A native of Montana, Mel G. Brekhus received his bachelor's degree in engineering science from Montana Tech in 1972. That same year, he went to work for Lehigh Portland Cement Co. as a technical services engineer, and by 1983, he had worked his way up to plant manager at facilities in Washington and New York. In 1984, Brekhus began working for Missouri Portland Cement Co.

He began working for Texas Industries Inc. (TXI) in 1989, when he was named vice president of cement production, and he is currently the company's executive vice president and chief operating officer, cement/aggregates/concrete. In 2001, Brekhus was named Chairman of the Board of the Portland Cement Association.

Cement Americas: From where TXI is standing, how does the U.S. industry look as those around you are getting absorbed into larger, multinational corporations? Is there any chance or fear that that's going to happen to your company soon?

Mel Brekhus: The globalization of the cement industry is certainly occurring. There's been quite a bit of activity recently, and it has been said that size is important in the world of cement. And the reasons are, according to those involved in international globalization and consolidation, that those companies' distribution channels are more effective because of their size. They also have leverage in purchasing power and more widespread market participation, which mitigates the risks of any particular market being down. And it seems that consolidation will continue. More specifically to TXI, management has and always will do what is in the best interest of its shareholders. If someone is willing to pay our shareholders enough, then anything is possible.

I can also say that the cement business is quite parochial. You need to know your customer's business as well as — if not better than — he does. If you do, you will succeed because you're going to bring your customer the value the customer is looking to receive. So it seems logical that a company like TXI, based in the United States with assets in the United States cement market, would be capable of competing very effectively with large multinational companies with headquarters in other parts of the world. Again the advantage goes to being close to the customer and understanding the marketplace.

CA: In the mean time, what is TXI doing organically in terms of growth?

MB: We're going to focus on what we've established in our long-term business plan, and that is to be the low-cost supplier in the marketplace. An example of executing that plan was the modernization and expansion of our Midlothian, Texas cement plant, taking that facility's capacity from about 1.3 million to 2.8 million tpy, and bringing it online in this calender year.

We did that because one of our basic tenets is to be a low-cost supplier in the marketplace. In order to do that in this day and age, you have to have state-of-the-art equipment and equipment of the size to service the marketplace in which you've chosen to participate. That's a good example of our organic growth.

We're also going to continue to be a market-driven company that makes its decisions based on the market, takes those back to our operating facilities and makes the products the market wants. We're going to be a leader in the marketplace — No. 1 or No. 2 in the markets where we choose to do business. We're an integrated company that is in the cement, aggregates, and concrete products business, and we're going to take advantage of that. We will grow organically in those markets, particularly in the aggregates market. For example, we're building a new state-of-the-art limestone crushing operation in Oklahoma, which will come online sometime next summer. That facility, along with a low-cost operation we already have in Bridgeport, Texas, will supply the Dallas-Ft. Worth market.

We have plans in California to expand and modernize our Oro Grande gray cement manufacturing facility. It's not a question of whether we will do that, it's a question of when. We took on a lot of expansion and growth in our company in the last four or five years; we've got a lot of that behind us now that Midlothian's expansion is coming online. And when we're in a position to modernize and expand that plant, we will do it. What will be required is that we have the human and financial resources to take that next step.

CA: Where are you currently with the Midlothian project?

MB: We started commissioning the plant early in this calendar year, and we put it into full operation in May. Of course like all startups, there are issues that you have to deal with, but overall it's operating well, and we're very pleased with the progress we've made thus far.

CA: While the Midlothian expansion was going on, TXI was importing a fair amount of cement into Texas, correct?

MB: Yes, we imported cement into Texas through Galveston to pre-sell the additional capacity that would come online when we brought the new kiln system into operation.

CA: Where are those imports coming from?

MB: We were importing cement in cooperation with Holnam. That company was expanding its Midlothian operating at about the same time as we were expanding ours. So we entered into a collaborative arrangement with them and brought the cement into a floating silo ship in Galveston. We sourced the cement from South Korea. We brought product through the floating silo ship for the specific purpose of preselling the market and then making sure that the floating silo ship floated away.

CA: What do you see as the future of imports into Texas?

MB: I think it's logical that as domestic capacity comes online to supply the domestic market that the imported cement should be reduced to compensate. And that's what we anticipate will happen with imports coming into Texas. They will be there to be supplemental and only supplemental.

CA: Do you believe there will there be much need for supplemental material in the years to come in the markets TXI serves?

MB: There currently is a need for importing cement into both the California and Texas markets because — fortunately for TXI and other who compete in those markets — demand exceeds domestic supply by a considerable amount. Even when TXI and Holnam in Texas, for example, bring their operations to full capacity, if the demand continues at the pace it is today, there will be a need for imported cement. Then it's just a question of who has the crystal ball. Will it be 1 million tons? Will it be 2 million tons?

CA: But clearly your expectations are high that demand will not drop off too much in the next couple of years.

MB: I'm very optimistic about both regions. We see currently that, in spite of the economy being soft and we don't have the growth that we saw during the past few years, we do still have very strong markets.

