Paul A. Yhouse is president, chief executive officer, and a director of Dundee, Mich.-based Holcim (US) Inc. He joined the company as senior vice president and chief financial officer in 1991, and was elected to his current position in 1993. Yhouse also is a director of St. Lawrence Cement, which is majority-owned by Holcim.

Prior to joining Holcim, Yhouse was with Arthur Andersen & Co. During his 20 years at the firm, he served in the Baltimore, Grand Rapids, Detroit, and Toledo offices and at the company's headquarters in Chicago. He became a partner there in 1982. Yhouse began his position as chairman of the Portland Cement Association in November 2002.

Cement Americas: Let's start talking about Holcim. In terms of the North American operations, where do you think Holcim stands right now?

Paul Yhouse: I'm pleased with our position in North America, looking from the long-term perspective. We've invested over $1 billion dollars here during the last 10 years. We'll invest another billion dollars in the coming five years to serve our customers and upgrade our assets. We're excited to see the growth in the market that's come with that investment. Some of these investments are in our distribution capabilities.

As a result, we've also been able to supply product from outside the U.S. to take care of our customers' needs during this growth period, while we are preparing in the longer term to serve them with domestic capacity.

CA: Is the product you're importing coming from Holcim operations?

PY: It's not always manufactured in other Holcim facilities, but it is procured for us through the global Holcim trading network.

CA: So, you're facilitating the importing.

PY: Yes, it's a very important service that we provide to customers. If you think about cement consumption 10 years ago, it was less than 80 million tons. Today it's 30 million tons more than that. The U.S. hasn't been able to add capacity that rapidly, even though many companies have begun expansion projects.

So, during this period of expansion, we provided the importing service. And, it's a logical thing: we have the distribution network, we have the relationships globally, we can distribute the product to our customers and absorb the substantial financial risks of importing. It's not without its hazards to contract for cement from offshore, get it here, have it arrive in the midst of some hurricane or some seasonal weather event. It comes all at once, in big chunks; an individual customer can't very well find a place to put 50,000 tons at one time.

CA: From which areas of the world are you getting product?

PY: Over the last five years, everywhere from the Mediterranean to Asia to Latin America.

CA: Are you expecting to end the year where your forecast thought you would?

PY: We began the year with a lot of uncertainty. I think we're going to see a year that is not as bad as we all feared it might. That's not a very comforting benchmark, I know. We will see fewer tons sold for 2002 than 2001.

CA: Some cement companies are known as being very aggressive in terms of acquisitions or their competitive nature, and some are more quiet, building from within. At least in North America, how do you believe that Holcim is perceived in the industry as a company?

PY: I think our customers would say we've been committed to being a reliable, growing supplier. We have continued to emphasize the importance of technical service to customers and maintaining long-term commitments to our markets, not merely selling one more ton today and being gone tomorrow.

We'd also be recognized for the commitment we've made to promotion and involvement in industry and trade association activities. We expect all of our sales and marketing people to be involved in advancing concrete against competing building materials as well as advancing Holcim products specifically. A recent survey [was conducted] by PCA of the various member companies on how many hours they have been involved in promotional activities, and I was pleased to be told that we're very near the top of the list. That's not an accident. It's the result of an intentional message and internal incentive systems.

Our customers also recognize that we've been working to bring to the U.S. market new products — GranCem would be our best known brand name — that make better concretes. And Holcim has shown a lot of environmental leadership in both our plant operations and our internal work within the industry.

Finally, we'd be recognized for our involvement in public affairs, both at the state and federal levels. About half of all cement, as you know, goes into concrete that is in some way a publicly-funded work. We've encouraged all of our senior managers and others in the company to be involved with their representatives and public officials. And we're not just talking about the Senate, U.S. House, or Federal Highway Administration, but also of state senators and city councilpersons. We have a model in our mind that all of our people ought to be involved at that level, not only a selected number of our trade association lobbyists.

CA: You mentioned a couple of times the network that Holcim has. Can you give me a sense of how the company has built up its North American network over the past 10 years?

PY: We've probably added a dozen terminals, most prominently among them, a large import/export facility at the mouth of the Mississippi River in Louisiana that we refer to as Globalplex, where large ocean-going vessels come in. We can unload the product in a very environmentally controlled way. We store it there in large quantity and then distribute it back through the extensive distribution system of the Mississippi River in barges in smaller individual quantities to our distribution points.

We've added storage capacity at many plants in this 10-year period to be sure that we have enough product to be a reliable supplier to our customers. The size of our rail and barge operations are amongst the largest in the cement industry.

