WEBVTT - USG CEO Metcalf on Innovation of Bubbles in Wallboard (Audio)

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<v Speaker 1>I'm Charlie Pellett. The Dow, the SMP nez dak at

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<v Speaker 1>I'm Charlie Pellett, and that's a Bloomberg business flash. You're

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<v Speaker 1>listening to taking stock with Kathleen's and pim Flos on

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<v Speaker 1>Bloomberg Radio. You know, one of the benefits of broadcasting

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<v Speaker 1>live from the Bloomberg Breakaway Summit, which is a two

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<v Speaker 1>day conference springing together a variety of executives select group

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<v Speaker 1>actually of high growth companies as they get to hear

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<v Speaker 1>directly from chief executives of companies that have really made it,

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<v Speaker 1>that have made some kind of major transformation. And so

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<v Speaker 1>here's a little quiz. All right, the stock of the

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<v Speaker 1>company of the chief executive we're going to talk to

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<v Speaker 1>the stock of the company is of twenty so far

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<v Speaker 1>this year. They're based in Chicago. And everyone listening, Kathleen,

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<v Speaker 1>everyone listening has been in close proximity to this company's

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<v Speaker 1>product today, probably and certainly for their lives. Who do

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<v Speaker 1>you think it is? Well, go ahead, you can tell it.

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<v Speaker 1>Scalfe's chairman, president, CEO of us G Corporation. And there

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<v Speaker 1>are a construction materials manufacturer that basically Jim helped turn

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<v Speaker 1>the putting around with a new kind of wall board.

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<v Speaker 1>I love this story, you know, I think you and

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<v Speaker 1>Jim no, Jim metcalf thanks very much for for being here.

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<v Speaker 1>Much appreciated. Um do we do you justice? I mean,

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<v Speaker 1>have we kind of wonder for us story a little

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<v Speaker 1>bit here. Well, we don't have enough time for the

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<v Speaker 1>entire year. All right, Well, I will say, you know,

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<v Speaker 1>everyone knows our product rock rock. So there's one of

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<v Speaker 1>our one of our brand that uh we been. So

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<v Speaker 1>we're going to take a little closer look at that

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<v Speaker 1>kind of thing. You know. It' funny. Can I remember

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<v Speaker 1>as a kid, al when I got to think of

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<v Speaker 1>sheet rock wall board, I could think of my uh

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<v Speaker 1>dad who was the home handyman putting it up, cutting it.

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<v Speaker 1>I just I could just and you know that it's

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<v Speaker 1>kind of gotten. Was a sper at one point. I

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<v Speaker 1>remember the smell. He was a good customer. He started

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<v Speaker 1>way back in the day when I started with us.

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<v Speaker 1>She but you know, we're more than just sheet rock.

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<v Speaker 1>We're building products. And I like to say what we

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<v Speaker 1>do is we build shelter. It's where you live, it's

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<v Speaker 1>where you were. Can you play like you said, everyone's

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<v Speaker 1>everyone's around it and U uh more than just walboard,

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<v Speaker 1>we make ceiling tile, we make steel. We really build shelter.

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<v Speaker 1>Uh for for the environment. You started at us G

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<v Speaker 1>as a trainee. When was that? And what was yes?

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<v Speaker 1>Started thirty five years ago? Uh right out of school.

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<v Speaker 1>I grew up in Ohio and western Pennsylvania area and

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<v Speaker 1>and drove out west and US Gypsum Company was kind

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<v Speaker 1>enough to offer me a job in the middle of

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<v Speaker 1>a recession and started out. What's great about that, I'd

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<v Speaker 1>like to tell young employees that you can start out

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<v Speaker 1>at the ground floor and be a trainee and work

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<v Speaker 1>your way all the way up to be and be

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<v Speaker 1>honored to be the CEO of a wonder of a

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<v Speaker 1>wonderful company. Tell us a little bit about the technology

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<v Speaker 1>that you're employing. Because you're making board, you know, you're

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<v Speaker 1>making the stuff lighter, lighter, easier to use, and you're

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<v Speaker 1>making it more vironmentally friendly. Doesn't necessarily come to top

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<v Speaker 1>of mind, but actually it's that's why it's so difficult

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<v Speaker 1>to do it. We we really we reinvented a product

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<v Speaker 1>that's actually today and this year is a hundred years old.

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<v Speaker 1>So walboard was invented sheet rock. Walboard was invented a

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<v Speaker 1>hundred years ago, and it was a replacement for plaster.

