Cement Americas: Portland Cement Association is in the midst of strategic planning. What do you see as the strategic goals for the next year and beyond?

Michael Clarke: We're coalescing around the idea of paving the world in concrete. Certainly this strategic planning exercise is more of a refinement of the strategic planning process that was started about 15 years ago. This refinement is to make sure that we're still on the right path as a trade organization.

I think one of the key aspects of the current strategic plan is trying to put together all of the different allied industry groups into a comprehensive and cooperative-type of organization. PCA is very active in trying to get all of the industries that are involved with concrete, concrete products, cement, and cement-based materials aligned and working in the same direction.

CA: Do you feel they're a little disjointed now or they're not quite in line with each other?

MC: They have always been disjointed in the past because they've been separate organizations with separate agendas. I think there's still room to have separate agendas in each organization, but I also think there's a need to try to coordinate some of the efforts and activities. There's a mutual dependency on a lot of the different products, and we want to coordinate our efforts when possible.

CA: What particular things will PCA do to accomplish those goals?

MC: Earlier this year, we helped form the Concrete Alliance, which will establish the formal links with these organizations. It's an offshoot of something that was formed a couple years ago-the National Concrete Promotion Council. Our goals here involve trying to coordinate some of the promotion activities and some of the public affairs activities. It's just getting started.

CA: With your current strategic planning, how far in advance are you looking?

MC: We're just coming to the culmination of the 1996-99 plan. So, our current planning will take us from 2000 to 2003.

CA: So, you don't do these every year?

MC: We don't but we should. We should revisit it every year and tweak it, rather than every three or four years. One of the things that I would like to see come out of this is a five-year financial plan. When we implement programs today, we need to have a measurable outcome five years from now. We need to keep a long-term perspective on our promotion investments.

CA: Let's talk about the current state of the industry, which obviously most people I think will agree is good.

MC: Yes, as good as it gets. We would say it's excellent: our fifth record year in a row of cement consumption. We're at a 100 million mt, with projections that could go on in an ever-increasing amount as we go forward.

CA: Not to put you in the role of economist, but how long do you really see this going on, and how is it going to culminate?

MC: Fundamentally, cement is still a cyclical industry and is still tied to the construction cycle. There are certain aspects particularly unique to cement and concrete that have helped-TEA-21 being a classic example of that. That may smooth us over what may be a construction recession or slowdown in some other areas. Certainly, the TEA-21 is going to buffer a lot of that. Down the road, will there be a downturn in construction? Almost certainly. When it's going to happen, or how deep it's going to be, or how severely it's going to affect the industry is anybody's guess.

CA: Is there an air of worry or caution regarding the fact that practically everybody in North America is now building up? Is there a concern that there's going to be a lot of plants not producing what they can be or could be when this drop occurs?

MC: There's always that possibility. I think a lot of the production that's coming on is modernization and replacement. Let's face it, we are importing 25 million tons from plants off shore, and most of the domestic producers are the same companies that are importing cement. Many of these same companies are improving their domestic capacity.

Certainly, there's a great deal of expansion that's going on, but there's also considerable growth rate at the moment. In the 20 years or so that I've been associated with it, PCA has been getting progressively better at its job in terms of promotion, increasing the size of the pie, so to speak. The results show up in terms of the quantity of cement per construction dollar, or the quantity of cement per capita, or any of those kind of broad-based measures. Cement and cement-based materials seem to be edging up in their share of the construction dollar over the last few years. If that continues, there's certainly enough growth in demand to absorb significant capacity increases.

These days you don't build a cement plant overnight. It takes considerable planning, and there's often opposition at certain levels for our kind of industries. New capacity announced now will not be available for a few years.

CA: Let's talk about promotion, since you mentioned that. Tell me about some recent efforts that seem to be paying off.

MC: Probably the biggest success story we've had is in the residential promotion area. It's a very well put together program of getting out to contractors and to specifiers and telling them what products are available and how they can be used.

Certainly we've had some product innovation with these insulated wall systems, but we've even seen developments in the traditional construction methods. As a result we can tell the concrete story and why housing should be built out of concrete. We've certainly tried to capitalize on some of the problems with other kinds of construction, and, by and large, it's been successful.

I think the real key to what happens here is the national organization-the PCA-developing the tools, developing the methodologies of getting the word out and doing the research that backs up the technology that's being promoted and the problems that come up.

