Born in the Klingenbrunn district of Grafenau, Germany, Helmut S. Erhard studied at the technical University of Calusthal, Germany, where he earned a master's degree in mining engineering in 1971. He joined Heidelberger Zement (now HeidelbergCement Group) in 1971. The company brought him to America in 1978-79 to be the assistant Plant Manager of the Mitchell, Ind. and Mason City, Iowa plants. As director of the Mainz-Weisenau cement plant, he was granted full power of representation in 1980. In 1987, Erhard was appointed Senior General Manager, responsible for the technical management of the six cement plants in southern Germany. In 1996, he was named Managing Director of Heidelberger Zement Group Technology Center GmbH. In 1999, Erhard was appointed Deputy Member, and in July of the following year, Member of the Managing Board. Currently, he is in charge of the North American region and of the Technology Center.

Cement Americas: Where do the North American operations of Lehigh Cement stand right now in your eyes in relation to the rest of the North American industry? Is it as strong as you'd like it to be? Where do you see your company right now?

Helmut Erhard: In the geographical areas where we do business, I see us in strong market positions. But have you ever seen a company that cannot make additional improvements?

With respect to the size of Lehigh, I think we are Number 4 right now in terms of clinker capacity and cement sales in North America. We control about 10 million tons of clinker capacity and we also import some cement, about 2 to 2.5 million tons. The company generates revenues of close to $2 billion, with about 55% related to cement and 45% to other construction materials like ready mixed concrete, pipe, block, and aggregates. So, our name is Lehigh Cement Co., but we actually are a vertically integrated construction material company with businesses in the United States and Western Canada.

CA: In your capacity, you oversee all of those operations?

HE: Yes, in my capacity as Lehigh's President & Chief Executive Officer, I am also a member of the HeidelbergCement Group Managing Board. The Group is structured in five Strategic Business Units [SBU]. The Managing Board consists of seven members: the Chairman, the CFO of the Group, and five members who lead the SBUs as the responsible CEOs. This Board forms the top decision-making committee of the Group, meets about monthly, and coordinates HeidelbergCement's worldwide business activities. With one Swede, two Belgians, and four Germans, this team certainly mirrors Heidelberg's international geographical portfolio and represents different cultural elements and business experiences.

CA: Is there a recession, as far as you're concerned, that is affecting you right now, or something that you may be afraid of in the future? In terms of the construction industry, it looks like there is a threat now to infrastructure spending. Is that something that you've seen materialize in your sales?

HE: Last year, we already realized that the expectations, which were high at the beginning, would not materialize. This was not just because of September 11; it had already started in mid-summer when we saw some slowdown. Eventually, our 2001 cement sales reached the level of the year before. Pricing is an issue as well, because we continue to experience a very competitive situation. This is a major concern because costs are significantly rising in some regions, mainly caused by energy price hikes.

PCA recently altered its forecast for 2002 to minus 3.5%. Nobody likes to see a decline, but we have to keep in mind that we are part of the construction business, which is a cyclical segment of the economy. After all, the industry enjoyed 11 consecutive years of growth.

I believe there are some indications that things will work out a bit better than projected. Although commercial building probably will be weaker, residential building seems to be performing significantly better than expected. Eventually, it will depend on the public sector. Will there be a delay or change in the TEA-21 program, and how will it affect the funds available for 2002 and later years? I hope that the American Portland Cement Alliance, arm in arm with the American Concrete Pavement Association, will be successful in promoting our interests in this important program.

CA: I haven't met anyone except people at PCA who's willing to admit that business may go down a little bit this year.

HE: I am a bit more confident, but circumstances can change quickly and I believe that's the difference between previous years and now. The element in the whole situation that is unpredictable is the political one. It has a strong impact on the nation's economy and people's confidence. But if things develop well in the international political arena, there are some indications that for our business next year, the worst could be behind us.