Because that's such an important part of our service to our customers, I have reporting to me a senior vice president of logistics. That person is on the Inland Waterways Users Board and the U.S. Department of Transportation's Marine Transportation Systems-National Advisory Council trying to shape public opinion and policy around transportation issues.

CA: In terms of plans for growth currently, I know you just finished a pretty substantial new plant in Colorado. Could you go through the recent history of how you've been expanding and then any new plants targeted for future expansion?

PY: Going back to the mid-90s, we were looking at the network of assets that had been accumulated by Holcim, to see what would be the optimal network of assets both to be a reliable supplier for our customers and to produce great shareholder returns. We recognized that we had a portfolio of assets that was typical by U.S. industry standards. And while being typical to the U.S., in truth our assets would be behind modern plants in many other places in the world. The U.S. hadn't attracted much new cement technology investment since the 1970s, maybe with the exception of Texas in the 1980s.

We had a set of assets that were average for the U.S., but not globally competitive and not uniformly best of class even within U.S. standards. So, we wanted to invest to build a network of flagship plants. Along the way, we sold a couple of assets that we thought didn't fit in the network or that we wouldn't upgrade.

We began by doubling the size of our plant in Utah to 635,000 mtpy by building a single dry kiln line that replaced two old, small wet kilns.

We went to Texas next and added another kiln line of essentially the same capacity as the existing one, which had been built in the mid-80s, to double the plant's capacity. At the same time, we began temporarily to import (through Galveston) for the Texas market so that we could be supplying our customers during the period of construction of the plant. When the plant started up, we supplied product from Midlothian to our customers and displaced the imports.

We then turned to Colorado to replace our old southern Colorado plant, the Portland Plant in Florence, building a single, dry kiln line to replace several old wet kilns. What should have been a two-year construction period turned into three years. As you know, the plant started initially to run for only a couple of weeks last year before we found a problem in the preheater tower. We had to repair that, and that added another nine months to the construction.

Prior to the plant coming on stream, we recognized that the market really wasn't growing to a level to require all of our Colorado capacity. As a result, we announced the closing of the northern Colorado plant in Ft. Collins. It was our hope that there would be a place to serve our customers with both facilities, but that's not the way the markets developed.

Then we turned our attention to Holly Hill, S.C., where we are replacing two, old wet kilns with a single dry kiln line, which is really identical in many respects to the southern Colorado plant. We will bring that plant online next summer.

Also, during this period we wanted to expand our presence in the GranCem product line. So in the mid-1990s, we acquired the then-existing assets of Koch Industries in Chicago and West Virginia. Having acquired those as an entry point, we subsequently doubled the capacity of the Chicago operation. We accomplished that about three years ago and have since brought online a greenfield facility at Fairfield, Ala., near Birmingham. And St. Lawrence Cement, our sister company, also invested to develop a greenfield GranCem facility in Camden, N.J.

And then we have two other projects under development in the United States. St. Lawrence Cement, which serves customers in the Northeast U.S., is developing a project on the Hudson River in the town of Greenport, N.Y., which would replace the old wet kiln lines at the Catskill plant with a new, single dry kiln that is essentially a duplication of the Colorado and South Carolina plants.

And, the other development project is our pending permit for a plant at St. Genevieve, Mo., south of St. Louis that would build a large, single kiln line plant on the Mississippi River to supply customers on all of the connected river systems. Permits are still pending for that, as they have been now for three years.

CA: Let's talk about GranCem, since you mentioned it. Holcim has been a leader in the charge to promote slag cement over the last few years. How do supplemental cementitious materials (SCM) change the scene? Specifically, how does slag cement figure into the Holcim picture? And as PCA chairman, you'll probably have to address that question. Does the scope of PCA have to broaden to include all cementitious materials, or should it just stick to portland cement?

PY: Supplemental materials are products that are used elsewhere in the world, including Europe. We know from experience that they make concrete that is better than some concretes produced in the United States today. So, we're committed to bringing to our customers this additional tool to enhance performance in selected applications of concrete.

We also do it because it is a way to have concrete be a very successful building material. So, we think it's a win/win opportunity that makes better concrete for our customers and end users, has less of an environmental impact, and is good business. We can earn a nice return on this for our shareholders and continue to attract capital, which also is one of our goals.

I think you fairly characterized us as leaders in [SCM development and production], but certainly not singularly. You see others who have been in it before and others who are getting more interested now, and I read that as affirmation that others recognize that what I've just said is true. I expect to see supplemental materials as a continuing interest to a variety of customers in the U.S.

