Interview with Larry Powers

Your humble editor sat down last week with Larry Powers, Chairman, President, & CEO of Genlyte Group.

Ed: You report your numbers next week. We are always amazed at how Genlyte consistently beats previous quarters on a regular basis. It must be tough to manage that growth and have the numbers always beat the previous quarter.

Larry: The numbers are what they are. With Sarbanes-Oxley, we can’t manage those numbers. It’s not like we can put additional funds in reserve and save them up for future quarters. We do work hard to improve our business quarter by quarter. Will there be more swings in the future? Yes, there have to be.

Ed: How do we improve education in our industry?

Larry: All major companies need to do everything they can to train and offer education and product knowledge. The industry needs to focus on energy efficiency. We should spend more time and effort and money to accomplish this goal. As an industry we need to focus more on education and less on price.

Ed: What is Genlyte doing to help educate the industry?

Larry: Many, many things. This year we hired a group of lighting designers and engineers direct from school. Actually, we have found it difficult to find qualified people, so we’ll hire them from school and train them internally. We hired a significant number this year. In addition to the lighting designers and engineers, every year we hire ten to twenty young people right out of college in a year long sales training program. They go to every facility and learn everything they can about good lighting. We have been very pleased with this program. It also helps us down the line as we try very hard to hire and promote from within.

We also have major training programs underway at all of our various companies. Lightolier has their Lightolier college for training lighting professionals of all types conducted at their training facility in Fall River, Massachusetts. They also have a very sophisticated on-line training program for lighting professionals over the internet. We are currently constructing a new training facility in Tupelo, Mississippi for our Day-Brite Capri Omega brands so that we can bring lighting professionals to this facility and train on the benefits of good lighting. Our new San Marcos, Texas facility has an outstanding training facility for HID Outdoor lighting. We put training as a very high priority at Genlyte.

Ed: Do you have big Lightfair this year?

Larry: Yes, we are planning Lightfair now. We always come out in full force for the New York show and we are planning full participation and will have many new products.

Ed: Do you agree with me that we are the worst industry at marketing?

Larry: Absolutely. There is an overall lack of marketing in the industry. Part of this is caused, in part, by our channels to market. For example, some reps—and we love reps at Genlyte, really, many do a tremendous job—but some reps don’t want to do the necessary work. They don’t want to call on the specifiers, the contractors, the distributors. It’s too much work. They want to quote price and delivery. There is way too much value engineering in our industry. This is what messes it up.

When the job gets substituted with ‘equal or better’ lighting—it usually ends up being an inferior product. So the end user gets lower quality and many times that price reduction does not get to the end user. Someone else puts that money in their pocket. We all need to do a better job of marketing quality lighting in our industry to not only lighting professionals but also to contractors and consumers.

Ed: What is the significance of industry organizations:  IESNA, NEMA, NECA, IALD, NAILD, etc.

Larry: They are all somewhat relevant. The NEMA lighting board is somewhat effective but could do more. They do a good job with codes and government regulations. The stronger these organization are, the more influence they exert, the better our industry. If IALD does their job, and their members hold their specs it is a good thing for everybody. Many of the substitution-type fixture companies don’t like those organizations. If you hire a lighting designer to do a job, then you need to respect what they recommend and be willing to spend some money to do what they tell you to do. Why allow a contractor or third party to sub the spec and say they do a good job? That’s a bunch of crap.

Ed: Tell us about your strategy of decentralization. As you know, your large competitors are much more centralized.

Larry: Well it works for us. The brands compete with each other to some degree. Lighting is a very broad-based industry. If we tried to run a top-down business it would not work. We do not want to drive product development down thru the organization. It is too difficult to do this in an industry as broad as Lighting. For example, designing chandeliers and floodlights take different types of engineers. We want to let our engineers that are closest to the market, closest to their customers, fill the needs of their market. We believe that it is more effective in the market. Of course we have a higher cost of doing business this way; we have sixteen general managers, sixteen controllers, 16 of everything.

Ed: Do the brands compete against each other on price?

Larry: No, absolutely not. They do not compete against each other on price. This is our corporate philosophy. For example, Frank Austin runs our national accounts group for Thomas, (Day-Brite, Capri, and Omega) and we have a national account team in Fall River for Lightolier. They won’t go after each others’ customers. If a customer goes to both of them, they will price it out and coordinate the pricing. We want to compete with our competitors, not each other.

Ed: There have been a few ballast price increases lately. Are they important in helping luminaire manufacturers increase prices?

Larry: Yes, they are important, but can only go so far. There are a huge number of complete products coming from China with ballasts. It works so long as there is not too much price disparity between the US and China. If ballast prices are up in the US but not in China, we won’t be able to support these component increases. Some distributors are now sourcing product direct from China themselves. This is counterproductive.