CA: You mentioned that Lehigh is not a publicly traded company. It has always struck me that Lehigh has had a reputation for being a relatively quiet company with no real large acquisitions, just small to mid-size purchases in key areas. At the same time, the company is guiding policy within the industry, and a great deal of success with your technological advancements. Can you talk a little bit about what you think the reputation of Lehigh is out there — perceived or otherwise?

HE: I think it depends on where you are coming from. With reference to our customer relations, we have an excellent reputation. For more than 100 years, the Lehigh Cement Co. has been active with the same brand name and a deeply rooted customer orientation, supported by a high and consistent product quality, as well as the reliability and credibility of management at all levels.

When it comes to public awareness, as you said, Lehigh is not very high on the radar screen. But there is a simple reason: Lehigh is not a publicly traded stock company, but part of the HeidelbergCement Group. Shareholder representatives, financial analysts, and the media obviously turn to the Group in order to get information on the company.

I am afraid I have to correct you with respect to Lehigh's growth accomplishments. Over the last seven years, Lehigh grew significantly. The first time I was in the U.S. was 25 years ago, when Heidelberg acquired Lehigh in 1977. Then a young engineer, I came to Mitchell, Ind. and later to Mason City, Iowa, spending a total of about two years in the states. At that time, Lehigh was a company that had, except for Mason City, all their plants east of the Mississippi. Between 1994 and now, Lehigh has almost quadrupled its revenues. First, we integrated the North American CBR cement, concrete, and aggregate assets, mainly on the west coast and Canada. Four years later, Heidelberg bought Scancem and Lehigh added additional businesses in Pennsylvania, New Jersey, and Florida. We also entered into a partnership with Dyckerhoff and formed the Glens Falls Lehigh Cement Co., which is strong in New York and the New England states. So the last seven years have been a great success story with respect to growth for Lehigh.

CA: How about your white cement business?

HE: Our white cement business is a partnership. It is an interesting, well-performing, and successful activity that has been ongoing for many years. We market a marvelous product that offers flexibility to architects and engineers. This enterprise shows an interesting aspect of the Heidelberg and Lehigh business culture. Heidelberg and Lehigh have a long tradition in doing business with partnerships. HeidelbergCement grew over time by not just fully acquiring other companies and assets but also by becoming a partner in certain businesses. The Group operates about 70 cement plants worldwide. But Heidelberg only built one plant from scratch, and that was a hundred years ago. We acquired the rest or ran certain companies together with partners. We then upgraded and further developed those assets.

CA: That leads into my next question, which is about organic growth. Your highest-profile upgrade of late is in Union Bridge, Maryland, but are there other places where you're expanding or modernizing?

HE: Lehigh has a plan for expanding capacity at some plants over the next few years, but we will do it prudently in accordance with the market situation. The expansion at Union Bridge increases Lehigh's production in the Mid-Atlantic region by about 1 million tons per year. We are in the process of making final plans to upgrade our Leeds, Ala. facility and the Mason City, Iowa production line. While these improvements will add some capacity, the main focus is on cost efficiency.

With respect to growth by acquisitions or partnerships, we are pursuing several promising ideas. Because we are part of an internationally operating group, we must coordinate our strategy here in North America with the Group's overall growth strategy. The Group pursues a growth strategy of balancing its geographical portfolio in order to maintain future sustainable profit growth. The Group has to be strong in mature markets, where it generates attractive cash flow now. But mature markets are usually not blessed with intriguing, long-term growth potential. Therefore, the Group also has to gain a strong beachhead in developing markets, where one has to invest now with expectations of profit growth in the years to come. As always, opportunity and potential come with some additional risk. We then must ask ourselves, “Can we bear the risk?”

CA: Tell me about Heidelberg's presence in Asia right now?

HE: I am not in the position to comment on our Asian presence because another member of the Managing Board is responsible for our business in those territories. We have been in China for quite a few years in a partnership with local authorities. We feel that China is an important part of the global economy and that it offers some good long-term growth potential. Our Indocement investment added another 16 million tons of capacity to our Group and will be a cornerstone of Heidelberg's position in Southeast Asia.

