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Published: Sunday, 5/13/2001

O-I's low-profile CEO hangs tight despite age

BY GARY T. PAKULSKI
BLADE BUSINESS WRITER

Owens-Illinois, Inc., Toledo's second largest company, over the past 18 months has had to stamp out bankruptcy rumors while trying to cope with skyrocketing energy costs, soaring interest expenses, and a currency- exchange crisis.

It was a time that would make a chief executive wish he were retirement age.

At 70, Joseph Lemieux, chairman and chief executive for 10 years, is well beyond the usual retirement age.

But in typical fashion, Mr. Lemieux, who is the oldest man ever to head the 98-year-old firm that invented mass production of glass bottles, is playing close to the vest with the answer to the question of when he will go.

“I'm really old, aren't I?” he said with a good-natured chuckle during an interview last week at the firm's downtown riverfront headquarters after the annual shareholders' meeting.

“I've stayed because the board has asked me to stay,” he said. If the company overcomes current problems, he added, “my guess is I won't be around much longer.”

He is less clear on how long that might take. Friends and associates, who say that only partially explains his motivation for staying, say they wouldn't be surprised if he is on the job five more years.

Affable and with a keen sense of humor, Mr. Lemieux nonetheless has a reputation for being a low-key leader who over the past decade has steered O-I away from the civic activism that once characterized the Fortune 500 firm.

No one accuses Joe Lemieux, (who pronounces his name LEMyear) of being doddering. Not a large man, he possesses a confident stride and a full head of hair. And, in intonations instilled during an upbringing in Rhode Island, he speaks forcefully and convincingly about his belief in a firm where he has spent most of his life.

O-I, with 34,000 employees worldwide, is a leading producer of bottles and jars for the brewery, food, and pharmaceutical industries.

Mr. Lemieux, who made $2.2 million last year, has presided over the company during a period of declining use of glass bottles - O-I's main product. But he is respected as an able manager. “O-I is one of the best managed packaging companies in a difficult marketplace,” said Ben Miyares, vice president of industry relations at the Packaging Machinery Manufacturers Institute in Arlington, Va.

O-I's outlook has improved since late November, when panicked investors sent its shares to under $3 and it was unclear whether banks would renew a $4.5 billion credit line.

The stock has rebounded, closing yesterday at $7.69 a share on the New York Stock Exchange, and the loans have been renewed.

Anyway you cut it, however, it has been a difficult year for a septuagenarian executive with 44 years of service to O-I and a lot riding on the company's future. He owns more than a million shares of company stock. Two of his sons and a son-in-law are executives in the firm's glass division: Gerald Lemieux, the unit's vice president and general manager; Craig Lemieux, quality assurance director; and Jeffrey Wolff, an accounts manager.

Among O-I's problems last year: a 77 percent drop in its share price. The company has a huge debt load. It owes $5.8 billion on which it paid $1.3 million in interest every day last year.

The company has tried to diversify. Plastic bottles and jars, produced by O-I's Continental PET unit and other divisions, accounted for about a third of sales in 2000, up from 22 per cent three years earlier.

George Staphos, a financial analyst with Salomon Smith Barney in New York, said O-I is a victim of a series of difficulties beyond its control, including economic problems in Latin America, rising energy costs, and currency exchange problems.

For example, products sold in Australia and valued at $1,000 in that nation's currency would fetch $518 U.S. today compared with $655 U.S. at the beginning of last year. Executives said currency problems are abating, but high energy costs are not.

“Certainly, after the last two or three years O-I is due to have two or three things go its way,” said Mr. Staphos.

The firm has cut costs, and industry analysts consider it the most efficient producer of glass containers in the world. Still, O-I lost $270 million on $5.8 billion in sales last year. The firm's performance improved in the first quarter of 2001, when it made $49 million on sales of $1.3 billion. Executives predict a turnaround in the second half of the year, although some analysts don't expect major improvements until next year.