You raised the question of the role of our various industry/associations. It is an important question and one that the PCA member companies will have to address. We do have the plan put in motion by the most recent chairman, Mel Brekhus at TXI, to update our business plan for the association. That comes at a great time for us to maintain alignment amongst the membership on the most important areas of focus for our limited resources. This will be one of many questions to be considered by the members during that exercise.

CA: In terms of the role of PCA, is this something you're going to encourage, i.e., including non-portland cement cementitious materials producers as part of the scope of the association?

PY: In the past, we've talked with other PCA member companies about whether the association was interested in developing and explaining to customers the benefits of other materials — composite products, slag cement, etc. A few years ago, it seemed the membership wasn't interested in that topic.

In the long term, I hope that we can find a way to get all of the various associations working in an allied way, whether it's under a single roof or not. I have a similar objective, which is that we would be continuously working in an aligned way with the National Ready Mixed Concrete Association, American Concrete Pavement Association, the American Concrete Pipe Association, and a long list of other allied suppliers and consumers of cement and concrete.

In PCA, all our members have a keen interest to assure that concrete is a competitive building material and that it is of high-quality. In that respect, we need to be sure that we are as efficient as possible in harmonizing specifications and standards across the United States, and with Canada.

You see some trend at the moment in the industry towards greater diffusion of specifications — it's not only the issue of standards, but it's the issue of what will a buyer specify.

PCA has several activities to harmonize a specification for a basic ASTM C150 Type I portland cement in order to standardize the cement specs between, say, here and Canada. This would allow places like Detroit to Windsor or Seattle-Vancouver the opportunity to trade similar, high-quality product. I think that's important to bring those two together.

Likewise, we've worked with NRMCA and AASHTO in the past and will in the future to harmonize the various standards.

CA: Give us a few details about Holcim's environmental efforts.

PY: Why don't we start by talking about the industry, and then I'll speak with some pride about Holcim's role in that. I've been in the industry now for 11 years and have seen a substantial growth in understanding amongst the member companies that we're expected to produce our product with less environmental impact than we have historically. Even though our plants often operate with supportive local communities, there are other constituencies who think we need to do more to have less impact.

I think the industry should be proud of what it has accomplished. Energy consumption to make a ton of cement has been reduced by 33 percent over the last 28 years. Production of cement kiln dust has been cut more or less in half. Particulate matter emissions, which are of increasing importance to communities around our plants, have been reduced over a 20-year period by almost 95 percent. Safety has always been very important in our industry. We have a very important safety award program that's recognized at IEEE. In the last 10 years, we've seen in general a decline in the incidence rate of lost time accidents. I'd like all of those who are touched in some way by the cement industry to recognize that the industry is committed to operating with as little impact as possible.

I'm pleased that the industry association through a committee that [Holcim's Vice President — Communications and Public Affairs] Tom Chizmadia chaired has set a goal to reduce our greenhouse gas emissions by 10 percent per unit of production, comparing the year 2020 with the baseline year 1990. I think it's going to be an important topic in our strategic planning activities for the association to discuss amongst the members how we move forward to achieve this goal.

Holcim has been in the lead on a variety of these topics, both within the association trying to shape views, and also acting on our own. One of many examples I would cite is our invitation from the EPA to join as a Climate Leader, a relatively small list of well known and well respected companies in the U.S. We're the only cement company to have been invited to join as an original charter member, and our sister company St. Lawrence just joined on October 30. We were invited to join because we've already made substantial progress in reducing our CO2 emissions and have committed to go beyond the industry's goal to further reduce our unit emissions of CO2 comparing the year 2008 with the year 2000 by 12 percent. Combined with the 15 percent we've achieved from 1990 to the year 2000, we would have a significant total reduction over the 18-year period from 1990 to 2008.

CA: I noticed that almost every Holcim plant burns some form of alternate fuel. So, you're clearly a big proponent of that kind of environmental measure.

PY: Absolutely. It's representative of our commitment to reducing our environmental impact, to recycle energy by using materials whether it's a substitute for raw materials or thermal energy sources that would otherwise go to a landfill or to a waste incinerator, where it's destroyed without recovering the energy value. Holcim is committed to this strategy of alternative fuels and raw materials.