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<v Speaker 1>And you think there's still buildings with plaster in and

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<v Speaker 1>it was it was a new invention. So we really

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<v Speaker 1>re revitalized the line because it was heavy. It was

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<v Speaker 1>hard to cut um. It was not. We used too

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<v Speaker 1>much energy. We drive off the water. So we made

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<v Speaker 1>it thirty lighter, made it stronger, and also we're using

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<v Speaker 1>less water. One of our strategies is used fifty less

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<v Speaker 1>water and all of our manufacturing to really reduce the

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<v Speaker 1>carbon footprint of of construction. But you know, there's to

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<v Speaker 1>me that is that's such a dramatic and in human

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<v Speaker 1>element of this story because when the housing market collapsed

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<v Speaker 1>in two thousand and eight, that hit us g really

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<v Speaker 1>hard because all that's that that gypsum walbarb were gonna

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<v Speaker 1>call that you were selling all those building materials. Suddenly

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<v Speaker 1>demand just you lost of your demand. So you got

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<v Speaker 1>your people together, you had to downsize. You figured you

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<v Speaker 1>could make this new product. You guys, your your team's

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<v Speaker 1>told you about three years. He said, no, I've got

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<v Speaker 1>to do it in a year, right, right, Well, you

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<v Speaker 1>know we didn't have a lot of time because it

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<v Speaker 1>was in two thousand and eight. I'm sure every want

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<v Speaker 1>to remember it was a perfect storm in the financial

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<v Speaker 1>you know arena, but also it had a ripple effect

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<v Speaker 1>in all of our markets. You know, housing was one thing,

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<v Speaker 1>but we sell in the commercial buildings that was down

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<v Speaker 1>even more than housing, and then repairing the model. The

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<v Speaker 1>home depots quit building stores, which he had never done.

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<v Speaker 1>They're always building stores. So each one of our markets,

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<v Speaker 1>really I called it, you know, it was a tsunami.

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<v Speaker 1>And we were not in a recession. We were I

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<v Speaker 1>called a small d depression, and we had to create

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<v Speaker 1>our own recovery. Waiting for housing to come back, waiting

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<v Speaker 1>for the market to come back. We just didn't have

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<v Speaker 1>the time to do that. Our balance sheet was under

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<v Speaker 1>stress and we needed to change the rules. So we

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<v Speaker 1>put together our strategy, which I called the Plan to Win.

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<v Speaker 1>We wanted to strengthen our core businesses, which has made

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<v Speaker 1>manufacturing and distribution in North America. We wanted to diversify

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<v Speaker 1>our earnings, so we had to get out of some markets.

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<v Speaker 1>We got out of Europe, and I used the term

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<v Speaker 1>we weeded and feeded. We weeded some areas where you

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<v Speaker 1>can't win. And the definition that you heard it before,

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<v Speaker 1>you need to be number one or number two in

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<v Speaker 1>the market, and we were not that strong in Europe.

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<v Speaker 1>So we took those funds and reinvested in Asia and

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<v Speaker 1>Austro Asia. That helped us diverse fire earnings to a

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<v Speaker 1>joint venture which has been very, very successful called us

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<v Speaker 1>D Borrel. But the third element, which is the most

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<v Speaker 1>important element of getting everyone together kind of things you asked,

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<v Speaker 1>was we needed to differentiate to innovation. And that's where

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<v Speaker 1>I got our best minds together and said, what is

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<v Speaker 1>the one thing that we're working on that we can

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<v Speaker 1>rally the troops. And it was called ultra light and

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<v Speaker 1>this is taking less weight at taking weight out, keeping

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<v Speaker 1>it stronger. It doesn't sag, it performs and from a

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<v Speaker 1>productivity standpoint, to our contractors that were under stress, it

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<v Speaker 1>gave them an advantage in this recession because we weren't

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<v Speaker 1>the only ones that were suffering the contractors, the distributors.

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<v Speaker 1>Distributors didn't have to buy as much equipment, so it

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<v Speaker 1>had a big trickle down through the entire network. But

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<v Speaker 1>we couldn't do We didn't have three years to wait,

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<v Speaker 1>so focus. I focused the organization. We've had all hands

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<v Speaker 1>on deck. We quit doing some things, we stopped doing

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<v Speaker 1>other projects, and I was personally involved in the rollout

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<v Speaker 1>of this. If there was an obstacle, I want to

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<v Speaker 1>know who was on it. I'd like to use the

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<v Speaker 1>term one neck to choke, So who was involved with

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<v Speaker 1>that and what do they need to do and how

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<v Speaker 1>can we shorten that? And what we found was the

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<v Speaker 1>corporate immune system made it three years. When when I

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<v Speaker 1>gave everyone the open plane field to say you can

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<v Speaker 1>do You're so good, you can do this in the

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<v Speaker 1>less time. It gave them really the energy to say

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<v Speaker 1>why not. And for me, being the new CEO, I

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<v Speaker 1>needed a morale booster because we're letting people off. We

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<v Speaker 1>were closing down factories. That's not fun. I hate that.

