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Weyerhaeuser's next steps
by STEVEN R. ROGEL
This column is excerpted from Mr. Rogel's acceptance speech for CEO of The Year at Pulp & Paper's Paper/Forest Products Global Outlook Conference this past November.
In the last year, Weyerhaeuser Co. has completed initial integration work relating to the acquisition of Willamette Industries. We're achieving synergies ahead of schedule and rationalizing capacity. Also, our employees are focused on paying down debt and improving shareholder return. More importantly, we're creating a new Weyerhaeuser by building on the strengths of both companies.
TAKING THE BEST FROM BOTH. From traditional Weyerhaeuser, we're taking our knowledge of forestry and applying it to the former Willamette timberlands. Meanwhile, we're using Willamette's experience to teach us how to reduce overhead and make faster decisions.
We are getting the best from both companies because of processes we put in place to ensure that Willamette's strengths weren't submerged as we combined companies. The infusion of Willamette personnel has helped drive change throughout our company. At the same time, former Willamette employees are learning how larger organizations require a few more processes. They're also learning about the advantages of larger organizations, such as our companywide volume-purchasing effort.
However, there is a little creative tension in the organization. Former Willamette employees challenge everything that hints of bureaucracy, and people from both companies are operating outside their comfort zone. Each group is changing and learning from the other. The resulting company will respond more quickly to customer needs, wring maximum value out of shareholder investments, and deliver improved shareholder returns.
PAST STRATEGY. When I joined Weyerhaeuser five years ago, the company was becoming a leader by focusing on core businesses. This process created a company with a strong financial base and a clearer focus. To find out how to become a global leader in all our businesses, we asked ourselves what we wanted to become and identified strengths we could build on, as well as the weaknesses to correct. We also asked if we had the resources to go where we wanted to go, as well as the discipline to stick with our strategy.
To answer those questions, we listened more closely to what customers and shareholders wanted. Basically, both wanted consolidation. Customers wanted fewer suppliers because channels to markets were changing. Our owners also wanted consolidation since a fragmented industry could not deliver improved service and efficiencies that result in better returns. And, our shareholders wanted a larger, more liquid equity base in which to invest.
We looked at what these insights meant to Weyerhaeuser. In 1991, we updated our long-term strategy, emerging with a clear focus on growing our timberlands, wood products, containerboard, and uncoated free-sheet paper assets. Since then, we've identified real estate as a business to grow.
Adding operations in Dryden, Ont., for example, enhanced our uncoated free-sheet position. MacMillan Bloedel added to our timberlands, containerboard, and structural wood product lines. Trus Joist gave us a major presence in engineered wood products, and Willamette added strength and manufacturing know-how to all those lines.
It also meant shedding niche businesses or single-mill operations that didn't support our growth strategy. Through this methodical approach, we've positioned Weyerhaeuser for future growth.
WHAT'S NEW FOR WEYERHAEUSER? We may make additional moves when the market and business conditions are right and we've paid down our debt. How can we further enhance our ability to deliver shareholder value? We have two choices.
One, we can further enhance our position in North America. While we can grow in our current core business lines, that would be limited to filling out product lines, adding geographic reach, or some move to enhance the ability to serve customers.
Our second option is to grow internationally, which offers several advantages. First, we can continue to focus on what we do best-growing trees and making and delivering our core portfolio of products. We'd also achieve market diversification to help balance regional economic disruptions. Finally, international growth puts us closer to customers in expanding markets.
So, which strategy will we pursue? We don't yet have an answer. Each course has advantages and disadvantages, or we could combine them. Finding the correct answer-or answers-is our challenge. It's not growth for growth's sake, it's growth for shareholder return.
Before undertaking additional growth, we must fully integrate Willamette into our operations, maximize synergies from this, and pay down debt. By acquiring Willamette, we've assumed a greater leadership role in our industry, which we'll use to make our company and our industry stronger.
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