You know that Holcim was one of the 10 member companies that sponsored the Cement Sustainability Study, conducted under the auspices of the World Business Council for Sustainable Development (WBCSD). From Holcim's perspective, the ability to reduce the consumption of virgin materials, to reduce the amount of emissions to the degree that we can, to use the cement kiln to recover the heat value of things that would otherwise go into an incinerator, to reduce the impact on the landfills for things like tires, are all part of sustainable development. They are reducing the impact on the communities in terms of having to find places to put these wastes, reduce the impact of emissions on the environment. They're good business as well.

We have ways to reduce the environmental footprint of our industry that don't require breakthrough, new technology. I see that as an opportunity, not to have to invent anything new, but to do nothing more complicated here than what is already done in many other parts of the world successfully.

CA: It's been proven that a company can be competitive and environmentally aware at the same time.

PY: I'm glad that you would say that. It occasionally frustrates me to find colleagues in the industry who somehow don't see that there's a successful intersection. It's win/win on multiple fronts for all stakeholders. The challenge is to find that reasonable common ground and not have rules and regulations that are too far in either extreme. We ought to minimize the amount of regulation by providing other incentives to companies to operate within this sweet spot that optimizes corporate social responsibility, sustainable environmental performance, and return for shareholders.

It's unfortunate when you end up needing regulation to get all of industry to step in the desired direction. The industry could itself anticipate and be more proactive in taking those steps, and [if] all would follow voluntarily, I think we would find that we were better able to optimize the trade-offs between investments, earnings, and impact on the environment and all stakeholders.

When we fail to do that as a group and leave some portion of those issues unaddressed, then we end up with the government stepping in to do for us what we ought to have done much better for ourselves.

CA: Can you talk about community relations and some of Holcim's specific actions in particular areas?

PY: Our model for corporate social responsibility begins with each plant having a community advisory committee made up of those from the nearby communities, including not only folks that you might think of as fans, but also those who have concerns and might even perceive that the company is not doing all that it should for the community, i.e., people who can challenge us and be involved with us around each site to understand what we're doing, tell us what sorts of concerns there are in the community, maybe help us shape ways to address those.

Holly Hill is a prime example of a community where we have had for years an advisory committee. It also uses alternative fuels and new materials, some that are hazardous; and we've developed a relationship with various folks in the community so that we know what their concerns are and they know what we're doing. When we proposed to expand the plant, we were able to work with the community to maintain support for the expansion. I think that's an example of listening to some concerns and make some adjustments and also explain to others in the community what we were doing and finally sustain enough support to proceed.

Currently, about half the plants have advisory committees, and the intent is to have all the plants, including the GranCem facilities, have advisory committees leading into 2003. The advisory committee is the best way to have a two-way stakeholder dialogue so that we're not just sending information out about what we're doing, but we're also listening to what people are telling us and what their concerns are so we can respond effectively.

CA: The Holnam/Holderbank name change is still less than a year old. Has it been well received?

PY: Yes. The topic of the name change is a sub-bullet under a broader theme for the Holcim Group. Globally, we have historically operated as a group of individual companies, each company looking to serve customers in its regional markets. Increasingly, we see an industry that's more global in its scope and operations, and so the Holcim Group embarked on a transition from being this group of local and regional companies to a single, worldwide operating group.

Here within the United States, we've had some experience with this because Holnam was a brand adopted in 1990 to signify the coming together of a group of individual regional companies known as the Dundee Cement Co., the Santee Cement Co., Northwestern States Portland Cement, Ideal Basic Industries, and United Cement. So we had some experience from the last ten years of becoming a single operating group.

CA: Regarding recruitment and retention of employees, do you consider it much of a potential crisis or a concern for (a) your company, and (b) for the industry? How is Holcim addressing it?

PY: It's absolutely a concern for us and for our customers and customers' customers. We have invested in hardware. But the kilns and the terminals don't run themselves. Ultimately, it is people who take the capital investment and operate it in a way that creates a return for all stakeholders.

So, the recruitment and retention of good people [is a pressing concern] in the cement and concrete industries, including in the placement and finishing profession. Therefore, another element for the strategic plan at PCA will be to find the right amount of resources to put on that topic.

Within Holcim, we've recognized this need for many years. The roots of Holderbank, now Holcim, recognize the importance of people. I was attracted to join the group in 1991 in part because investment in people was an important vision; it's very nice to work in a company where the role of people is recognized and valued.

We began in the mid-1990s to step up our activities. We started ranging from recruiting college graduates to Holcim (including an internship and co-op program that targeted a number of colleges and universities) and actively recruiting experienced people from outside Holcim. We also became active in bringing folks from around the world to our team, while having our people get experience outside the United States as a part of their preparation for senior leadership posts.

