch says. “This initiative is paid off with such airline investments as United’s nonstop service to the West Coast and Delta’s nonstop service to Europe.”

The third clear obstacle to economic investment groups is Pennsylvania’s tax structure. The major state tax, corporate and income tax is uncompetitive. At 9.99 percent, it is the second highest in the country.

“This creates a very negative first impression for potential investors,” Bunch says. “In addition, Pennsylvania is the only major state that taxes the amount of net operating losses that a company can carry forward and offset against its tax liability.

“Pennsylvania’s corporate net income tax proportionate formula penalizes companies for expanding their physical presence and hiring employees in Pennsylvania because it does not utilize the single sales factor as utilized by many other states. The Pennsylvania state tax burden on business is a major in hindrance.”

Leverage strengths and opportunities

While there are several challenges that the Pittsburgh area needs to improve upon to make the region more attractive for businesses, the city, surrounding areas and local companies are making plans that address the weaknesses.

“Some people will tell you that Pittsburgh can’t compete with larger cities or Sun Belt states and there’s nothing we can do about it,” Bunch says. “I don’t believe this is true. I do, however, believe that in order for the Pittsburgh region to be more successful, we must work to leverage our strengths.”

The Pittsburgh region has some of the best educational institutions and hospital systems in the country, and as a result, research and development is more than $3 billion in the local economy.

“This is clearly a home for innovation here in the Pittsburgh region,” he says.

Bunch, who is chairing the Allegheny Conference this year, believes the organization dedicated to improving economic growth is in a unique position to build on these strengths for the betterment of the region.

“Beginning in March of last year, the conference convened 26 planning sessions across the region that involved more than 750 individuals, members of our regional investor’s council and partners,” he says. “We took stock of our progress to date and discussed an agenda for the three years to come.”

The conference developed a plan that includes three strategic priorities designed to take full advantage of what the region has to offer today.

“First, we wanted to enhance the opportunity for individuals and employees,” he says. “We will work to help connect diverse individuals to jobs and careers by identifying the skills needed and by increasing awareness of these opportunities among educators, students and workers.

“We will help employers by marketing the region globally and by building the capacity of existing businesses to succeed including the creation of a new venture capital fund to support the success of entrepreneurs and start-up companies.

“Second, we want to strengthen our communities by bringing together partners to take a fresh look at places in our region that have languished. We will seek to champion needed improvements to state laws and policies and work across political boundaries to streamline things to better integrate transit and transportation.

“Lastly, we want to energize tomorrow’s economy. We will work on improving our tax and regulatory climate, including creation of a site development fund to ensure that our region can provide competitive locations to accommodate business expansion and relocation.”

A focus on these strategic priorities will lay the groundwork for sustainable prosperity in the region.

“We’ve made a lot of progress on many of the fronts,” he says. “To succeed, partners across our region must come together to make it happen.” <<

How to reach: PPG Industries Inc., (412) 434-3131 or www.ppg.com

The Bunch File

Charles Bunch

Chairman and CEO

PPG Industries Inc.

Born: Philadelphia

Education: Received a degree in international affairs from Georgetown University and a master’s in business administration from the Harvard University Graduate School of Business Administration.

Facts: After joining PPG in 1979, he held positions in finance and planning, marketing and general management in the United States and Europe during his first 12 years with the company. He was named general manager of architectural coatings in 1992, vice president of that unit in 1994, and vice president, fiberglass, in 1995. Bunch was elected senior vice president of strategic planning and corporate services in 1997, and executive vice president, coatings, in early 2000. He was named president, COO and board member in July 2002; CEO in March 2005; and to his current post in July 2005.

Bunch is a member of the board of directors of the H.J. Heinz Co. and the PNC Financial Services Group, as well as a member of the University of Pittsburgh’s board of trustees.