L-P Getting New Boss, ‘Fresh Blood’ Suwyn To Take Wood-Products Giant Away From Troubles And Into Future
Louisiana-Pacific Corp.’s new top executive is a professional manager who’s expected to foster discipline at a company tarnished by legal problems and a lack of internal controls, analysts and investors say.
Mark Suwyn, an International Paper Co. executive vice president, was named last week as chairman and chief executive to succeed Harry Merlo. Merlo was forced to resign in July after the company was indicted for fraud and environmental violations at a Colorado plant.
The 53-year-old Suwyn ran International Paper’s wood-product, timber, distribution and specialty-product operations, whose $7.8 billion in annual sales accounted for more than half of the company’s $15 billion in 1994 revenue.
“It’s time for some fresh blood, fresh talent and imagination,” said Michael Green, president and chief investment officer of EverGreen Capital Management, an Omaha, Nebraska-based investment firm that holds about 198,000 Louisiana-Pacific shares.
Louisiana-Pacific Director Donald Kayser has been interim CEO for the past six months, and Lee Simpson, its interim president and chief operating officer. For the most part, employee morale and the company’s profits didn’t suffer during that time, said analysts and investors.
“Suwyn has shown ability in management reorganization and restructuring and has the marketing expertise that Louisiana-Pacific wants,” said Evadna Lynn, an analyst at Dean Witter Reynolds in New York.
International Paper’s specialty products include specialty panels, imaging products, chemicals, specialty industrial papers, nonwovens and petroleum. Specialty panels include door facings, laminates used for countertops and graphic-arts display materials.
Shares in the Portland, Oregon-based company closed up 1/2 at 25-3/4 on trading of 478,500 shares, exceeding the stock’s three-month daily average of 364,800.
Suwyn couldn’t be reached to comment for this article.
Suwyn takes the company’s helm six months after the U.S. Justice Department and U.S. Attorney’s office in Denver indicted Louisiana-Pacific for environmental violations and quality-control fraud, and two months after the company agreed to settle class-action suits alleging defective siding products.
“This year has not been easy for L-P, and there are still a number of bridges to cross on the litigation front before the company can resolve the problems of the past,” Suwyn said in a letter to employees.
Portland-based Louisiana-Pacific, a maker of wood products and building materials, is the U.S.’s largest maker of oriented-strand-board - or OSB a plywood substitute made from wood scraps that are glued and pressed together. Used as subflooring and sheathing on houses, the product is considered environmentally preferable to plywood because it doesn’t use the large trees in old forests.
The company also makes pulp, the processed wood fiber that’s used to make paper products.
Suwyn’s first priority probably will be to create a plan to steer the company into the next century, Dean Witter’s Lynn said. Louisiana-Pacific, known for its entrepreneurial culture, has lacked a long-term strategy.
For instance, the company will have to decide whether it wants to expand into other kinds of building products, she said.
As new competitors enter the OSB market, Louisiana-Pacific will have to expand its product line to keep its profits healthy, EverGreen’s Green said.
“The company is going to have to find new, creative uses and expand the market for OSB or find new products,” Green said.
The new CEO needs to turn Louisiana-Pacific from an entrepreneurial outfit into a “more mainstream,” professionally managed company, said John Maack, a senior portfolio manager at Portland-based Crabbe-Huson Group, which holds 2.6 million Louisiana-Pacific shares.
“It’s unusual for a company to reach that size and still have an entrepreneurial culture,” he said.
The new CEO will also have to rebuild a management team. Along with Merlo, two other top officers - James Eisses, executive vice president, and Ronald Paul, vice president of operations - agreed to take early retirement.
Analysts said they believe that the bulk of the company’s litigation problems are behind it. In October, the company reached a $375 million settlement of classaction civil suits that claimed its OSB siding products are defective. Final court approval of the agreement could come as early as April 15.
The company took a $345 million charge in the third quarter of 1994 to cover its siding lawsuit settlements.