We've also built a huge organization of local promotion groups that go down to individual states and individual regions within states. They are the ones that carry the word down to individual contractors teaching them how to use these new technologies. Then you have demonstration-type projects that are done regionally. We have an army of people out there creating success stories.

CA: Do you have any statistics concerning the results of these promotional efforts?

MC: Concrete's share of single-family housing has gone from 3% to 9% increase in concrete home construction. We actually think it's higher than that, because that last number was done at the end of 1997. We don't have the 1998 numbers yet-we'll have those shortly-but our estimate is that clearly the trend is probably more than 10%, which would be a pretty dramatic increase in market share. And the more people become familiar with the products and how to use them, the better it gets. The more contractors that are out there using the products, the better it's going to be. So, there's significant future growth in this area.

CA: Let's go back to what you mentioned before. Tell me some more about the Concrete Alliance. And I'd also heard there was some sort of reorganization at the American Concrete Pavement Association (ACPA).

MC: There was another opportunity, if you will, where you have this tremendously broken infrastructure system in the U.S., compared to what it should be. We developed an entire strategic plan, complete with timing and funding requirements at both the national and local levels. We wanted to know how to make a significant difference in the share that concrete has in the paving industry vs. other materials.

That study was done a year and a half ago, and the ACPA, which is the concrete paving group closely aligned with the PCA, have been implementing the plan since then. The ACPA changed its structure to adapt to the findings in the study. The study also called for building up a sizeable structure of local promotion field groups, which have since been created. These regional paving engineers in many markets have started calling on the specifiers and the state DOTs to really put a push on, to significantly increase the share that portland cement products have.

That's been under way now for more than six months, and it couldn't have come at a better time now that TEA-21 has passed. If you're ever going to increase market share, the best time to do it is in a growing market.

CA: Tell me more about the Concrete Alliance.

MC: Beginning in 1996, we channeled promotion through the National Concrete Promotion Council-which has since evolved into the Concrete Alliance, consisting of the National Ready Mix Concrete Association (NRMCA), PCA, and ACPA. Before 1996, all three groups separately promoted, for example, parking lots. That didn't make a great deal of sense.

So, we sat down with them and said, "What is the best organization to be the brand manager or target market leader for parking lots?" Now, ACPA covers markets such as streets and local roads, airports; NRMCA hasparking lots among other markets; and PCA handles residential, buildings, bridges, transit etc.

In addition, we evolved into the concept of the brand manager or a target market manager in each market. If you look at the organization chart for ACPA, you'll see airport promotion and right on down the line. We were maximizing resources, avoiding these redundancies, and everybody was essentially going in the same direction. That was also the real beginning of putting more emphasis on local promotion and helping to get more involved with the cement promotion groups.

Now we're looking again at what are the priority markets, what kind of resources should be put into those markets. It's a nice problem to have because we do have direction, we know where we want to go. It's a matter of sorting all this out and moving in that direction. We have some very exciting things and some great opportunities there as well outside the residential market and the paving market. We're all working together with the three groups. We're trying to be more and more market-driven.

CA: It must be nice to finally have the clear division duties straight for once with no redundancy.

MC: The Alliance is great because we're building on that promotion success. Basically what you've got with Concrete Alliance is the three founding groups plus others as we begin to expand on this concept down the road. Everybody keeps their identity, their board, etc., but it's an opportunity to coordinate in three arenas: the promotion arm, which has just absorbed the National Concrete Promotion Council; government affairs, which had a big success with the Government Affairs Conference in May with 17 concrete-related associations as sponsors; and research, which will be helpful as companies look at markets or get involved in government affairs. There may be some research that we may need to coordinate.

This is going to be so beneficial to all of us. We can really leverage everything. Can you imagine the grassroots power that you could harness with just the ready-mix, cement, and contractors alone. The next step is to bring other concrete associations into the Alliance.

CA: Mike, you mentioned TEA-21 earlier. Is it too soon to tell if the share of concrete used for highways is going to go up because of it?

MC: The share of concrete without any action like this probably would remain the same. Hopefully, the actions that are being taken through the ACPA and the PCA will increase the share. We believe that by the time TEA-21 is concluded five or six years from now, that there might be as much as another 6 million tons of cement out there.

With all flatwork right now, we have 25% share. The goal is to reach 40% at the conclusion of the ACPA's new strategic plan.

Also, the ACPA at the local level is expected to grow from about 35 promoters to near 70 people promoting concrete paving in all the contiguous 48 states by the time the current strategic plan is completed. Probably within another two or three months, we will have most of those people in place. We're starting to see some payback in some states already.

