It would be understandable if Michael McGarry exhibited a touch of nerves these days. After all, he’s in a new job, taking over as president and CEO of PPG, a global manufacturer of coatings and glass with annual sales of $15.3 billion, on September 1. He assumed the helm of a company that is not only big but successful, with a long streak of record revenue quarters. And the man he succeeded, Charles Bunch, was just named one of the top 100 CEOs by the Harvard Business Review.
But in a recent interview at PPG’s landmark headquarters in Pittsburgh, McGarry instead demonstrated the cool command of his job that comes with spending a long and successful career at PPG. Educated as a mechanical engineer at the University of Texas, McGarry joined PPG 34 years ago at its former facility in Lake Charles, La. Since then, he has had 22 jobs with the company that have taken him around the world. But McGarry quickly establishes that his focus is on the future.
“If we're not moving forward, somebody is catching up to us,” he says. “Our goal is extend the gap between us and the rest of the competition. We can only do that by driving better innovation, better technical service, and support of our customers. Innovation and our customers will be the keys to our success.”
While PPG is an acronym for Pittsburgh Plate Glass, the company has steadily moved away from glass manufacturing, which now makes up just 5% of the business. PPG today is a company overwhelmingly focused on coatings for everything from so-called architectural purposes (for example, the paint on your house or your kitchen walls) to sophisticated coatings for automobiles and aircraft.
In the transportation field, McGarry explained, PPG is a partner with automakers and aircraft firms in helping them shave costs from production while at the same time meeting their evolving needs as new materials are introduced in cars and planes to increase fuel efficiency.
“You have the auto industry moving away from plain old steel to aluminum and composites,” McGarry notes. “They can’t do that without the support of the coatings companies. They want plastic bumpers to look exactly like the aluminum hood which looks exactly like the steel on the doors. You have all these different substrates but you want a perfect paint job.”
PPG’s role in coatings development also extends to energy efficiency. He spoke about the deep purple color found on Southwest airplanes. That color would ordinarily retain heat, resulting in the interior of planes sitting at the gate becoming overly warm. That would force Southwest to invest in more air conditioning units for the planes. But PPG developed a heat management coating that reflects heat from the planes.
“We allowed them to achieve the branding without spending the money on additional power units,” said McGarry.
Given these types of challenges, PPG maintains a robust research and development organization. The company’s Coatings Innovation Center at Allison Park, Pa., has 310 employees. McGarry says the company spends more on R&D than any of its competitors.
“The scientists that we have working on our coating technology are the most important technologists in the company,” McGarry notes, adding, “If you go out into our Allison Park facility, you’ll see the United Nations of technologists because we recruit tech people from around the world to drive innovation. We have really good innovators.”
PPG has operations in 70 countries. McGarry says PPG is dedicated to growing regionally, noting that the company now sells its products in 140 countries but “there are a lot more than that.”
McGarry says PPG makes coatings around the world because “to a certain extent it is like shipping water. It is costly to ship coatings so we produce locally.” That emphasis on serving individual markets also extends to customer support.
“A lot of the coatings space needs top-notch technical support,” McGarry says. “We help our customers set up lines so they can run more efficiently, use less paint and move coated parts through a line faster.”
In recent decades, many U.S. manufacturers have looked principally to China for international growth. Asked about the slowdown in the Chinese economy, McGarry says that was having more of an impact on commodity products than the products PPG is involved with aimed at the middle class, such as for cars or appliances. He also expressed confidence in the Chinese government’s ability to manage the economy.
“Has it slowed down in China? Absolutely. But the areas we are in are not slowing nearly to the extent that the rest of China has,” asserts McGarry. “We still think it will have a very good long-term, positive growth trend.”
PPG has built a good portion of its business through acquisitions, and McGarry cites the ability to integrate these acquired firms into PPG as a “core competence” of the company. He said PPG takes a disciplined approach to assessing acquisition candidates and “passes on a lot.” For architectural coating firms, McGarry said, the company looks for companies that are either number one or two in their market, or that help with regional positioning. For industrial coating companies, PPG seeks acquisitions that will help them acquire new technologies, or provide greater penetration into a market such as aerospace.
“For each segment, we have a very specific goal in mind,” says McGarry. “It is not one size fits all.”
PPG’s largest acquisition was the SigmaKalon Group, a global coatings firm based in the Netherlands that PPG bought for $3.2 billion in January 2008. PPG did not have an architectural coatings business in Europe at the time so it left that part of the business largely operating as it was. However, it took the industrial and protective marine parts of the company and integrated them with corresponding PPG units.