Kohlberg Kravis Roberts & Co., the New York investment firm that acquired O-I in a leveraged buyout in 1987, continues to play an influential role in the Toledo company. Its stake in O-I has been cut to 25 percent. KKR representatives held 5 of 10 board seats until last year, when Henry Kravis, KKR managing member, stepped down and the board was reduced to nine members.

Analysts believe KKR wants to sell its 36 million shares but has not done so because of O-I's low stock price.

KKR's continued involvement in the Toledo firm could be influencing Mr. Lemieux's decision about retirement, associates said. He fears that the board of directors, with its strong KKR presence, would replace him with an outsider, who might break up the company, said William Laimbeer, a former top executive at O-I.

“Joe would very much like to see O-I continue on in the way he brought it along,” added Mr. Laimbeer, father of professional basketball great Bill Laimbeer.

Mr. Lemieux declined comment on the matter.

Mr. Laimbeer, who was once regarded as a candidate for the top job at O-I, described Mr. Lemieux as a good friend who shares Mr. Laimbeer's love of basketball. “He's a basketball nut,” said Mr. Laimbeer.

His friend, he said, is low key by nature. That trait was reinforced on a career path that began in O-I's accounting and auditing section in 1957 and then moved into manufacturing, with its nose-to-the-grindstone emphasis.

Mr. Laimbeer lamented that O-I isn't as involved in community causes as the firm was under such high-profile leaders as the late Edwin Dodd. But different times call for different leadership styles, he said, and Mr. Lemiuex was sharp at cutting costs, which is what was needed during his tenure.

Gary Schneider, an analyst with Bear Stearns in New York, said he found the O-I chief open during a recent visit to Toledo headquarters.

“How do you have a high profile as manager of a company that investors in general believe is going to be seeking court protection in the next round?” he asked.

Mr. Schneider, who was one of the few Wall Street analysts to warn that Toledo's Owens Corning might be headed for bankruptcy, said he believes O-I will survive the multibillion-dollar asbestos-liability crisis that has sent more than two dozen other firms into bankruptcy.

O-I executives say bankruptcy is out of the question. The firm stopped making asbestos insulation that has been linked to lung cancer and other ailments in 1958, much earlier than other firms.

The Bear Stearns analyst is recommending the stock for the first time in eight years, but warned that “it is not an investment for the faint of heart.”

Analyst Joel Tiss, of Lehman Brothers in New York, also is bullish on O-I. “I own it myself,” he said.

Skeptics have predicted the death of glass containers for years, he noted. Yet sales continue to grow at a respectable 1 to 2 percent a year internationally. O-I is one of two companies that produce 85 percent of the glass bottles in the world, he added. “When you have a large market share around the world with the best customers in the world, there is a definite franchise there,” Mr. Tiss added.

He agreed O-I has a low profile, but doesn't think it hurts the company. “These guys are very focused on their business.”

He praises Mr. Lemieux for grooming a strong group of potential successors. Wall Street analysts like David Van Hooser, chief financial officer. Other possible candidates mentioned by people familiar with the company include Thomas Young, the firm's legal chief, and R. Scott Trumbull, executive vice president in charge of international operations.

Mr. Lemieux and other O-I executives have been more visible over the past year as the firm has tried to deal with bankruptcy rumors and other issues, Mr. Staphos added. “If anything, O-I has become a bit more open and communicative to the street. ... Joe now regularly participates in conference calls with analysts. That was something we had been hoping for for a while.”

Mr. Lemieux said he tries to be communicative. “The real issue,” he said in a Blade interview, “is as long as we have currency, interest rates, and energy hitting us like they have, what are you going to say?”

The low-profile approach of O-I and its chief executive isn't unusual in the packaging industry, observed Mr. Miyares, the industry official.

Even with customers, he said, the O-I corporate attitude seems to be “you don't have to love me, you just have to respect me.” While defendable, that strategy doesn't build goodwill or enhance the firm's image.

“They might benefit if their warm-and-fuzzy quotient was a little higher,” said Mr. Miyares.



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