CA: In view of the opportunity for change and new direction attendant upon PCA's November strategic planning, tell me about some of the things you have in mind to present to the association that either don't exist now or need a change in direction.

PY: I think the question for us will be less about changing direction than it will be about being sure that we've focused our limited resources on the most important items of core business. Also, how well organized we are and aligned to be sure that we are using all our resources — not only those of PCA, but also those in our regional cement and concrete promotion groups, and in our relationships with our other national allies.

A relatively robust group of resources are available to promote concrete and cement or advance our environmental commitment or help educate and attract people to the industry. I see the strategic planning questions as more about how to pick the most important points of leverage, to be sure that all the members are aligned around what those most important points are and then how to work through this complex web of resources.

CA: So, where do you think resources should be put that maybe they're not being put currently?

PY: We have two fundamental missions within PCA. The most significant is helping our partners to promote concrete and cement against other building materials and to grow the pie (highway funding, for instance). We've done some great market research to find target markets. Of course, our efforts in the residential area are visible to date. Our efforts with our partner, the Concrete Paving Association, are also well recognized and bearing some fruit. But, there are other markets that PCA's market research has identified that offer great potential, and we need to be sure that we all agree around the table as PCA members which are the places that offer the best potential.

As an example, soil cement work, roller compacted concrete. And we haven't fully realized the residential potential. Recently, our regional promotion groups have identified what they think of as emerging opportunity in the area of pervious pavements. That hasn't been very much on our radar screen, but we're rapidly trying to learn more about what that opportunity might be and what sorts of technical and other work we need to do.

Besides promoting cement and concrete, the other core mission for the industry association is working together in appropriate, lawful ways on reducing our environmental impact, influencing rules and regulations, trying to find voluntary agreement around these areas, and to shape our public policies, often maybe trying to be more proactive than we have been in the past.

CA: You mentioned highway work. It seems that the benefits of TEA-21 are finally coming to fruition. So maybe that's one area you don't have to promote as much.

PY: But the TEA-21 bill also expires next year, so there is a very important step to be taken, working with our partners in the Concrete Alliance, to pick the key points that will be important to us in the new, highway bill. We must be well organized and get all of our feet on the street to influence, and hopefully increase, the amount of funding that's available.

It's clear that there are substantial unmet needs for infrastructure investment. Although there's a lot of budget constraint, it's important that we fight for continued benefits in infrastructure investment, both federally and at the state level. Even with the highway program, there's a state match that's required in all those programs and it's not an era when state budgets are in surplus.

CA: In view of the recent 30th anniversary of the Clean Water Act, there's a movement in Congress over the past several years to obtain funding — equivalent to TEA-21 or that for airport runways — for water pipe replacement. Is that something that's been discussed?

PY: It's being followed by the trade association and their coverage of legislation to reauthorize the Clean Water Act and the Safe Drinking Water Act. Indeed, to reinforce my earlier point, I and other Holcim leaders have been in touch with our various legislators. And then there's discussion of the need for further investment in our port facilities. The recent work stoppage of the West Coast ports demonstrates the importance to our economy of our over integrated network of transportation systems. The locks and dams of the Mississippi River are also important. Think about the economic growth that's sustained up and down that river every day. So, if the locks and dams aren't maintained, it has big implications.

That requires continued, vigilant investment. Some of it's going to have to be public funding — it isn't going to attract private capital — and if we don't over a period of time sustain that, we end up as a country unable to compete efficiently to get people and goods to market.

CA: In your mind, is there an import problem? [Then] Holnam was never part of the Southern Tier Group?

PY: We have several plants in that area. But we're not members of the Southern Tier.

The Holcim Group worldwide stands for free and fair trade and doesn't favor artificial barriers to trade, whether it's cement or other products. The vast majority of imports to the U.S. have been brought here and distributed to customers as a service by the existing cement producers. So, the industry provides a very important service over time to our customers to bring the product from offshore, store it, and move it smoothly through the distribution system. Increasingly, we see the United States capacity being added, and over time, imports will decline.

At the same time, we all know there has been some global surplus of capacity, particularly in the last four or five years from Asia; and particularly when the U.S. dollar has been quite strong by all historical records against the Asian currencies, we find a lot of global product — particularly Asian product — pressing towards the U.S. markets as well. So, there is some uncertainty about how all that will be balanced as the U.S. has less need and while the global capacity continues to press for some outlets for the excess. Exactly how this all plays out will be very important to the U.S. industry.