CA: Let's talk a little more about Union Bridge. I know it's a fairly old facility. Is that why you selected that for an overhaul?

HE: Union Bridge was, as you said, an older facility with long dry kilns, but the main driver toward modernization was the market. Union Bridge is a major supplier for the Washington, D.C. area and for the Northeast Corridor, which begins around Washington and goes north to Philadelphia, New York, and Boston. Based on this geographical advantage and promising long-term market projections, we decided to invest in a new production line. The project is completed, the start-up went well and the new facility is in business. With the additional capacity we will be able offset most of the imports that we were bringing into the Mid-Atlantic market.

CA: Let's talk a little about imports as they relate to Lehigh, which imports about 2.5 million ton annually. If I remember correctly, you have some pretty well documented opinions on the dumping and that sort of thing. Tell me your opinion about dumping in this current market place. When demand is so much higher than what we're capable of producing domestically, how does that change things?

HE: We have to put things in the right perspective: importing is not generally dumping. But there is some imported cement, which is dumped into the U.S., based on Southern Tier Cement Committee's firm belief and the U.S. government's definition. It is not just an assertion; it's a well-documented fact. We feel that this is a free trade world and we want to continue to have it that way. But a prerequisite for free trade is fair trade.

When it comes to general imports, we have to understand the big picture. Obviously, there is overcapacity in some regions of the world, for example, Southeast Asia. The United States is a very attractive market, easy to access by ocean-going vessels and river barges. Therefore, there is obvious import pressure on the U.S. market. Lehigh buys some of the surplus cement in the world, thus helping balance our supply and demand situation in the U.S.

CA: Where is Lehigh importing cement from?

HE: As we are part of the HeidelbergCement Group, we can rely on its trading branch. In recent years, our imports mainly came from our Group's operations in Turkey, Scandinavia, and Southeast Asia, but we also purchase on the open world markets. Lehigh has two major import flows: one into the East Coast and Florida and one into the West Coast. In total, we operate an efficient network of about 10 import terminals across the nation, which help us facilitate a reliable supply for our customers.

With growing domestic capacity over the next few years, we expect to see a drop in imports, as domestic plant production is able to meet domestic demand. As long as importers are also producers in the U.S., a switch to our domestic capacity can be decided quickly, based on product quality, customer considerations and economics. But there are people out there lacking this flexibility because they are not producing cement here.

CA: Tell me about Lehigh's interest in supplemental materials, like slag cement. I believe you a member of the Slag Cement Association.

HE: Because our parent company is a European player, Lehigh has access to Heidelberg's broad experience with a variety of cementious materials and their applications. I am sure that we will see a major increase in the usage of slag, for example, in many regions of the U.S. The material is available, domestically and internationally, and it will be sold. It's just a matter of who will do it.

In European markets with a long tradition of making blended cement, the average clinker content of the cement is around 60%. The rest is slag, pozzolanic material, fly ash, or ground limestone. I do not feel that we will see such a low clinker content in this country because of availability issues, logistical costs and traditions in various markets. But the importance of slag as a cementious material will grow and Lehigh is preparing for a future that includes blended cement. Environmental considerations will be a driving force as well, and I believe the majority of the American cement industry is heading in this direction now. Let us consider the CO₂ issue. There is worldwide mounting pressure on all kinds of industries to decrease the emission of carbon dioxide. How can we do it? Well, there are fortunately some ways open to us in the cement business.

Firstly, save energy, which means lower fuel and power consumption, surely an issue here in the U.S. with plants using older technology.

Secondly, burn waste fuel, because it reduces equivalent primary fuel, preventing it from oxidizing in a public dump and generating additional CO₂. In other areas of the world, the percentage of waste fuel used in cement production is significantly higher than here. There are plants with a primary fuel replacement rate of up to 70%.

Thirdly, reduce the clinker content in cement, by intergrinding cementious material like slag, fly ash, or limestone.

What a cement company really sells is performance in concrete. Slag, inter-ground with clinker, can add some characteristics to the blended cement, which can help extend the field of applications for concrete.

