Chattanooga-based Propex, a synthetic material and carpet backing manufacturer, has hired a new chief amid slow housing starts and rising oil prices.
Michael Gorey, new president and chief executive officer, said he has a history of taking parts of struggling businesses and making them successful.
The self-described "roll-up-my-sleeves CEO," known at Bridgestone as "Mr. Fix-it," arrives on the scene at what could be a turning point for the company, which has labored to create lines of business with its existing assets after Wayzata Investment Partners bought the company out of bankruptcy two years ago.
Gorey helped Firestone deal with problems stemming from the Ford Explorer tire recall, and brought Bridgestone's North American consumer tire business to profitability for the first time in 21 years amid the recession in 2009, he said.
"I think there's a lot of infrastructure demand globally, and I think that Propex can participate very successfully in meeting those needs," Gorey said.
Propex's carpet backing business once boasted $500 million in sales, according to Kemp Harr, publisher of Floor Focus Magazine.
But Harr estimates the company's carpet backing business brings in revenue today closer to $75 million, and rising oil prices add directly to the company's cost of materials, which rely heavily on polypropylene.
"Propex has obviously been through a lot with the bankruptcy and the change in ownership, and a less than successful 2010," Gorey said. "But we're starting to make strides in the right direction."
The company has struggled to find its niche after a flurry of business moves in the mid-2000s.
Before 2005, the company made its money selling carpet backing material to industry giants such as Shaw Industries and Mohawk Industries, among others. But over a two-year period, Shaw and Mohawk bought their own carpet backing operations from Propex and SI Corp., respectively, curtailing their need to buy carpet backing from Propex.
Beaulieu of America already made its own carpet backing, and therefore also was not in a position to buy the quantity of carpet backing from Propex needed to sustain its operations.
To compensate, Propex purchased the remaining, non-carpet backing assets of SI Corp. in an attempt to diversify, but the 2006 sale came at a bad time.
"There was a significant debt following the purchase of SI's geosynthetics and concrete businesses by Propex," said Randy Powell, executive vice president for operations. "Then the credit crisis hit, and they couldn't refinance that debt."
New home sales, a primary driver of carpet sales, began to fall in 2007 and have yet to rebound. The company filed for bankruptcy in 2008 and was purchased by the Waysata, Minn., investment group in 2009 with a renewed interest in non-carpet products.
Propex then began leveraging its excess carpet backing production to ramp up production of geosynthetics, which help with erosion control, as well as everything from automobile airbags to concrete-strengthening fibers.
The company has five product divisions of which carpet backing is but one. Others are geosynthetics, home construction products, concrete solutions and hard synthetics for use in luggage and other products.
Though housing sales have lagged and oil prices peaked at $145 a barrel in July 2008 and have been on an upward trend in the $110 range the past two months, the company continued its push to diversify into other markets.
Ralph Bruno, executive vice president for global sales and marketing, has "done a nice job of distilling the products into logical groups," Gorey said, and the company will likely continue that strategy globally.
The new CEO plans to continue pushing Propex's products overseas, as a way to stabilize the company and build "a solid foundation to position the company for purposeful growth," he said.
"With global growth, there are going to be opportunities, even in carpet backing," he said.
Contact staff writer Ellis Smith at email@example.com or 423-757-6315.