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Outlook 2013: Versatility brings SI Group through tough times

Saturday, February 16, 2013
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The SI Group Headquarters on Balltown Road in Niskayuna.
Photographer: Marc Schultz
The SI Group Headquarters on Balltown Road in Niskayuna.

— Braving tough economic conditions is nothing new for a company like SI Group.

The Niskayuna-based manufacturer of chemical intermediaries has weathered market tumult for more than a century. Even the Great Depression did little to slow the progress of the company originally founded in Schenectady by W. Howard Wright.

While other industrial companies were struggling to stay afloat, Wright’s business was holding tight. Wright’s foresight and the versatility of what was then called the Schenectady Varnish Co. allowed it to emerge from the nation’s worst economic crisis without having to lay off a single worker.

Likewise, in recent times, the ability of the SI Group to diversify its business model and foresee market indicators in advance of the global recession has helped it successfully emerge from the down economy. The family-owned private corporation actually saw its gross annual sales nearly double — from $1 billion in 2005 to $1.8 billion in 2012.

“No company is immune to the economy, certainly,” said Stephen Large, SI Group’s outgoing president and CEO. “But we didn’t let it define us.”

Today, SI Group employs roughly 2,000 people at 20 sites in 11 countries across the globe. Locally, the company employs 350 workers between its Niskayuna headquarters and its manufacturing plant in Rotterdam Junction.

Widespread usage

To trace SI Group’s resilience in the marketplace requires an understanding of the global application of the products it produces. Chemicals manufactured by the company are almost ubiquitous in everyday life — from car tires to sunscreen.

SI Group’s emphasis on research has allowed it to diversify its products. And the investment the company has made in production facilities has allowed for it to be positioned close by the businesses that rely on its products.

“We’ve invested heavily in our global facilities, technology, operational processes, and people,” Large said. “We believe that these investments, combined with continued improvements in the economy, have positioned us well for continued growth.”

Phenolic resins produced by the company are found in roughly 90 percent of the tires produced in North America. These same chemicals are used in a variety of belts and hose, helping rubber to bond with steel fibers.

These same resins can be found in other rubber compounds, such as ones that are molded. For instance, the easy-grip handle often found on kitchen utensils are made using SI Group resins.

Other phenolic resins are employed for industrial uses, such as grinding wheels and friction products, like sandpaper. These heat-resistant resins are also integral in the production of brake pads and clutch facings.

Adhesive resins are used to bond rubber soles to running shoes or in the production of duct tape or other rubber-based products. They’re also instrumental in connecting rubber to metal for automotive parts.

SI Group’s alkylated phenols are used as lubricant additives in engine oil, gasoline and diesel fuel. They’re also commonly found in the packaging of consumer goods, because they add both flexibility and protection from ultraviolet rays.

Surfactants — compounds that lower the surface tension of a liquid — produced by the company are used in a variety of cleaning agents to dissolve dirt and stains. And they’re used in oil drilling because they can markedly increase the production of a well.

Engineering plastics made by SI Group are capable of mimicking the function of several metals, such as bronze and aluminum. But the plastics are much lighter, cheaper and easier to handle, making them ideal for industrial machinery, automobiles, medical equipment and even appliances.

Specialty products produced by the company are used to provide chemical-resistant coatings that prevent food products from reacting with cans. Other chemical intermediaries are used in the production of sunscreen because they help block the sun’s harmful rays.

“So many common items in your house or in your life are made with products from our company,” said Brooke Manrique, a company spokeswoman.

Formed in 1906

SI Group’s rise to prominence started with the chemical genius of Wright, a Union College graduate who worked as the chief chemist at General Electric Co. The protective varnishes he developed to coat wires in electric motors and generators became so widely used by the company that the in-house operation couldn’t sustain the demand.

Wright and two other General Electric workers decided to start Schenectady Varnish Co. in 1906, with the goal of supplying their former employer. The new bushiness landed on Congress Street in the city’s Mont Pleasant neighborhood, in a location near the New York Central Railroad and with plenty of land to expand.

The company under Wright rapidly expanded, growing to employ more than 50 people by 1925. Wright also pioneered ways to make varnish from petroleum rather than extracts from leaves.

This switch revolutionized the varnish industry and gave the burgeoning company the strength it needed to withstand the crash of 1929 and the Depression that followed. While other companies in the region were laying off massive swaths of workers, Schenectady Varnish made it through the Depression without having to reduce its workforce at all.

By the 1940s, the company had diversified into producing so-called chemical intermediaries — compounds used in different manufacturing processes. By the early 1950s, ground was broken on a new production plant along the Mohawk River in Rotterdam Junction.

Wright’s son, Henry, took over as chief executive officer in 1959, touching off a period of expansion both domestically and overseas. By 1962, the company was renamed Schenectady Chemicals to better reflect its products.

Wright also saw the need to carry on the research his father had pioneered earlier in the 20th century. He authorized the construction of a new research facility in Niskayuna, which was completed in 1968.

Rapid overseas growth would put the company on five continents and helped cement the adoption of a more worldly moniker in 1993: Schenectady International. Wright died in 1995, leaving the company in the hands of his son-in-law, Wallace Graham, who continued overseas expansion.

Graham also moved the company headquarters and all of its operations out of the city where they were located for nearly a century. Under his stewardship, the company constructed a $7 million expansion at the research facility to accommodate its base of operations.

Graham also presided over the company when it hired Large, its first leader from outside the Wright family.

Large, who had worked at a Minnesota-based resin company, was brought on in 2007, the year after the company changed its name to SI Group during its centennial celebration.

Large quickly began restructuring the company, consolidating two divisions and forming an executive leadership team. The change eliminated nearly two dozen jobs, but came just as the national recession was starting to grind global business down to a trickle.

“The crisis was real and severe,” Manrique said.

The company responded to the economic turmoil by reviewing its cost structure, looking closely at variable and fixed expenses.

Large also implemented a five-year strategic planning process aimed at restructuring around seven key market segments and challenging the company’s leadership to identify other internal efficiencies.

The plan helped SI Group acquire three businesses, including facilities in China, Brazil and India. It also spurred an aggressive expansion in China.

In 2010, the company announced it would spend $35 million to help boost production capacity in China and reinforce its position within the region. A $30 million facility broke ground in Nanjing last year and should be completed in May.

“We have continued to do well financially in these difficult economic times and are very well positioned to capture future growth opportunities wherever they are around the globe,” said Bill Scheffer, vice president of SI Group’s North America division.

To read all the stories from the 2013 Outlook special report, click here.

 
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