The price increases seem to be holding now because business is strong and conducive to price increases holding. However, if the market falls, look out.

Ed: Do you see any real threats in the market place?

Larry. Not really. We constantly watch our competitors. There are always concerns out there, but we do not see any real threats that we have not planned for.

By the way, we believe we are now second in market share. Our sales were $1.252 M last year before the JJI and Strand acquisition. Second is a nice place to be, but while market share is important, we tend to focus more on margin.

Ed: Why JJI? I was surprised, because I do not know what JJI brings Genlyte?

Larry: Are you kidding? JJI is an excellent company. It gives us some great niche companies which have the ability to affect specification businesses and we like specification business. Look at Alkco, they have been a leader in undercabinet lighting for many years. JJI is a very nice group of companies.

Ed: We heard a rumor about that acquisition on 11 MAY. . .

Larry: . . .and you couldn’t confirm it could you?

Ed: Right, no one would confirm, so we held the story until it was released.

Ed: When you do your strategic planning, I assume you are looking at least three to five years out. How do you write a plan for 2010 and incorporate technology, like LED, knowing that the technology will change significantly before your plan is in place?

Larry: We work very close with the people that are developing the new technology. We are seeing LED already and when the technology is ready, we will be right there. Today’s big problem with LED is that it can’t compete in general illumination. Will it at some point? It might, and we’ll be ready. There are lots of new products in LED's where people are willing to pay for value of LED’s in hard to relamp areas and areas where a small footprint is appropriate.

Ed: Today, Larry Fox (Director of Sourcing) is in China, and his counterparts are in China also. Do you see this trend growing?

Larry: We see it more and more. There are more parts, more components, more influence and I don’t see it changing. We are fighting very hard to keep our plants in the US.

Ed: How difficult was it to add the San Marcos facility on this side of the border.

Larry: It was a tough decision, but a good decision. It makes sense. These are premium products, and on-time delivery is very important. Because San Marcos builds superior, high quality products, we hope that some people are willing to pay a little more. I think it is one of the best HID facilities in the US.

Ed: How does your international growth look?

Larry: Acquisitions are taking us more into Europe and Asia. We are very pleased with that. Vari-Lite and Strand really help with Europe.

Ed: How do you see the Lighting economy?

Larry: Assuming that forecasts are accurate. We expect robust commercial construction to grow, which is 85% of our business. There is some concern with the downturn in residential and that it could spill over into light commercial. Look at Louisville. With people moving to the eastern suburbs, there has been huge growth in residential. With that residential growth, we have a lot of light commercial construction such as branch banks, hospitality, strip malls, etc. Look out the window. This was farm land a few years ago. If the residential slows down, I expect some spillover to light commercial.

Ed: Speaking of Louisville, do you see Jim Campbell much?

Larry: I see him once in a while. He has done a nice job with GE.

Ed: Any plans on retirement.

Larry: None

Ed: We heard that you wanted to do one big deal before you retire and that deal was JJI?

Larry: I am not going anywhere. JJI was a good opportunity, lots of profitable niche companies. It fits well within our companies. But, I’m not going anywhere. I am here for the duration. Look, I’m 64 years old and at some point, I will retire, but not anytime soon.

Ed: I have heard of a couple of names mentioned when you retire…

Larry: No need to go there, I have a plan, but it is up to the Board of Directors. Hopefully, they will follow my recommendation, but it is ultimately their decision. I will tell you that the person is internal and I would be embarrassed if we had to go outside the company. Thirteen of the present sixteen General Managers are from within the company. We strongly believe in promotion from within. I would not have done my job if we could not find an internal candidate, but again, it will be the Board’s decision. Rest assured that we have a comprehensive succession plan.

Ed: Overall, how do you see our industry?

Larry: I hope the big lighting companies won’t try to commoditize the business any more than they already have and allow the Chinese to come in and take over. China knows how to build fixtures but not how to design lighting projects; that is still a US function which allows us to have our fate in our own hands. They can copy the product but they cannot copy the ability to create exciting innovative lighting designs.

I think lighting is a tremendous medium. Our industry has the opportunity to lead through innovation with exciting new energy efficient products and we should be willing to demand a decent return on our investment. Lighting only gets better. The next generation of lighting is coming along. With the rise of dimming in both fluorescent and HID, with the systems approach, the industry has a fabulous future.

All downlights are not the same. Some are made like jewelry and others are not. Some will fall out of the ceiling! Lighting really enhances people’s lives. I couldn’t be happier to have such a great opportunity to help people improve the quality of their life. Think about it, we don’t harm anything, lighting only makes things better. It is a deterrent to crime, and an enhancer to quality of people’s life. Don’t tell me that lighting is bad even if some of those Dark Sky people think it is. Would you want to drive up and down the street if it were pitch black? We try to only sell quality lighting that enhances the quality of people’s lives.