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<v Speaker 1>So I needed something as a leader. And you know,

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<v Speaker 1>it wasn't a hail Mary. But we weren't sure it

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<v Speaker 1>was gonna work because, as you say, Pim, it's very

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<v Speaker 1>it's counterintuitive. You're taking mass out of a product. It's

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<v Speaker 1>just as strong, it's lighter. And we were We have

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<v Speaker 1>these wonderful scientists that came up with this invention. I mean,

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<v Speaker 1>it's really all about the bubbles, you know, the bubbles

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<v Speaker 1>in stucco. It's all about goes, how does this work?

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<v Speaker 1>What does We can't tell you. I like to say

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<v Speaker 1>we put like magic pixie dust in it, but it

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<v Speaker 1>makes the bubbles stronger. So when you say how they

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<v Speaker 1>get lighter, it's all about the bubbles. I gotta ask

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<v Speaker 1>you about age, not yours, not mine, but the buildings

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<v Speaker 1>in the United States, particularly residential and commercial, tell us

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<v Speaker 1>about that. That implies they're getting older like we are. Okay,

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<v Speaker 1>we're making them better because we can remodel those and

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<v Speaker 1>that falls half of our business is repairing remodel. So

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<v Speaker 1>the commercial buildings that we're looking around at the beautiful

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<v Speaker 1>city here are the average ages forty forty years old.

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<v Speaker 1>So you know you have to you know, there aren't

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<v Speaker 1>environmentally sensitive you know, the the attendants want uh different lighting,

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<v Speaker 1>you know, heat, I mean, everything's changed. So we come

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<v Speaker 1>in and we remodel a lot of these buildings. Housing. Uh,

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<v Speaker 1>the average house is forty plus years old. So that's

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<v Speaker 1>why we've really focused on repairing RAM model because our

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<v Speaker 1>products are a fairly inexpensive repairing m model in your home,

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<v Speaker 1>build a new home, get your kids out of the basement,

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<v Speaker 1>you know, hopefully they go get a job. So it's

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<v Speaker 1>a really important So we look at that that overall

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<v Speaker 1>demographics of you know, the demand of of our products.

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<v Speaker 1>So isn't that with driving your business. A lot of

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<v Speaker 1>concern about the economy is still the companies haven't been investing.

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<v Speaker 1>FED might raise interest rates because they want to get

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<v Speaker 1>off the dime. As a CEO of a company that

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<v Speaker 1>seems like it's doing very well, how does that How

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<v Speaker 1>does this all feel to you? You know when people

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<v Speaker 1>ask me about the ec on me, I say, it

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<v Speaker 1>depends where you are in the economy. If you're an

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<v Speaker 1>oil and gas, you're in the railroads business. I think

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<v Speaker 1>they're in a different spot. They kind of were where

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<v Speaker 1>we were maybe in two thousand and eight. If you

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<v Speaker 1>look at overall construction, if you look at the household,

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<v Speaker 1>household growth and the birth rate, you know, we should

0:10:16.280 --> 0:10:19.400
<v Speaker 1>have about a million four starts. That's kind of the mean,

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<v Speaker 1>that's the historic mean. Right now we're a million, one

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<v Speaker 1>million two if you look at the commercial repair and remodel.

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<v Speaker 1>So we think, you know, the next few years. You know,

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<v Speaker 1>we're cautiously optimistic. Um. You know what's great about the

0:10:32.320 --> 0:10:35.439
<v Speaker 1>United States? People are still having babies, population growth, Uh,

0:10:35.480 --> 0:10:37.800
<v Speaker 1>interest rates come up a little bit, they're at historic clows.

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<v Speaker 1>Doesn't matter. I mean, we really don't. We are not

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<v Speaker 1>as interest rate sensitive as a lot of people may think.

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<v Speaker 1>And you've got the bubbles under control. We got the

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<v Speaker 1>bubbles and they're stronger and faster than ever. All Right,

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<v Speaker 1>Jim mc if you're gonna have to come back, I'd

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<v Speaker 1>love to thank you. Harley, Wait, thank you. Jim mcalf

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<v Speaker 1>as chairman, president, and CEO of us G Corporation based

0:10:57.320 --> 0:11:00.200
<v Speaker 1>in Chicago. However, today he's in New York City, where

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<v Speaker 1>we're broadcasting live from the first ever Bloomberg Breakaway Summit.

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<v Speaker 1>I'm Kathleen Hayes along with Pim Fox, and this is

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<v Speaker 1>taking Stock on Bloomberg Radio.