Corning Inc. president looks beyond recession

Like most companies, Corning Inc. felt the affects of the worldwide recession.

A decline in sales in the specialty glass components Corning Inc. makes forced the Fortune 500 company to make adjustments beginning late last year to stabilize its bottom line and prepare for uncertain market conditions.

Those changes included installing cost controls that resulted in layoffs, decreased spending in capital projects and a reorganization in management in some of its businesses.

However, Corning Inc.’s solid financial standing going into the recession has allowed it to weather the downturn better than most of its competitors. And, according to Peter Volanakis, company president and chief operating officer, the recession has actually created opportunities for Corning Inc. that could make it stronger in the future.

Volanakis was named president in 2007 after steadily climbing through the management ranks since joining the company in 1982. He recently discussed with The Leader some of the dynamics of the innovative glass-making company, the challenges facing it and what the future may hold for the area’s largest employer. 

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The company had a good second quarter, where sales rebounded more than 40 percent; to what do you attribute the success of the last few months?
“Three things. I think first of all was the tremendous performance across Corning in cost reduction, inventory management, spending control and capital spending control.

“We’ve been pretty transparent about all of the things we have been doing. We actually started planning for this last November, and implementing, basically everything was done by March. But basically, the discipline that was instilled is really remarkable.

“The second one is the earlier-than-expected recovery in the display business. I mean the supply chain recovery because retail has been strong all along.

The third thing is China. About 40 percent of our above plan performance is China. And there’s really three industry segments affected there by Chinese stimulus programs.

The first is display. The second thing is cars. They did two things there, they reduced the tax on new car purchases by half and, in rural areas, they had subsidies for the purchase of cars. Third thing is they’re building out a wireless network and that is resulting in a very large demand for fiber and cable.”

What if China wasn’t so strong in your particular markets?
“It wouldn’t be a disaster. Our performance would not be as strong in the first half as it had been. We do expect that to continue for the second half of the year in China as well. We expect to continue buildout in the telecom networks, we expect continued incentives on cars and there is no let up in the demand for LCD TVs right now in China.”

What will it take to achieve the target of $5 billion in sales this year and what are some of the challenges the company will face in the second half of the year?
“The first half we were almost exactly half way to that $5 billion, so what you would have to assume and believe for the second half is the display business will remain very strong and the concern there is what happens in the fourth quarter. You generally have a build up for the strong retail that is expected around Christmas and early in the new year ... the question is, will they over-build as they have in prior years or is the current glass shortage and is retail demand so strong that that won’t happen again? We’re optimistic that there will be more moderation this year. So we think there is more likely than not to be a continuation of trends we’re seeing now in display.”

Corning continues to invest heavily in research and development, so what are some of the more promising inventions they’ve come up with?
“The next big move in display is our Gen 10 glass. The factory starts up in full production in Japan in October. It is co-located with Sharp in Shiki City. It is the largest single LCD manufacturing complex in the world. There’s about $10 billion to $11 billion invested by Sharp and other suppliers, and we are there with our glass production facility which is directly connected to Sharp’s facility.

With Gen. 10, the panel of glass is even bigger than before?
“It is 60 percent larger than Gen 8. It is 10 feet on a side.”

What other new products are there?
“Gorilla Glass. It didn’t exist two years ago. It’s a new function. We have about 30 products with 10 major brands. The business began for small hand-helds, it is now migrated to laptops as a protective element.

Green lasers, aluminum titanate is a new material to the world used for diesel filters, our new fiber-to-the-home activities are progressing ...”

A lot of things, huh?
“We are actually trying to launch as many new products right now while our competitors are in a weakened condition. This is the time when you gain competitive advantage. So a crisis is good for two things. One is it forces us to be better on cost and inventory. Second, it is a good time to be launching products because many times your competitors are pulling back.”

Is it correct that the management changes in the diesel business the company rolled out recently were probably going to have to happen anyway despite the recession?
“Yes. They were driven by the recession but it was also driven by the fact that our spending on (research and development) in that area was really, really high. We felt we weren’t doing it as effectively as we could.

If you look at our likely revenues for this year, they are about one-third smaller than they were in 2007. Then looking forward over the next five years, it looks to us that our revenue plan that we did for last year, and we redid it for this year, looks about 20 to 30 percent smaller. So those two things compel us to do something different.”

The school district has proposed another facilities plan. Do you foresee the company expanding its role beyond being the largest tax base in the district?
“We haven’t talked about this amongst ourselves recently. Just speaking for myself now, it seems like the proposal that’s been put on the table is very logical from a financial point of view, given that the community is not growing. We have too many roofs; the taxes are quite high. So how do you get better facilities without having a big tax liability put on the community? I think they’ve got a very logical proposal out there. Now, I’m just speaking for myself, not for the company.”

So you don’t foresee the company buying up the old school buildings?
“Actually, we haven’t talked about it so I can’t even give you a reading one way or the other.”

What’s one thing you’d like to emphasize to Corning Inc. workers?
“First of all, we are No. 1 and No. 2 in every business that we’re in. We have not pulled back on R and D, we’ve refocused it somewhat to things that can really generate revenues in the next couple of years. We have a very strong balance sheet. We are committed to Corning, New York, as our headquarters. We have arms and legs scattered throughout the world, but the brain is here, in particular the core of R and D.”

Is there something you’d want to emphasize to the public?
“I’d say the same thing. This is our home. We’re a very healthy company. We’ve got great businesses. Once we get out of this recession, everything else will improve as well.”