Louisiana-Pacific Reinvents Itself To Stay Competitive

The balcony outside Patrick “Patch” Bonkemeyer’s office looks down on a manicured forest of waterfalls, flowing streams and deciduous trees.

The indoor plot of land, more than an acre, is ringed by the 41,800-square-foot Northwest Region headquarters of LouisianaPacific Corp. in Hayden Lake.

Bonkemeyer, L-P’s Northwest Region operations manager, is part of the sharp-pencil set that has taken the helm at the international wood products company. He seems a world apart from the business philosophy that built this sprawling monument to what he calls “the old L-P.”

Of the interior arboretum, he jokes,”I think we should clear-cut it and put in more offices.”

But more offices are not what L-P needs.

The man with the sharpest pencil of all - Chairman and CEO Mark Suwyn - was hired last year to implement a reorganization plan that called for selling $1 billion in “nonstrategic assets,” reducing the work force by more than 3,500, closing mills and consolidating regional headquarters like the one in Hayden Lake.

Twenty administrative workers were transferred from North Idaho to L-P’s corporate headquarters in Portland in October. Up to 80 more positions are scheduled for consolidation, leaving only about 30 administrative jobs at Hayden Lake.

“Do we sublease parts of that building or do we consider selling it to another operation? Those are all things we’re wrestling with,” said Suwyn, who agreed with Bonkemeyer that architectural extras like arboretums have no place in the new L-P.

“We all have a much more practical view of life,” he added, referring to an executive team mostly newly formed within the past year. “We understand that this is the shareholders’ money we’re dealing with here and we better be careful with it.

We can’t afford to do things lavishly.”

Bonkemeyer’s main interest is not office aesthetics, but getting more finished lumber out of each raw log in the safest manner. “Whether the presence is in this building or in a leased office down the road, it doesn’t really matter to me. I’ll let the real estate guys figure that out.”

Chris Paulson, who handles real estate matters for L-P in Hayden Lake, said the headquarters building has not been added to his inventory. He does, however, have a growing list of other local properties to sell.

This year, L-P placed the site of its 33-acre former sawmill in Post Falls on the market for $6.5 million, but got no acceptable offers in a sealed-bid auction. The company is about to list its aircraft hangars at the Coeur d’Alene Airport and plans to also list the vacant sawmill site in Priest River, and the adjoining building that housed a finger-jointed stud plant, which assembles scrap-sized pieces of wood into dimensional lumber.

Three L-P mills still run a total of seven shifts in North Idaho. That’s where the remaining 300 local jobs can be found, and, Bonkemeyer said, that’s also where the future of the Northwest Region lies.

“We shut a lot of mills down and people got the wrong impression that we were slowly pulling out of the area,” he said. “But L-P is committed to being in the building products business. And if you’re going to be in that business, you’ve got to be up here. We’ve got to maintain a regional presence.”

Rick Jemison saw the “wrong impression” in action this summer when L-P officially closed its oriented strand board plant at Chilco. The random-length sawmill next door still is in operation.

“A lot of my close friends and relatives assumed I was out of a job,” said Jemison, who was named plant manager both for Chilco and the planing operation in Sandpoint.

In Chilco, Jemison oversees work in the big yellow box of a building that has become more mechanized as L-P seeks to improve efficiency through automation. A network of steel catwalks seems to move in time with the equipment beneath it as logs ride the production line to be debarked, cut, sorted and stacked for shipment to Sandpoint.

“Once you’ve been in a mill long enough, you can walk across the floor and tell (by the sound) if there’s a problem,” Bonkemeyer yelled over the rumble of wood across metal. “There’s a pitch and a vibration to the thing.”

Chilco produces “well in excess of 100 million board feet of lumber” a year, Bonkemeyer said, declining to be more specific for competitive reasons. The L-P stud mill at Moyie Springs produces about the same.

There are now 85 employees at Chilco, roughly two-thirds the number working there before an automated “J-sorter” was added at the end of the production line.

The machine uses electronic sensors to determine the length and width of passing boards, dropping them into the appropriate stacks as they move along the “green chain.”

“You look at something like this and it probably did away with 25 jobs,” said Bonkemeyer, who spent 20 years in paper mills before coming to L-P. “But by this kind of upgrading, we probably saved all of the other jobs in the mill.”

It was rumored last year that the Sandpoint planing mill would be folded into operations at Chilco. Suwyn said merging those plants would save on trucking costs, but the price tag is too high now.

Said the CEO: “That’s something I’ll be looking at every year and asking, ‘If I spend new money on this consolidation, will I make enough on return for it to make sense?”’

In Sandpoint, unfinished lumber trucked in from 35 miles south is unstacked and restacked with spacers between the boards before the wood is sent to one of five dry kilns.

“On any given day, we mirror the production at Chilco,” Jemison said. “The average is about 250,000 board feet a shift.”

Tom Lund, L-P shipping superintendent at Sandpoint, said the amount of wood leaving the planing mill now is about half the total when both Priest River and Chilco sent lumber to be surfaced.

