One of the engineers at the conference presented a case study of a CHP facility that was built a few years ago for Temple-Inland at its Pineland Lumber complex. I knew the Pineland complex well...I spent a significant part of the 1990's working at the facility. It was a southern pine plywood operation in those days, and it had a chip'n'saw operation that made studs. (Both the wooden kind and the human kind.)
The Pineland mill was a part of Temple-Inland, Temple-Eastex before that, Temple Industries before that, and Temple Lumber Company before that. Temple Industries was the result of a merger between the Temple family's original company, the Southern Pine Lumber Company that was started in Diboll, Texas in 1893, and their expansion venture, Temple Lumber Company, which was started in Hemphill, Texas, and Pineland in 1910.
The picture at the right hangs on my office wall. It's a nice sketch of the old Southern Pine commissary in Diboll that sold goods to the folks of the company town back in the old days. That old building was still right down the street from my house when I lived there in the 90's. The picture below is of some old company money that was issued to workers back in the day, which could be exchanged at the commissary, or out on company lands between employees. These too hang on my office wall.
The Pineland facility has pretty much manufactured just about anything that can be made from southern pine at one time or another. As I mentioned, when I was with the company the big product was plywood, and I learned a lot about getting maximum veneer recovery, producing optimal "lay-uyps" from the different thicknesses and grades of veneer produced, and producing the best combination of plywood bolts and sawlogs from tree-length logs.
But the most valuable lessons I learned at Pineland, and in with working with the other employees of Temple-Inland in Diboll and in places like West Memphis, Arkansas, Thomson, Georgia, and Fletcher, Oklahoma, were about pride of workmanship, whatever your job was; respect for the people you worked with; and the value of a family culture in an organization.
When I started working with Temple-Inland in 1987 as a graduate student at Texas A&M, I immediately related to the East Texas culture of family that pervaded the company. Mr. Arthur Temple, Jr., third generation of the Temples to run the company, was still the chairman of the board of directors, still lived in town, and his presence pervaded the whole community and just about every major managerial decision that had to be made. Many times in my working in the plants I had old-time employees tell me some story about "Mr. Temple" saying or doing something nice for them just while walking through a mill. There was a beautiful "lodge" in Pineland that served as one of Mr. Temple's homes, and later as temporary facilities for company employees who worked in the Pineland mill on various projects; I stayed there many times myself and loved the different rooms, each finished with a different type of wood paneling. The best part of staying at the lodge in those days was that there was an elderly caretaker that made the absolutely best fried chicken in the world, I kid you not. I wish I could remember his name. He was just another of the Temple family that took pride in doing what he did the very best he could.
In the mid-1990's, though, Mr. Temple stepped down from his duties on the board of directors, and I think we all realized that something big had changed. Like a boat that loses its anchor, the culture of the company began to drift, to change into one that placed less emphasis on the long-term sustainability of the company and more emphasis on quarterly, and then monthly, profits and loss. The culture changed slowly from familial competitive to corporate competitive, and there was a difference.
Now I don't mean that as an indictment of the company or the employees. That's just the way it was for us, and how it has been for many companies in the country these days. At first we had a sense that we were going to get smarter, run the plants better, and make better strategic decisions, unencumbered by the old biases that kept us running older plants that had passed their prime. And I think for the most part, that's the way it happened. And as far as I know, the older plants were all kept running, and were upgraded in an attempt to keep them competitive in the marketplace. But the metrics were changing, the hurdles were being set higher, and the whole meaning of business began to change, slowly but surely.
Certainly, the mission of Temple-Inland changed for good when a man named Carl Icahn bought into the company and forced management to divest itself of the company's forestland. Sure, the investors loved the change, because it promised to unleash all the "hidden value" that Mr. Icahn promised was being covered up by the company's global optimization of its resources. Previous generations of Temple employees always understood that the company's land was the foundation for the company's existence, and that by being good stewards of that land, and by utilizing its products as efficiently as possible, the company would be sustained and provide jobs and meals on the table forever.
But modern, distant investors ignore local communities and employee culture in their value equations. And as they change the lens through which management views its mission, the mission itself changes. I was confirmed of this by a web-page header on the Temple-Inland website...
"Our technology-driven, low-cost systems keep our plants operating in the lowest cost quartile, delivering a 37% ROI for 2006."
Sounds like a cozy place to work, huh?
Well, obviously, that web page hasn't been changed since 2007. Lots has happened, probably including the downsizing of the IT department that kept up the web site. The stock price spiked with Mr. Icahn's power play, and then crashed with the rest of the stock market almost immediately. It just recently regained the level it was at ten years ago, as shown by the blue line in the chart below. (The legend at the top is wrong, for some reason...orange line is the total revenue, and blue line is the stock price.) And due largely to the market vulnerability created by the company break-up in 2007, Temple-Inland was forced last year to sell out to International Paper.
The other two lines reveal what modern management is all about. The orange line is total revenue (ignore those two downward spikes, they're data errors). It had increased up to the company break-up, and has fallen since. But the red line, gross profits, has generally increased over that time. There is Modern Management 101...make more profit with less product. Eliminate the less profitable operations, and try not to ignore (too much) the long-term viability of the company.
By the way, judging from the company's stock price being at exactly what it was ten years ago, it would appear that Mr. Icahn was wrong about value being hidden by the company's ownership of the forestland. Big surprise there, that analysts unfamiliar with the symbiotic relationship between ownership of a limited natural resource and profitable production of its products should discount the value of that relationship. It doesn't express itself well on the balance sheets.
They should have listened to the managers who worked for Mr. Temple or his father or grandfather anytime over the previous one hundred or so years. They all understood the relationship well.
But Icahn and his bankers didn't ask, didn't care...they weren't interested in the company, its products, or its people...they just made money, baby. And as a result, Carl Icahn is a bigger star than ever on financial shows, and Temple-Inland is soon to fade away into our country's history...a history when manufacturing still worked and sustained our communities. We hope the new owners of the business, International Paper, retain some of that "boots on the ground" culture. IP has established a reputation for its high business ethics. Let's hope that really means something. If not, some great wood facilities and their employees are soon destined to fade away, as well.