First Merlotti Says He Will Listen

October 11, 2002
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GRAND RAPIDS — Listen, learn and then act.

Those are the steps Frank Merlotti Jr. plans to follow in his new role as head of Steelcase Inc.’s North American operations.

On the agenda for Merlotti’s early tenure at the office furniture maker is a period of reaching out to and learning from Steelcase employees, suppliers and dealers as he helps to formulate a strategy for the company’s rebound from a downward spiral that has pushed revenues down by 36 percent from two years ago, resulting in thousands of job cuts, plant closings and repeated financial losses.

“My first 100 days are going to be mostly in a listening mode with dealers, suppliers and employees,” said Merlotti, who assumed the presidency of Steelcase North America on Sept. 30.

“They’re going to help me understand and they’re all going to come at it from different perspectives,” he said. “I think it would be dangerous for me to walk in with a lot of preconceived notions about what we should do and how we should do it.”

Merlotti succeeds Steelcase’s former North American president, Robert Ballard, who retired late last year. He is responsible for overseeing all aspects of a business segment that, as of the most recent quarter, generates 80 percent of Steelcase’s revenues.

Merlotti has more than 15 years of experience in the industry, serving more than eight years as president of the Steelcase subsidiary Metropolitan Furniture and then as CEO of G&T Industries Inc., a Grand Rapids firm that supplies foam and soft-surface materials for office furniture manufacturers.

In announcing Merlotti’s appointment last month, Steelcase President and CEO James Hackett cited his success in developing a product portfolio at Metropolitan Furniture that helped to improve revenues and profitability, as well as his ability to transform G&T Industries and improve performance there.

“Frank’s understanding of Steelcase’s vision, his ability to implement strategy and his track record in achieving superior results make him the right choice,” Hackett said. “As part of my leadership team, Frank will infuse energy throughout our North American business, helping the team manage through this downturn so we are well prepared for an economic recovery. He knows how to unite people around a common vision and excel in times of continued change. This will enable us to advance our strategy while exceeding our customers’ expectations.”

After hearing input from employees, suppliers and dealers, Merlotti will put together a plan for the North American division for implementation early next year, he said. While it’s too early to gauge any potential changes that may occur, including within the organizational structure, Merlotti is committed to making the changes he identifies as needed.

“If they’re there to be made, we’ll make them,” he said.

Among his goals is speeding up the process for developing and bringing new products to market. Merlotti said he’s also fully committed to Steelcase’s “AFT” strategy of developing products that integrate office architecture, furnishings and technology to help people work more efficiently and effectively.

“The overall umbrella is entrenched and I’m committed to it,” he said. “I’m coming in very much in support of the direction of the company.”

While much of his work will focus on positioning Steelcase for an economic rebound, Merlotti said he isn’t dwelling on the industry downturn that has seen industrywide sales plunge 32 percent from $13.2 billion in 2000 to a projected $8.9 billion for 2002 — a sales level that was last seen in 1994.

Midway through its 2003 fiscal year, Steelcase has experienced a 23.3 percent sales decline, to $1.3 billion, from year-ago levels. Sales are off 35.8 percent from two years ago, just prior to the beginning of the slide.

Steelcase expects a quarterly sequential increase in sales for the current third quarter, to $630 million, although it expects to post a pre-charge loss of $7 million to $15 million. The fourth quarter of FY 2003 is expected to come in at between break-even and a loss of $7 million.

“I’m not too worried about the economic landscape. It is what it is,” Merlotti said. “This too will pass.”

There’s still nearly $9 billion of business available for office furniture makers to compete for, he said, and “you basically have to go after the business that is there.”

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