“We used to have two mills supplying this place and our record shipment for a month was 23 million feet,” he said. “You can’t even imagine that anymore.”

As part of L-P’s reorganization, most shipments are now sent directly to regional home center chains like Home Depot, Lowe’s and McCoy’s. Lund administers an “adopt-a-customer” program through his Sandpoint shipping office, sending L-P workers to home centers to compare products with competitors.

“We’ve chosen two of our more prominent customers and we send employees who actually do the stacking and grading to visit them,” Lund said. “It used to be that as soon as you let go of a piece of wood here at the mill, you felt like you were done with it. Well, that’s not the case.”

Suwyn calls the approach “learning to work from the customer back, instead of from the tree forward.”

A few miles north of Bonners Ferry, the L-P stud mill at Moyie Springs is the last self-sufficient sawmill in the company’s North Idaho lineup. The mill added a third production shift last fall and now employs 140 people - its highest level of employment ever.

Plant manager Doug Flory started on the green chain here at age 19, almost a decade before Louisiana-Pacific came into existence. Thirty-two years later, he is going into his second decade of running the place.

“This mill has brought up my family,” Flory said. “I have four sons and all four of them log for this plant.

“Even when the market was depressed in 1995 and all the mills were shut down, we were running one day a week to keep people working,” he added. Where the Chilco plant is a timpani filled with industrial thunder, the Moyie Springs mill is a snare drum alive with the clatter of boards. Here too, they are pulled from a yard stocked with approximately 12 million feet of logs, enough to last the winter and on through spring breakup. But these are smaller trees, in diameters that wouldn’t have been bothered with 20 or 30 years ago.

“That’s where we’re fortunate,” Flory called out, his hands forming a small circle as similar-sized logs rolled by to be cut. “We like those little fellas. We run about 11,000 of them through on each shift. And they’re still available.”

Availability - or lack of it, depending on who you ask - has forced companies like L-P to do more with less in an increasingly competitive environment. Stefany Bales, communications program manager for the Intermountain Forest Industries Association, said that’s particularly true in states like Idaho, where 44 percent of the timber is publicly owned.

“As the resource becomes harder to get your hands on, the folks who are still in business have to be state-of-the-art in mill technology and harvesting techniques,” she said. “The folks who have been largely dependent on public timber are going to have to re-evaluate the way they do business.”

Doug Flory, who has as much seniority as anyone in the company, understands the need for new technology. His mill is now “full of PCs,” he said, though the Moyie Springs sawmill was turning out more than 100 million board feet a year with only two shifts and no computers. But Flory doesn’t understand how he can be virtually surrounded by trees while being told supply is drying up.

Suwyn said L-P’s Northwest Region will remain viable as long as he can feed wood to the mills. With the U.S. Forest Service as the region’s largest owner of that wood, viability depends on decisions made at the federal level, he added.

“Just look around here,” Flory said from his perch overlooking the canyon that cradles the confluence of the Kootenai and Moyie rivers. “There’s timber everywhere you look. I don’t know, I just have a feeling the future of this industry is going to be here in the Northwest.”

, DataTimes ILLUSTRATION: Color Photo Graphic: Louisiana-Pacific mills

MEMO: Two sidebars appeared with the story: 1. L-P jobs Three years ago, Louisiana-Pacific Corp. was one of the largest employers in North Idaho’s timber industry. Reorganization within the company and regional growth among its competitors has placed L-P farther back in the employment pack. Louisiana-Pacific 300 jobs; 3 North Idaho mills 1.5 million acres of timber in eight states Idaho Forest Industries 400 jobs; 3 North Idaho mills 80,000 acres of timber, primarily in Idaho Crown Pacific 437 jobs; 3 North Idaho mills 800,000 acres of timber in four states Potlatch Corp. 735 jobs; 3 North Idaho mills 1.5 million acres of timber in three states

2. Company profile Louisiana-Pacific Corp. was formed in 1973 as a spinoff of Georgia Pacific Corp. The company owns 1.5 million acres of timberland and operates facilities in 29 states, as well as Canada and Ireland. L-P had sales of about $2.5 billion in 1996. Sales for the first nine months of 1997 were about $1.8 billion, down 6 percent compared with the same period a year earlier. At the beginning of 1997, L-P employed 13,500 people worldwide, with about 12,000 employees in the United States. Employment in North Idaho has gone from a 1994 peak of about 550 people at six production sites to 300 workers in the three remaining facilities at Chilco, Sandpoint and Moyie Springs. L-P plans to consolidate some regional offices into its main headquarters in Portland. In mid-October, 20 administrative positions were moved out of the Northwest Region office at Hayden Lake in the first phase of reorganization there. L-P closed 22 plants and sawmills in 1996, leaving 101 in operation at the end of the year. The company shut down three additional sites in 1997, including the oriented strand board plant at Chilco. Over the next year, L-P plans to sell $1 billion in “nonstrategic assets,” reduce its current work force by more than 3,500 jobs, continue the consolidation of regional offices and focus on developing its building products divisions. -David Gunter