And it's sorely needed. If you look at TEA-21 and at the projects that are going to be done, unless we start putting down more concrete, we're going to have the same kind of highway problems for years and years. I drive up and down the northeast near Albany, N.Y., and in the 15 years I've lived up there, we're now in the third generation of surface, and there's no reason to do that. It just makes me cringe every time I see that. We have a solution that is more permanent and less disruptive.

We have a solution. We just have to get it out there and make sure that the public understands it. Our message is: If we're going to pay to rebuild all this roadwork, let's do it right. That's what we have people out there telling the DOTs.

CA: So, when you talk about the reorganization of ACPA, you're really talking about increasing the size of its staff.

MC: The ACPA is really a 50/50 partnership of cement producers and concrete contractors, as far as board representation goes, so they are closely affiliated, though not part of PCA. It's a joint venture. A lot of the reorganization is on the chapter level.

The national has restructured in order to carry out the strategies contained in the study. We really needed to build up the chapters to be successful and get the market penetration that we're seeking.

What was really done at the national level was to enhance the talent there to support what was going on at the local level. For instance, in the knowledge-management area, we really had no strong measurement system to really know if we were having any kind of impact or not. The national organization developed some database software, which was introduced last week at a meeting with all the chapter executives. So we're going to begin to have a database with historic data along with new data as it comes in. So, we're really moving in directions that we were not doing before.

CA: That's going to be quite a change.

MC: It's great. This is one of the most exciting things. I think that residential promotion and what we've done there has been exciting, too. This database has even greater opportunities.

And don't forget, the airport improvement program, Air-21, is coming. The opportunity there is to increase nationwide airport funding from about a $1.5 billion to $5 billion dollars a year, and most of that $3.5 billion would be dedicated to new runways and new concrete-dominated construction.

CA: Is it another five- or six-year plan?

MC: It would be. That bill is under discussion right now as we speak, but you can see a lot of people drooling already.

By our best estimates, we figure that around 50%-and perhaps a little more-of cement is now going to public works projects. That's up fairly dramatically in the last decade. That's primarily driven by the public works dollars, and that could be everything from waste treatment plants to highways, airport runways, dams, and bridges. You start looking at all of the opportunities out there, and you realize there's a lot of money being dedicated to these projects.

CA: What is the current state of affairs right now with the industry in terms of its government regulatory agencies?

MC: I think we're doing an excellent job at the federal level. We have visibility, access, and a good reputation in Washington. We've supported some of these significant spending bills, which benefit everyone in the construction materials industry. The portland cement industry is well represented at the federal level.

One of the aspects of our strategic plan is to try to improve our level of coordination and activity and knowledge at the state and local level, which is infinitely more difficult and complicated. It starts to geometrically increase when you try to do the same kind of monitoring on a local level that we do at the federal level. But we're taking a stab at it and things are getting better. Certainly in some states where we have a greater number of producers, there are some more organized activities in terms of government affairs. In some other states where there are no producers, it gets a little more difficult dealing on the promotion side, but it's an extremely important area.

Certainly, there's an important aspect of that involved with the ACPA's efforts under TEA-21 because there is state and local involvement. Our study addressed this, and also addressed streets and local highways, which are not federally funded. That's a huge market that's probably almost as big as the federal highway market. That's a market that is arguably very under served by cement and concrete products, and its an area where you have to get out and do the footwork on the state and local promotion. You have to know what's going on, not only with the elected officials but also with the state bureaucrats.

What's interesting, too, is that a lot of these states have major surpluses right now, like Illinois and New York. That frees up additional dollars for them to initiate infrastructure projects and highway projects on their own without relying on matching federal dollars. So, there's an area there that's untapped, and streets and local roads clearly fall into that category.

We've got to make these specifiers understand that permanent pavements are better than these election-cycle pavements that they go through. We'll get there with diligence in our location promotion programs.

CA: The new air quality rules are upon us. How much does PCA really have to do with informing its members about them and about ways to economically comply?

MC: Between the PCA and the APCA, there have been tremendous efforts put forth making sure that the regulations that do come down are as fair, equitable, and reasonable as they can be. There's been a great deal of industry participation and activity in trying to address the way that they're interpreted and developed.

Certainly, it is getting more complicated to operate a cement plant from a rules and regulations standpoint, but as long as the rules and regulations are fair to everybody, we can work with them. That's an area where we have tremendous industry participation, too. Individual companies have their own public affairs people who are very involved with those issues.