McGarry says PPG tries to share best practices both ways with newly acquired companies.
“We know every company we buy does something really well,” he notes. “Our goal is to find what they do well and bring it inside PPG.”
McGarry says PPG strives to make sure that the leaders of acquired firms understand they can now operate in a larger enterprise that offers more opportunities. At least half of the top executives in PPG joined the company as a result of acquisitions, he points out, including direct reports such as Marcos Achar Levy, the CEO of PPG-Comex, the Mexican coatings company that PPG purchased for $2.3 billion in November 2014.
Seeking Talent and Diversity
Attracting a talented and diverse workforce is important to any global manufacturer and PPG, with 55% of its sales outside the U.S., is certainly no exception. Of the company’s total workforce of 46,000, only 12,000 are in the U.S.
While McGarry says PPG is diverse from a regional and cultural standpoint, there is one area where he hopes to see improvement.
“We certainly don’t have as much diversity on the female side as we would like,” he admits. “We are constantly looking for opportunities to give our female leadership more opportunities to grow.”
Unlike some manufacturers, McGarry says PPG is well-positioned to attract millennials with its emphasis on innovation, global growth, and safety and environmental performance. But he says it is a challenge to convince millennials that PPG can offer them the diversity of experience they desire.
“Some of the folks think it is important to go from company to company to company,” he observes. McGarry says the company tries to demonstrate that PPG can offer them that diversity, whether it be through international assignments or working for the company’s different businesses.
McGarry also stresses that PPG needs to improve its communication of the fact that it is an innovative company. For example, he points out that advancements in coatings allow auto manufacturers to use smaller paint shops, reduce the heat for finishing and to apply multiple layers of coatings in one step rather than in multiple steps. These innovations all result in faster production with less energy use and less impact on the environment.
PPG is investing in technology as well as its people. McGarry said paint production is now highly automated.
“The technology that runs the reactors is basically a no touch environment. We are staging the raw materials but after that the computers take over and produce the resins. Then we are weighing that out and producing the formulations to make the paint,” said McGarry.
While PPG is investing in technology at “slightly higher” levels than in the past, McGarry said PPG is trying to invest smarter by sharing information.
“We have a database that people put their projects into and it alerts them if that problem they are trying to solve has already been solved somewhere else in PPG,” he said, resulting in more efficient use of R&D funds.
PPG is benefiting from color matching technology that allows it to match colors accurately and quickly. That’s particularly valuable, McGarry explains, given the company’s library of nearly 3 million colors.
“If you get in an accident in your white car in Phoenix, that’s different than the white on a car in Boston. We have to match that white exactly,” he says, noting that environmental factors play into color formulations in different regions. This automation improves customer productivity.
Staying in Touch
The cliché “It’s lonely at the top” highlights one of the job hazards for CEOs – an isolation from company operations and from any news other than what their reports think they want to hear. McGarry says it is an issue that he works actively to overcome.
“It is a huge concern that you are getting all the information you need to make the best decisions for the company,” says McGarry. He says he combats that by reaching out to as many people as he can when he travels. Depending on the year, he routinely visits five or six continents.
PPG had a senior manager meeting in Europe coming up soon after our interview. McGarry said he hoped to touch base with all 100 of the attendees if he could. He says he tries to make sure they have an open avenue to him if they have a concern. While it is time-intensive, he says that level of communication is necessary.
“It’s important that people see you,” he says.
When he travels, McGarry says, he asks people what is the biggest obstacle they are facing, and what is preventing them from growing. He also asks about what the competition is doing in their market and how PPG is performing there.
McGarry says you can’t be in an executive position and not periodically get bad news. The key, he says, is to have employees not just report the setback but offer ideas for what to do about it.
“What are the lessons learned? What action are we taking? How are we going to make sure it doesn’t happen the next time,” he continued. He added that it’s also important to make sure the solution is broadly adopted in the company so that it doesn’t occur in another location.
McGarry brings that same commitment to communication to his views of government policy and its influence on manufacturing. He says some people in Washington still say they don’t want manufacturing, but he believes the sector is “hypercritical” to America’s economic success. He says narrow ideological agendas expressed by vocal minorities have been a problem and that the country needs broader two-way discussions that can result in policies that support, for example, both manufacturing prosperity and a cleaner environment.
That’s especially true given the advantages that the shale revolution presents for American manufacturing.
“There are a lot of things that can be made here cheaper than other places in the world,” he notes. “There is a need for manufacturing in the U.S. and it can be done efficiently, cost-effectively and at a lower environmental impact than almost any other place in the world.”