In a moment, I’m going to tell you about the new
Weyerhaeuser we’re building and what it means to you, our shareholders.
But first, I want someone much better known to describe
what we mean when we say the future is growing at Weyerhaeuser.
[Videoclip]
Did you recognize the voice? That
was Jeff Bridges, who does all our radio and television ads.
Last year, I spoke with you about a “brand new day” at Weyerhaeuser.
Today, I want to discuss how we’re creating a “brand new Weyerhaeuser.”
Perhaps that sounds strange for a company 103 years
old, but it’s true. We’re a new company not just because we’ve incorporated
Willamette Industries, but because, in doing so, we’ve taken a fresh look
at how we conduct our business … and we are changing.
Here’s
how I described the new Weyerhaeuser in this year’s annual report: “It’s
a company with an exciting future — a future built on the foundation of
enduring values and a new approach to running our business. It’s a company
where the finest qualities of two leaders in the forest products industry
— plus some new ideas — combine to create the best possible forest products
company. It’s a company focused on maximizing the return on every dollar
invested in us.”
Providing the returns you expect requires
not only that we operate as efficiently as possible, but that we follow
well-thought-out strategies for dealing with the challenges and opportunities
we face. I want to take a few moments to describe some of them.
Globalization may be the most daunting challenge of all. There’s
no question all of us exist in a global marketplace. But what does this
mean for Weyerhaeuser? Global markets for one thing — the reason we maintain
sales offices and/or operations in Canada, Australia, New Zealand, China,
Uruguay, Ireland, France, Mexico, and nine other countries. On the other
hand, it means we’re competing with products made anywhere in the world
— logs from Russia, lumber from Austria, pulp from Indonesia, paper from
Scandinavia, and so forth. In some cases, we’re even competing for raw material.
A front-page article in last Wednesday’s Wall Street Journal
traced the journey of a homework assignment, thrown away by a nine-year
old New Jersey boy named Kevin. After Kevin discarded his two-page assignment,
it made its way to a Clifton, New Jersey, recycling plant. There it was
bound with other waste paper into a fifteen-hundred-pound bale that was
shipped to Ningbo, a port city on China’s eastern seaboard. In China, the
boy’s discarded homework was sold to a paper mill that “gobbles up America’s
throwaways and spits out new paper products.”
Maintaining
access to the raw materials we need — in this case, waste paper — is why
Weyerhaeuser operates its own paper-recycling business … and why we’re working
with the American Forest Products and Paper Association to increase recycling
of all grades of paper.
There is good news, however,
in terms of currency exchange rates. The U.S. and Canadian dollars have
both significantly weakened against the euro since early 2002. Let’s look
at what this means to our pulp business. In just the last nine months, our
cost position relative to Scandinavian producers has improved $50 to $60
a ton. This is a big plus.
Also on the positive side,
industry consolidation is helping create efficiencies. And we have to be
extremely efficient to compete in the global marketplace, given the high
wage base and high level of benefits in North America.
For
example, health-care costs are rising 10 to 15 percent a year in the United
States. A 15 percent increase costs the company more than 50 million dollars
per year.
These costs directly impact the company's bottom
line.
Overcapacity also remains a problem for most of
our product lines. The softwood lumber dispute between U.S. and Canadian
producers remains a major issue. Weyerhaeuser has taken a leadership role
in working with the governments of the United States and Canada to try and
resolve this dispute.
Finally, the United States and
world economies are still weak, and the economic impact of the Iraq war
is not clear.
At the present time, the negatives are
outweighing the positives. Along with the costs of integrating Willamette
and streamlining the company, this helps explain our 2002 net earnings of
$241 million on sales of more than $18.5 billion.
While
some of the challenges I mentioned are formidable, in business there are
always obstacles to one’s goal. The best companies overcome them. And there
are forces in our favor beyond those I’ve already mentioned.
First and foremost, we make products people need … lumber and panels
for houses … pulp for paper and hygienic products … paper for communications
… boxes for shipping goods … even entire homes. We expect demand for these
products to continue to rise with population and the rising affluence of
developing nations.
As a company, we have excellent assets
and people … wonderful timberlands … leading technology … financial strength
… a great reputation … and an increasingly global presence. We also have
a clear direction for success, which we’ve been describing in both our internal
and external communications.
In the near term, we’re
going to continue our focus on capturing synergies from the Willamette integration,
paying down our debt, and reshaping the company.
