A Lumberman Goes Against The Grain
Most people in the forest-products industry were horrified when the Clinton ticket won the day last November. If the northern spotted owl could cause problems with a friend such as George Bush in office, they reasoned, what would happen when someone dubbed "Ozone Man" was running around the White House? The kind of environmentalism championed by Vice-President Al Gore raises hives among lumber people. They blame such thinking for choking off their lifeblood: the old-growth forests of the Northwest.
Not Walter C. Minnick, the 50-year-old president of TJ International Inc. He's a supporter of both Gore and President Clinton. TJ, a $400 million wood-products company based in Boise, Idaho, has figured out a way to turn strips of wood into I beams every bit as strong and true as the lumber cut from an ancient tree. TJ's products tend to cost more. But as government restrictions on harvesting send the price of lumber soaring, TJ is poised to boom. "We represent the supply-side response to the spotted-owl problem," Minnick says.
'ENCOURAGED.' Ever since he arrived at the former Trus Joist Corp. in 1974, Minnick has been a renegade. Not only does he oppose the way federal timber is sold to lumber companies (he contends it is a subsidized resource), but he also is a longtime member of the Wilderness Society and wants to preserve more forests.
Minnick has served on the society's governing council since 1990. His fellows there include several nominated for Clinton Administration posts, including George T. Frampton Jr., picked for Interior Assistant Secretary, and Jim Baca, slated to head the Bureau of Land Management. Alice M. Rivlin, another fellow member who's now Deputy Director of the Office of Management & Budget, served for two years on TJ's board. "I'm encouraged," Minnick says. "The proponents of change are now in control."
Some critics charge Minnick is simply out to make money. TJ doesn't grow its own trees or buy timber from the government. Instead, it buys wood strips and forms them into building products. "I don't really view Trus Joist as a member of the forest-products industry," snaps Richard B. Parrish, vice-president for wood products at Boise Cascade Corp. "It's easy to take an environmental stance when they have no dependence on public timber. I don't think it should be cloaked in holier-than-thou statements about the environment."
Minnick says that his record on environmental activity speaks for itself. "I'm not a hypocrite," he says. "I don't have to be." TJ's products, he insists, are simply an economic response to a diminishing resource: "We and others have developed a way to build houses out of forestry resources that are independent of the spotted-owl forest."
RAPIDS RAFTER. Minnick, in fact, considers himself a devout free-market thinker. That has been the case since he grew up on a grain farm in Washington State and saw how federal subsidies can warp incentives. After Whitman College in Walla Walla, Wash., Minnick spent five years at Harvard University, where he earned both an MBA and a law degree. A longtime Republican, he got a taste of politics when he worked on former President Nixon's White House staff, heading an antidrug program. He quit in disgust after Watergate and headed West.
Minnick's love for nature is just as long-standing. As a boy, he went skiing and fly-fishing with his father. And after leaving the White House, he chose Boise specifically for the outdoor lifestyle. Over the past 20 years, he has taken up backpacking, hiking, and white-water rafting. Along the way, he gained an affection for wilderness.
Since Minnick took over as TJ's president in 1979, sales have grown from $102 million to $400 million last year--with a 13% drop in 1991 due to the housing slump. Breaking in, though, has been tough going. TJ's products are made from strands of wood or veneer cut from small, fast-growing trees. The pieces are laminated together with resins to form structural beams--sometimes assembled in an "I" shape like a steel girder. The process allows a 12-inch board to be made from 8-inch trees. The product is as strong as regular lumber but doesn't warp or suffer from knots or other inconsistencies.
The problem is, depending on lumber price swings, it can cost up to 90% more than the real stuff. And many contractors simply don't want to try something new. As a result, while TJ's products are gaining--even in the face of a difficult housing market (charts)--they still command less than 10% of the potential market, which Minnick estimates at $2,500 per housing start.
STOCK STALL. The spotted owl, however, is changing that. Starting in 1990, plans to protect the bird meant a sharp cutback in the harvest of old-growth trees. During the recession, when housing starts plummeted, that didn't matter so much. But now that the recovery is gaining steam, constraints on the timber supply have pushed the price of lumber up 90% since October. That has narrowed TJ's price disadvantage to about 13%, causing Larry Zarker, a researcher for the National Association of Home Builders, to say: "You could see the market [for engineered wood] explode."
Price increases aren't entirely good news: They pinch TJ's margins in the short term by hiking raw-materials costs. That may be why TJ's stock price rose sharply to top 30 in February, only to stall. Even TJ's rivals, though, are convinced that engineered wood has big potential. Louisiana-Pacific, Georgia-Pacific, and Boise Cascade have all leapt into TJ's market with their own engineered-lumber products. TJ still owns a two-thirds market share, but to guard its position, Minnick in 1991 put his engineered-wood business (TJ also makes windows) into a joint venture with Canada's giant MacMillan Bloedel Ltd., a $3 billion wood and paper company. MacMillan has deep pockets and two promising engineered products of its own. TJ is majority owner and managing partner.
Minnick's hope is that Clinton and the industry will use the upcoming "forest summit" in Portland, Ore., on Apr. 2 to forge the basis for a compromise on old-growth cutting restrictions. That would stabilize the timber supply--probably at a price where TJ could compete--and still protect the forests. Minnick favors federal aid for the countless timber workers and sawmill owners displaced by wrenching policy shifts. "Engineered wood is an example of using technology to help solve a very sharp public-policy issue," Minnick says. In an age of vanishing resources, that's compelling logic.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- Morgan Stanley Says Stock Slide Was Appetizer for Real Deal
- U.S. Stocks Fall With Treasuries, Dollar Climbs: Markets Wrap
- U.S. Pays Up to Auction $179 Billion of Debt in a Span of Hours
- Florida Teachers’ Pension Fund Invested in Maker of School Massacre Gun
- Dollar Extends Gain; Europe Bonds Rise, Stocks Dip: Markets Wrap