CA: With your Oro, Calif. operation, how close to you think you are to beginning that expansion project?

MB: We've done as much as we can at this point. We have the permits and permissions from the county and appropriate air district to expand and modernize that plant. We're not moving forward beyond that until we're in a position to start engineering and equipment procurement.

CA: What types of projects in your markets are seeing the most activity of late?

MB: What we see happening in Texas, in spite of the economy softening — which by the way was softening before September 11; I think September 11 just expedited things — is commercial construction off, but public works coming on strong. We're seeing a significant increase in public works, especially heavy highway, and it is more than offsetting the slump in large commercial construction. Surprisingly, the residential market in Texas is still strong. One explanation for that might be that interest rates are low and entry-level purchasers are continuing to buy homes. So we're seeing a residential market that, year over year, we expect will be flat to slightly higher.

CA: Now that it's had a few years to make its impact known, has NAFTA [North American Free Trade Agreement] affected your business at all?

MB: To say that NAFTA has a lot to do with the growth in Texas and California may be stretching things. But I will say that the immigration of people between Mexico and the United States has benefitted TXI and other companies in the Southwest. We have a tremendous amount of construction activity in both the Texas nd California regions that is directly related to the flow of people, as well as goods and services, across the border.

CA: With TEA-21 ending soon and some question as to whether a comparable spending package will be passed in the near future, what do you see in terms of the impact this may have on the industry?

MB: TEA-21 was slow starting, and we really haven't seen the full effect of TEA-21. Even though it expires in 2003, in the history of highway spending and funding, those monies that are funded are spent. They aren't necessarily spent in the time that they were allocated, but they always have been spent. We have an infrastructure in the United States that is 50 years old, and it needs the funding to build itself back up to where it needs to be for the citizens of this country. I believe we're going to see continued efforts to bolster federal funding and in particular highway funding. The alliance that the Portland Cement Association has with the American Concrete Pavement Association will be working feverishly in Washington, D.C. to promote that funding.

CA: Are there any local spending projects in California or Texas that will benefit TXI?

MB: Both states are reaping the benefits of TEA-21, and I believe they will reap the benefits of any future programs to fund highway construction. We need it and we're looking forward to it.

CA: There are major air quality regulations coming into effect in 2002. Is TXI fully compliant at this point? Do you feel the rest of the industry is ready for these new restrictions?

MB: Yes. That's a short answer because TXI is in compliance and will remain in compliance in the future. Our industry is in compliance or will be in time for any deadline. I should point out that we have the American Portland Cement Alliance, which is very active with regards to these issues, so that whatever regulations are promulgated, we're going to have a seat at the table to make sure that we promote this very environmentally friendly product called cement.

The APCA really understand the issues, and PCA has tremendous membership involvement when it comes to environmental matters. We have very smart people working on these extremely complex issues, and we are respected by the regulators and the legislators.

CA: TXI still has plants using waste-derived fuels, correct?

MB: We have one plant that uses waste-derived liquid fuels. That's in Midlothian, where we have two of our existing wet kilns operating. We also burn chipped tires at our operation in Hunter, Texas. And we use alternative raw materials that might normally be classified as waste at all of our operations.

We've been burning liquid-derived fuels at Midlothian since the 1980s. Unfortunately, it took us 10 years to get the permit to do that. And I say “unfortunately” because we take these liquid-derived fuels and — rather than incinerating them or landfilling them — we convert their energy into clinker and cement, which is by far the best solution to this environmental issue.

CA: This year, TXI celebrated its 50th anniversary as a company. What has changed about the company in the time you've been there that's surprised you?

MB: In TXI's executive management group, I have the least amount of seniority, and I've worked here since 1989. This is a very stable company with long-term employees prevalent. The reason is that they have always been focused on paying attention to people and developing those people into innovative risk-takers who are focused on the company being the low-cost supplier in the marketplace.

We claim that we empowered our workforce in the 1990s, but I would contend that 50 years ago — by standards that were measured then — we were very empowering. I see this in our culture and, for example, in our safety programs, where we have emphasis on safety that you just don't see in a lot of industries. I see it in our layers of management or lack thereof. We drive the decision-making process to lowest-competent level. The result is that we are a successful company with employees who enjoy working in that environment, stay with the company, and make us as successful as we are today.

CA: You touched on TXI's safety program. What sets it apart from others?

MB: In the 1970s, the company started a very progressive safety program designed to eliminate accidents, and it worked very well because those in charge got participation at the plant level. We have people in every one of our operations who are on the safety committees. They find the safety problems and they fix them and they are accountable for the program. It's not something that came from the ivory tower; it's something that they work on diligently every day, and it has resulted in a culture that is truly interested in safety for safety's sake. Safety is important not because of what accidents cost, but because of the total impact that safety incidents have on the company; the most important being employees who could be injured.

In the beginning, like most companies, we didn't keep the emphasis on safety like we needed to, so we changed the program once again. Now, every operating vice president has a safety manager. When they report at my monthly staff meetings, they not only report their production and sales results but also their safety results. And the results are favorable because a bright light is shining on safety.

