Renewed resolve at States Industries

To hear Bill Powell tell it, States Industries was built on innovation and entrepreneurship. Seated alongside president and coo Mike Taylor, the marketing veteran and Berkley University graduate spoke of founder Harold Jones’ uncanny ability to extract high value from low cost wood.

“Harold started States in 1966 without owning any wood resources. Just his business savvy and a spirit that didn’t allow him to know what his limitations were.”

According to Mr Powell, it was States’ focus on the retail market that saw it develop pre-finished wall panelling, a veneer-based product whose popularity lasted well into the 1980s. “Prefinished wall panelling was huge for States and we owned the lion’s share of the market,said Mr Powell, adding that, back when States began to manufacture industrial panels, its competitors stayed with making primarily commodity products.

“That was States’ niche – making products its competitors wouldn’t,he said.

According to Mr Powell, there exists a sense of Harold Jones in the way States Industries does business today.

“Our sales people learn what the market wants and we figure out how to make it. That’s what differentiates States from its competition and how we’ve earned our place in the market,he said.

Mike Taylor agrees. “Many of the innovative practices and products that put States in an industry-leading position were in place well before I joined the company 14 years ago. I quickly realised, however, that States’ business was solid because they aggressively went after market share and had the products and people to do so,he said.

A chemical engineer with an MBA, Mr Taylor spoke enthusiastically about his company’s NOVA and ApplePly products, both of which support States Industries’ leading position atop the pre-finished plywood and components business.

“States has always strived to provide what the market wants. We don’t tell our customers to look elsewhere and so we’ve cultivated industry partners who regard us as being integral to their success. These partnerships enable us to invest in technology to help our business grow, while providing our customers with specialised services like CNC-machined components and pre-finishing.”

Mr Taylor cited the company’s NOVA prefinished panels, which States brought to market in the late 1980s. It was a time, noted Mr Taylor, when customers began asking for a pre-finished panel that could be used directly by the kitchen cabinet and furniture industry. In response, States expanded its pre-finishing capabilities, adopting UV-curing two years later. It was “just what the doctor ordered”.

“Our competitors responded somewhat, but States was considered the pre-eminent pre-finisher because of our flexible product offering and the range of custom finishing that included custom colour and opaque finishes, among others,he said.

The introduction of NOVA pre-finished panels was soon followed by what marketing manager Bill Powell described as an equally well-received and innovative product. “In the mid-1980s, Baltic birch began making its presence felt in the US market and States saw this as a potential opportunity. It eventually saw us enter the premium hardwood plywood business with ApplyPly.”

ApplyPly, originally produced from 1.5mm (1⁄16in) alder peeled at one of States’ own mills, eventually saw birch replace alder as an inner ply. According to Bill Powell, it quickly became a hit with customers because of its consistent quality and dimensioning. Today, ApplyPly is offered in thicknesses from 6mm (1⁄4in) to 31mm (11⁄4in) and sizes ranging from 1200 x 2400mm to 1200 x 3000mm (4 x 8ft and 4 x 10ft).

Few words kill a lively discussion about innovation and success better than ‘bankruptcy’. For States Industries, however, it was a topic that had to be addressed before the future could be discussed. Mike Taylor spoke openly and honestly about the ordeal.

“States was in a weakened financial position prior to the crash in 2007, mostly as a result of the initiatives we had undertaken previously in the southeast United States.”

As he explained it, in 1996, the then management responded to strong demand for their products by setting up a components production and finishing plant in Bluefield, West Virginia. The plant was to serve as a components production and distribution base for the furniture industry. Potential savings in manufacturing costs also sweetened the pie.

Panels were shipped from the Eugene plant and transformed at Bluefield. In 2001, States set up a lay-up and pressing operation in Mocksville, North Carolina.

All of this expansion was done because States wanted to become an established supplier east of the Rockies.

“We had plenty of business in the southeast but our costs were just too high. So, in 2008, we made the very painful decision to curtail our southeastern business and concentrate our efforts on the west coast, where business remained good,said Mr Taylor.

The damage, though, had been done and despite stringent cost-cutting beginning in late 2007, States was unable to satisfy lenders. Subsequently, a chief restructuring officer was appointed and the process of finding a buyer began.

“Unlike other companies that entered the torrid period beginning in 2007, we didn’t have the luxury of ‘wait and see’. We had to make quick decisions. By early 2009 we were lean and mean, but it wasn’t enough. Our efforts were probably a year too late and bankruptcy was the next step,said Mr Taylor.

When asked why States Industries survived bankruptcy instead of going away, Mike Taylor’s response was persuasive.

“Throughout this ordeal we ran our Eugene plant and met our delivery obligations. Our customers supported us and didn’t migrate away. I believe we survived this low point in our history because our core business is strong – it makes sense and is profitable. The equity company that acquired us obviously feels that way, too. Unfortunately, we were overleveraged at a time when business declined severely. However, we had momentum going into the bankruptcy and have emerged with all the good things intact,he said.

The president & coo of the new States Industries LLC stated that immediate plans now were to attend to deferred maintenance and invest in the components division.

“Our components business remains strong and so we are investing in a new CNC router, which will be installed in April. Additional capital will be invested to strengthen our position in the components business and we are reconfiguring the plant to meet the highly-customised needs of our customers. We’re looking forward to significant capital investments in the coming two years.”

And what message does States have for its customers? “We want to thank all our partners who supported us during the hard times and assure all that States remains well-positioned to serve our industry and customers by continuing to provide products of the highest quality for specific end-user markets. That’s what differentiated States in the past and it will do so in the future,said Mr Taylor.