CA: What is Lehigh's record with regards to alternative fuel usage?

HE: In some plants, we are burning tires. But I think we can do more in this area. Our Heidelberg Technology Center and the plants are working to increase secondary fuel usage.

CA: Where are your slag cement facilities?

HE: We have facilities in our Evansville, Pa. plant, where we are grinding slag and producing blended cement by inter-grinding clinker, gypsum, and slag. We also operate a similar setup at our Glens Falls Lehigh partnership and run a slag grinding facility in Minneapolis, Minn.

I think in the long run blended cement is the preferred product, from the standpoint of economics, environmental protection, and product quality assurance. But, in any case, the market will decide.

CA: Let's talk a little more about Lehigh's environmental programs. I assume that with these new air quality regulations about to kick in that all of your plants are compliant.

HE: Lehigh certainly is. We undertook some major investments in the last few years to further optimize and make our plants ready for the new regulations. Our parent company, HeidelbergCement, is a member of the World Business Council for Sustainable Development (WBCSD). Together with nine peer cement companies, we are working to study the options available to our industry to reduce emissions and further protect life around us. At the end of the day, it is also a matter of social responsibility and, it will become a marketing issue as well. Where does a company stand when it comes to its environmental reputation? We have to work hard to be able to give an answer that satisfies our customers and the public, not only now, but in 10 years.

CA: Usually something that goes hand-in-hand with environmental issues is community relations. What sets apart the way that Lehigh handles its community relations? I've been to several Lehigh plants, and many of them are right in the middle of a town. So, community relations really is an issue.

HE: Lehigh has five Critical Success Factors: growth, customer satisfaction, employee satisfaction, measurement systems, and community involvement. It's a local issue, first of all. Plant management and employees have to be involved in their local community activities and be part of an ongoing dialogue. To underline its importance, Lehigh made community involvement a part of our annual performance evaluation system for managers.

CA: Is that true for Union Bridge, that when you had to apply for those kinds of permits it went smoothly?

HE: Absolutely. Union Bridge successfully resolved some permitting issues at the very beginning, but these were not at the community level. The project was strongly supported by local authorities and the neighborhood, probably because, as a first step of the permitting process, we talked to the community, even before we submitted any paperwork to the State and Federal agencies.

Community relations are not just a matter of charitable donations. Of course, we feel that charitable giving is an important part of our business culture and we also encourage our employees to contribute time, as well as financial resources, to their communities. But one cannot buy trust. You develop it over the years and there has to be a consistency in your approach and philosophy.

CA: What kind of efforts are made to recruit new employees? At some cement companies, the human resources personnel have said that they're having real issues with getting new people in the industry. Have you found that this is an issue for Lehigh as well, and what sort of efforts are you undertaking to resolve the situation?

HE: You've hit a strategic issue. We consider it of utmost importance for our company to be able to attract qualified people and retain them. We firmly believe that, at the end of the day, the most important asset is people. Shareholders expect a company to be profitable and financially sound. But people manage money, markets, operations, quality, productivity, and profitability. It doesn't just happen. If you look at our free enterprise economy and how we produce and market our products, people do it.

When one discusses ways how to attract good people, usually one talks about recruiting at universities and colleges. But what we also need are supervisors who are well-trained and have hands-on experience in operations. They have a strong impact on production costs and product quality. We have a program that focuses mainly on developing employees, not just in their basic trade and operational skills. The program includes courses, for example, in basic financials to help them to understand a balance sheet, what EBITDA or fixed costs means, etc. This course helps them comprehend our business on the larger scale and become more creative.

To enhance our engineering expertise, we set up a program called Engineering-In-Training (EIT). It requires a financial commitment on the part of the company and a time commitment on the part of technical managers, but it helps us to continually secure new blood for our succession planning. And, by the way, it is fun to see these people grow.

Another appealing element in our development program for managers is the fact that because we are part of an international group, we can provide ambitious and capable employees with assignments overseas. When they return to North America, they have a broader view of the world, good additional professional experience and an international mindset.