CA: Another area where the bright light has been shining lately is recruiting new blood into the cement industry. What measure is TXI putting forth in terms of recruiting?

MB: TXI has and will continue to grow its management from within whenever possible. We've done this very effectively for the first 50 years, and I'll think we'll continue to do so for the next 50. But one of the ways to start that process of developing managers for the future is to conduct management audits, which we conduct no less than once every two years. We critically assess our position in respective disciplines. And if we find a shortfall, then we remedy that from within; if we can't fulfill all the needs that way, we'll go outside.

For example, we have gone outside for engineers, through intern programs at various colleges. We've gone outside and acquired business types by hiring newly graduated MBAs.

I'm very pleased with what I've seen our people do. In our aggregates, cement, concrete, and steel operations, we're very successful at recruiting engineers from the mining and technical schools.

I don't necessarily share the belief that there's a crisis in our industry with regards to this, because we are a wonderful industry in which to work. We hired a young man out of college in a sales position not too long ago, and he's been here about three years. He recently said that when he would go out at night with his buddies, they would all say, “I can't believe you're working for a cement company. You should be working for some dot.com company or another.” But he noticed that he was the only one who was having fun. Today, his friends aren't enjoying what they're doing like they thought they would. And that's because he's out there in the trenches, and he not only has the responsibility to make decisions but also the authority.

CA: But I'm assuming that you've heard from other cement companies and other industries that this is an issue for some.

MB: Yes, but for us it's anecdotal. I know of some who feel they really have a serious problem, but we just don't share that. I think it's really important that we bring people in and do two things: give them a real job, and train and educate them. If we do those two things, we're not going to have a higher attrition rate than any other industry.

The one thing that I require of our people when they go out and hire young college graduates is that they come into our company with a real job. They may start out in a training program but not one that lasts any longer than it takes to understand the ins and outs of working for TXI.

CA: What are some of the latest cement and concrete promotional efforts that PCA is putting into place?

MB: I can tell you where my focus will be as the new chair. I'm going to focus on refining what the PCA is doing in promotion and marketing, not defining it. A lot of work went into putting together a marvelous program for promotion of cement and cementitious products. I'm going to continue to put an emphasis on paving, commercial building, and residential markets. What I want to do with the membership is take this marvelous promotion program and refine our relationship with local promotion groups.

We need to take this well-thought-out program to the grass roots level. We need to evaluate our current efficiencies, coordinate with state and local marketing groups, and be as effective as we can be. In order to do that, we're going to have to obtain more sweat equity at the local level. I don't believe we need to put any more money into the programs; that's already there. We need to be more effective. Our national PCA dues and the amount of money we spend in local dues and investments are about equal. So we need to make sure that this program is driven as close to the customer and decision makers as possible. That's the direction I believe is natural for us.

Working toward this goal has paid off quite handsomely so far, and I believe we can do better with more buy-in at the local level. Like any association, this association will be most effective if it's able to communicate from the national level to the local level, and we end up with a concerted effort to reach mutual goals.

Another thing we've done is to set clear goals and objectives, have timelines to accomplish those goals, and monitor our progress frequently. That's not new, but I sure like it.

CA: Are you getting a sense from the membership that all the plant upgrades and expansion may not be running at capacity in the months and years to come with the way the economy seems to be turning?

MB: It's unfair to answer that question without saying that the events of September 11 have caused increased concern. Because we are facing these uncertain times, companies and our association will certainly evaluate contingency plans in the event that our economy becomes softer and we see significant decline in demand for our product.

However, I will make the argument that now is the time for us to increase the time, effort, and energy that we put into promoting and marketing our product. I will advocate within the PCA and my company that we not retreat. Instead, we should be more aggressive in our promotions and marketing programs.

CA: Ultimately, how will September 11 change our industry in the long run?

MB: That's just something we won't know until it happens. I believe that in the United States, we will pay attention to following long-term goals and objectives, as we will in the PCA and TXI. We will be tempted to establish short-term goals that aren't in concert with our long-term goals, but we'll only be tempted. We will overcome that and stay the course, and when we do that we'll be stronger than we were prior to the horrible September 11 terrorist action.

CA: I saw a tape of Donald Trump recently discussing constructing a new building on the site of the World Trade Center, and he specifically mentioned concrete as something that would have to be used to build something stronger and safer. That's a strong endorsement.

MB: I was just talking about this with someone yesterday, and we don't want to appear to be taking advantage of a terrible situation, but we're already involved in making sure that we promote concrete as stronger and safer. Because whether you like Donald Trump or not, he's right. There are application for concrete that are superior, and we're going to follow through on that reality.

CA: There's been a lot of talk lately about slag cement lately with the formation of the Slag Cement Association. Where do you see the role of supplemental materials today?

MB: I think the role of supplemental cementitious materials hasn't changed significantly in the last 29 years I've been involved in this industry; the names have just changed. It makes a lot of sense to use supplemental materials rather than waste them. If they have cementitious value, they're going to be used, whether it's fly ash or granulated blast furnace slag or whatever they might be. We'll see a growing use of these products as we move forward because recycling makes sense.