CA: Can you talk about some specific things that you've been doing?

MC: We've been working on the HAPS, the Hazardous Air Pollutants, regulations that have just been published and making sure that those came out with a reasonable set of standards and guidelines for the industry. We are trying to make sure through the industry's efforts that those guidelines are by and large reasonable and achievable for most companies. We want a balance between what EPA wanted and what the industry is reasonably able to do.

CKD is another issue that's been heavily worked on by the industry to try to avoid unduly qualifying CKD as some sort of horrible pollutant. Certainly, there's some common-sense management practices that need to be practiced and are practiced. Most in the industry have looked after their own CKD issues with good management and disposal practices. The industry has made significant improvements in that area, but there's still some concern. Washington likes to control everything, and there's some of that going on when it comes to CKD.

The next one coming along right now is this NOx regulation, which is going to be a little different because it's become state against state. We've already seen the utilities in some areas of the country-notably in the Midwest-who are literally fighting for their lives against some of the other utilities. NOx regulations affect a lot of cement plants.

CA: This falls in line with the problems that Florida Rock has had and how long it took them to get through its litigation.

MC: The reality is it's getting tougher and tougher to get any industrial facility built. It isn't just the U.S. You go to Europe and you have exactly the same kind of problem. We've had one that we were working on for about three years to get our permit. There are more people involved, more special interests that come into play.

CA: Are there areas of the country that you think are going to really benefit from all these new projects or maybe some areas that won't benefit that much?

MC: That's really hard to say. Certain areas of the country are very different. You've got high growth in Texas, California, and Florida, and you've got slow growth but heavily industrialized poor infrastructure in the Northeast. Right now, virtually every area in the country has been going on all eight cylinders. There may be a difference in what's driving the markets.

I think the older, more established areas are more dependent on infrastructure rebuilding and less on housing starts. In the South, it's more related to housing starts and similar areas, plus growth in the infrastructure to support all the new houses and people. In some cases, it's new construction and in others, it's reconstruction.

We are now into a situation where everything's humming at the same time. But a couple year ago, California was still in the doldrums. It's really only in the last 12 to 18 months that it's taken off. It's really lagged behind the rest of the country. Now, it's going to be shooting ahead.

CA: Is there any new technology that you think will affect the way things are produced or the way things are transported?

MC: There are hundreds of small improvements that are happening all the time. Also, there have been huge improvements that have been made in control systems, information systems, and distribution. Clearly, the technology that's available now is helping the industry tremendously to lower costs in production. But is there some particular technology out there that I could identify coming up in the next five to 10 years? Not really. I'm sure that there are very smart people out there working on it, and there may be something coming along.

The trend in the industry certainly in the 20 years that I've been involved in it has been to build larger and larger plants. The economies of scale have changed, and perhaps that's an example of technological changes. The types of plants that are built today are far more fuel-efficient and more labor-efficient than plants built 20 years ago. But has there been a fundamental change, such as a new process? Not really.

CA: It's not really an industry where advances happen by leaps and bounds.

MC: The process stays the same. You're still doing the same thing to the limestone. Certainly, there have been improvements in areas like grinding, and precalciners came along about 15 years ago. And while there has been tremendous advancements in reducing fuel consumption-or more accurately increasing fuel efficiency-there hasn't been any kind of dramatic breakthrough in the process, and it's unlikely there will be.

If you look at PCA's energy survey, you can see energy costs per ton are just down dramatically. We've really made some tremendous strides. I don't think we get enough credit for it, but we really have. We've decreased usage by one-third in a 25-year span, and as this new capacity and modernizations come on, that trend is going to certainly continue. We're going to become much more fuel and energy efficient as the years go along.

CA: Mike, let's talk about what you do when you're not representing PCA. Glens Falls Cement recently joined forces with Lehigh. What is your feeling about the trend toward consolidation and the reduction in the number of major players in the North American cement industry, now that you have become a part of this movement?

MC: I think it's an outcome of the increasing globalization of the industry, the linkages between domestic production and imports, and the cost of building plants. You also have consolidation because quite frankly, it's a pretty profitable industry at the moment. Is it good or bad for the industry? I don't think it's either good or bad. It's hard to say what the impact is.

>From the PCA's standpoint, certainly we've got tremendously high level of >involvement, and I would hope to continue that, even improve on it. It's >not good or bad. It's like sunshine: it's just there.