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Published: Wednesday, 11/16/2005

O-I exec forecasts big leap in stock price

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER
O-I Chief Executive Steven McCracken O-I Chief Executive Steven McCracken
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In five years, Owens-Illinois Inc. could become the Toledo-area's largest firm and its stock price could double, its leader said yesterday.

In a bold pronouncement to shareholders and analysts, O-I Chief Executive Steven McCracken revealed plans for a vibrant firm that will be good for shareholders and its employees.

The forum was the glass-bottle maker's first presentation to investors outside of its annual shareholders meetings, and Mr. McCracken, in his second year as CEO, outlined his goals.

He said he plans to increase the glass-bottle maker's revenue to nearly $9 billion, up from about $7 billion now, and to double its stock value by 2010.

If he's correct, that might mean O-I, now the city's second-largest corporation, would overtake Dana Corp., whose revenues are likely to hover near $9 billion after it sells off some business units. It also would mean O-I stock would climb to about $40 a share, up from $19.80 yesterday and a level not seen in at least several years.

"We're turning this big ship around, this $7 billion ship," Mr. McCracken told the New York crowd. "And we're not changing our course."

In addition, he said, O-I plans to continue paying down debt, increasing profits, and solving its persistent as-bestos-liability problem.

Still, Wall Street was not impressed. The message the company's leader delivered in the morning didn't prevent the firm's stock from dropping by 8 cents a share by the 4 p.m. close of the New York Stock Exchange.

Ironically, Mr. McCracken rang the closing bell on the exchange, a ceremony afforded corporate executives at times.

Industry analysts did not return calls seeking comment about Mr. McCracken's message. But four of six analysts that follow the firm call the stock a buy.

His message could be a hard sell for some analysts, including one who suggested selling the stock because of a pessimistic view of the impact of higher energy, raw material, and transportation costs in coming months.

Mr. McCracken and other O-I officials told the crowd of about 150 in New York City's Rainbow Room that, even though the company faces an extra $400 million in costs next year - about half energy-related - it is helping to solve the problem by raising its product prices around the world.

"I can tell you right now, we're encouraged," the CEO said. "The outlook is positive [and] our long-term partners understand the issue."

Mr. McCracken, a former DuPont executive who became O-I's leader in April, 2004, said the Fortune 500 firm is ahead of schedule on most of the goals he has set over the last 18 months.

For example, he said, the company has more than $7 billion in revenue this year, compared to an earlier projection of less than $7 billion. The company ranked No. 292 on the latest Fortune big-company list.

If it climbs to $9 billion by 2010, and to $10 billion within a decade as Mr. McCracken forecast, it would jump significantly on the prestigious list. Dana, with $10.1 billion in revenue last year, ranked No. 201 on the latest list, but it is selling business units that produced $1.3 billion in revenue.

During a three-hour presentation, which the top executive called a report card on his 1 1/2 years as O-I's chief, Mr. McCracken said he planned to increase the firm's stock-market value to $6 billion, or twice what it is now.

On the asbestos front, the company leader said payments to claimants have dropped sharply in recent years, from $246 million in 2001, to $175 million in a 12-month period ended Sept. 30. New cases filed have dropped from 25,700 in 2003 to 10,900 in the 12 months ended Sept. 30. The average age of the claimants is rising, now at nearly 77, so the number of new cases should decline soon, he said.

The firm, and others such as Toledo's Owens Corning, are targets of claims by people who said they have become ill from asbestos in products once made by the company.

Congress is considering measures to establish a national trust fund to handle asbestos-liability claims, which would help firm O-I.

"Financially, we're going to walk out of this [asbestos] issue," he said.

Although not a big deal to the New York crowd, O-I's planned move next year was not highlighted. The company plans to relocate its headquarters and its 340 employees from One SeaGate downtown to a new building under construction in Levis Development Park in Perrysburg, where the firm has other operations.

Mr. McCracken told shareholders, however, that the firm has paid off some sizable debt two years in a row, a feat not accomplished for 15 years.

Its debt now stands at $5.2 billion, and more will be paid off next year, he said.

Contact Homer Brickey at:

homerbrickey@theblade.com

or 419-724-6129.



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