As
these one-time costs work themselves out – and the synergies increasingly
hit the bottom line – you should see significantly improved earnings.
In the longer term, our direction is set in a document we call
The Weyerhaeuser Way, which was developed last fall by our Senior Management
Team with about 70 other company leaders. It outlines a new approach to
our work, or what some people refer to as our “culture.” In this regard,
as Bob Dylan put it, “the times, they are a-changing.”
The
kind of workplace we’re creating focuses on the Roadmap elements of speed,
simplicity, and decisiveness. These will drive accountability and frugality,
leading to a less cumbersome, more streamlined, more customer-focused organization
and ways of doing things.
Speaking of customers, I’m
pleased that we have some with us today. Would you please stand and be recognized?
We’re also holding people accountable for results, not
activity, and people will be given the responsibility and authority to deliver
results. And we’re continuing our intense focus on safety, as well as making
money.
I would note that most of the changes I’ve been
discussing were underway prior to our acquisition of Willamette. However,
since the acquisition, we’ve accelerated our pace.
What
are some signs that we’re making progress?
- We’ve
eliminated redundant, unnecessary and time-consuming processes, as well
as layers of management.
- We’re less patient with underperforming
assets. It’s painful to have to close a line or a mill, but a company periodically
has to prune to keep the overall enterprise healthy and in balance.
- We’re more focused on the bottom line. Frugality isn’t only finding
the least-cost solutions, it’s asking whether something needs to be done
at all.
Lean, nimble, quick, opportunistic.
That’s what we’re trying to be.
Admittedly, this new
Weyerhaeuser is not going to be a comfortable fit for everyone. As I’ve
told our employees, “you’re going to find our workplace of the future fulfilling,
exciting and rewarding IF you’re the kind of person who is customer-focused
and results-oriented … is comfortable with change … wants to grow … wants
to take on new challenges … and wants to make a difference every day.
You’ll be more accountable, but also better able to deliver results.
You’ll have the opportunity to grow more quickly through on-the-job training,
other forms of education, and more varied job assignments. As a company
and as individuals we must never stop growing … in our skills … our reputation
… our ability to serve our customers … and our ability to deliver returns
to our shareholders.
As shareholders, I believe you’re
going to like where we’re going. We’re building momentum, so buckle your
seat belts and join us on our journey.
Before I end these
remarks, I do want to take note of some changes in our Senior Management
Team. Rich Hanson has assumed the new role of Chief Operating Officer, freeing
me up to devote more time to long-term growth strategies, customer relationships,
leadership development and instilling the new work culture I’ve just described.
- Sandy McDade, formerly our vice president for Strategic
Planning, has joined the Senior Management Team as senior vice president
for Canada. Sandy succeeds Bill Gaynor, who retires at the end of this month
after a distinguished career, primarily in Canada.
- Susan
Mersereau, formerly vice president of Human Resources for our Containerboard
Packaging & Recycling Business, has joined the Senior Management Team
as Senior Vice President of Information Technology and Chief Information
Officer, a new position on the Senior Management Team. Susan succeeds Tom
Ped, who will be retiring later this summer after a varied and valued career
at Weyerhaeuser.
- Dick Taggart, formerly vice president
of Finance, has today joined the Senior Management Team as Executive Vice
President and Chief Financial Officer, succeeding Bill Stivers.
- Jack Taylor, formerly vice president of Western Timberlands, is
joining the Senior Management Team as Senior Vice President for Timberlands,
succeeding Rich Hanson.
Congratulations
to all the new members of Weyerhaeuser’s Senior Management Team. I have
every confidence they will serve Weyerhaeuser Company and you, our shareholders,
well.
Finally, we can’t let Bill Stivers go into retirement
without noting the tremendous, positive impact he’s had on Weyerhaeuser
Company. Bill, would you please stand and be recognized?
Bill
joined the company in 1970 as Weyerhaeuser’s finance manager, as well as
treasurer of our newly formed real estate subsidiary. He worked his way
up the ladder until 1990, when he was elected senior vice president and
chief financial officer — and, later, executive vice president.
Bill has played a critical role in the growth of Weyerhaeuser Company,
not least through his day-to-day leadership of the company’s successful
effort to acquire Willamette Industries. In addition, Bill has been a close
and trustworthy advisor to me. Bill, we all wish you well as you head into
this new phase of your life.
