ONLINE EXCLUSIVE - Behind the Scenes: Jack McMahon, President of PEMCO Corp.
How long have you been with PEMCO Corp. and how has the industry changed in that time period?From 1979-97, the company was part of the Bayer Corp., and I started working for Bayer in 1976. I came to Baltimore, to this business, in 1993. In ’97, Bayer, like a lot of companies, was reviewing strategically where they wanted to go. This business, worldwide, was sold, and I elected to stay with the business.
The industry is very competitive. What has happened over the years for, we’ll say enamels and ceramic coatings, has been a greater and greater pressure from the customers for better quality, better consistency material. And at the same time, as you might expect, lower and lower costs. There was, over probably the last 30 years in this industry, a move away from these types of products, so there is an over-capacity in the marketplace, which also increases the pressure on pricing from customers.
What are some of the biggest challenges PEMCO faces, and what steps has the company taken to overcome those challenges?The pressure from customers has increased considerably this year, and it’s partly because of the significant rise in energy [costs] early in the year. And, of course, what our customers are trying to do to make up for a good portion of that is to pass the pressure to reduce costs down through their supply chain. Unfortunately, the sandwich that this business ends up in is that we also see that increase in energy costs. And that makes it ever more challenging as the years go on.
Obviously, we try to make our plants as efficient as possible. We purchase materials all through the world to get the best price/value combination we can get. We run what we consider a very lean operation, and we keep the plants as full as possible.
What is PEMCO’s business philosophy, and how has this philosophy contributed to the company’s success?PEMCO has always approached the marketplace from the technical side. We don’t just sell a pound of frit, in other words. What we do sell is the support for the use of the product. We are very ready to do a lot of analysis and to look for problems that the customer, not even necessarily directly related to the product, is experiencing. And that’s always been our philosophy—to technically support the product and the use of the product to the customer. I think it’s been very successful. We are one of two large players in this marketplace in North America, and actually we’re one of two large players worldwide in the supply of this type of product.
Do you anticipate continued growth in the markets served by PEMCO?I think it’s a relatively mature market. Over the last 30 years or so, there’s been a switch to what I call alternate technologies like plastics, or in some cases, just organic paints. That seems to have run its course, and we’re into an equilibrium, so to speak, at the moment. I think since we are into a number of mature markets, meaning things like appliances and water heaters, we’re probably going to grow at what I would consider GDP types of growth rates.
I don’t see any dramatic breakthroughs, but one of the things the industry has been very bad at has been promoting the advantages of the glass type of coating. And there are definitely certain advantages, whether it’s resistance to acids or resistance to heat or resistance to alkaline types of products, like detergents. In the industry, there is starting to be a movement to promote those advantages. I don’t see in the short term that it’s going to bring a lot of products back or introduce new applications. But, I think over the long term, if we get out there and talk about why these types of glass coatings have an advantage, we may see some increased usage over the normal GDP growth. And that’s one of the objectives of the Porcelain Enamel Institute, at this stage, to try and promote that.
Do you have any fears about the slowing U.S. economy and how it will affect PEMCO and the porcelain enamel/ceramic coating markets in general?It’s a difficult question to answer, because obviously we’re involved in some markets—washers, dryers, water heaters—that are considered capital items. And it’s also somewhat related to housing starts. So there’s a little bit of, “Is it really going to slow, the economy?” If so, then that’s going to be of concern, because we will see that. Or, is it just a temporary slowdown for one or two months? I think it’s very unclear at this stage. We did a survey through our customers, and the message was very mixed. We had people saying they don’t see anything. We had other people who were saying that they see a 15-20% slowdown. So we’re taking it essentially one day at a time to see what’s going on.
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