We also retain good employees with our Succession Management and Employee Development System (SMEDS) program. Lehigh is a total quality oriented company, and SMEDS gives people another way to get more professional education and training.

CA: I wanted to cover Lehigh's recent name change and reorganization of its territories.

HE: This was the result of a discussion we had a few years ago at the Managing Board when we said, “HeidelbergCement grew within the last 15 years its business from a $1 billion to a $6 billion company, mainly by acquisitions. But we have also acquired businesses and people, some with very different cultures from our own. We owe it to our stakeholders to consolidate the various business philosophies and establish a common set of business values.”

We initiated a Corporate Mission project, which identified eight basic principles, which are the guiding values for our employees worldwide.

One of the elements of the Corporate Mission was the Corporate Design. It is not our business practice to do away with local names after an acquisition and just put a Lehigh or HeidelbergCement on the new company. Rather, we retain the local names. At the same time, there were numerous questions from our employees, who wanted everybody to know that they are a proud member of a strong international group. That's why we decided to redo our Lehigh logo, which had been there for more than 100 years. We put a team together and they came up with a very fresh new proposal. It is an emotional issue for some, but the overwhelming reaction I'm getting now is very positive.

CA: I understand there are some organizational changes, effective the end of this year. I don't know if they're connected to these other changes…

HE: No, there is no connection. This is a simple business decision to improve our internal structure. I believe we should not stand still, whether it is in the marketplace or in our own organization. I believe that we should always ask questions about the way things have been done. Our current structure in North America, with six EBUs, was an excellent idea for the last seven years when we merged our Lehigh assets with the former CBR activities. Now, looking not only in the future but also around us, we have to assure that our internal organization continues to match the competitive environment, as well as, the customer consolidation that is occurring. By looking around and to the future, we feel that we can streamline our organization. That's why we will merge two of the EBUs — Lehigh East and Lehigh Midwest — into one. This measure will enhance the decision-making process in a decentralized organization, be more cost effective and further improve our ability to supply the market place.

CA: The assets that you had that didn't actually carry the Lehigh name, like Tilbury, Inland, and Calaveras, how will they be branded?

HE: Lehigh, as of February 1.

CA: Are they going to be put in one of these units?

HE: Yes, they are. The former Calaveras is Lehigh Southwest; Tilbury is Lehigh Northwest; and Inland is now Lehigh Inland. All cement companies in those EBUs will operate and market under the Lehigh name.

However, because aggregate, concrete products, and ready mixed concrete businesses operate in distinct local markets, they will continue to use their existing names. Ready mixed concrete is a local market and we feel we won't generate any value by changing. For example, the name of a ready mix company in Saskatchewan from A to B. Nobody will buy more from us because of a name change. It may only disturb our people and the customers in the area. Cement is different because it is an internationally traded product. Lehigh has such a strong name in the market, the construction materials industry and our industry associations that we will benefit by unifying our cement in North America under the Lehigh name.

CA: Earlier you mentioned the company's Technology Center. What kind of work is done there?

HE: HeidelbergCement Technology Center (HTC) is basically an in-house engineering company with offices in Europe and here in Allentown, Pa.

The mission and role of HTC is to support cement operations worldwide, to help plant personnel pursue the continuous improvement process, to advise them in production matters and environmental affairs, and to manage projects. In addition, HTC has a significant role in some of our training programs. For example, the EIT program is conducted by HTC. The EIT program is an incubator for cement engineers in the HeidelbergCement Group.

When it comes to capital projects, HTC has a very distinct and important role. They perform feasibility studies, manage mid-size and large projects, and advise line management.

They also play a vital role enhancing the information flow within our Group by managing the distribution of technical and product knowledge.

A major segment of HTC's work is related to cement chemistry and concrete applications. HTC's research and development center in Atlanta, which cooperates closely with a sister facility in Europe, supports the plants when it comes to quality assurance. Our technical experts at the lab also work with our sales force to promote our products and to help our customers improve their products as well.