2009 Executive of the Year: Mike Petersen, Petersen Aluminum Co.
Petersen Branded Top Exec
Mike Petersen’s oversight of the family business, transforming it from a simple service center to a major manufacturer and distributor of architectural products, combined with his long record of industry leadership, have earned him the distinction of the 2009 Metal Center News Service Center Executive of the Year.
By Dan Markham, Senior Editor
To call Mike Petersen a service center executive is like calling Bill Gates a computer programmer or Barack Obama a basketball player. It just does not tell the whole story.
Metal Center News is pleased to honor the president of Petersen Aluminum Co., Elk Grove Village, Ill., as its 2009 Service Center Executive of the Year. Each year, MCN recognizes an individual whose career and business strategies represent a model for the rest of the industry. The unconventional evolution of Petersen’s career and his company would no doubt be difficult to emulate.
Over the past two decades, Petersen has expanded the business founded by his father Maury at a rapid rate, achieving average annual growth of more than 10 percent. Even during one of the worst years for the U.S. economy since the Great Depression, Petersen Aluminum managed to remain profitable. The company has transformed from its early days as an aluminum brokerage to a service center selling primarily aluminum, to a major manufacturer and distributor of aluminum and steel building products. Indeed, Petersen has managed to redefine his corporate mission and turn both ferrous and nonferrous sheet goods and paint into a strong national brand known as PAC-CLAD.
Mike’s a Character...No Bull
Mike Petersen is renowned for shooting the bull. But he is perhaps best remembered for the time the bull shot back.
Asked to describe him, anyone who knows Petersen will point to his sense of humor. Whether through his quick wit or his fearless bravado, the 54-year-old executive has created some lasting memories.
His most famous exploit happened during his second year as president of the National Association of Aluminum Distributors when he was asked to kick off the annual meeting in Tucson by riding into the hotel ballroom on a huge Brahma bull named Frosty. Always game, Mike donned a giant 10-gallon hat and climbed aboard. The appearance of their fearless leader astride the great beast brought gales of laughter from the attendees—apparently startling the incontinent critter.
Most people would be mortified to find themselves in such a predicament. Petersen just smiled and winked and tipped his hat to the crowd as Frosty took care of business. To this day as he tells the story, he revels in reliving the bull’s relieving.
When his team opened the Atlanta facility, the employees there put up a Christmas tree for the holidays. Instead of a star at the top, they put a picture of the company president. “We weren’t sure how he’d react,” says Tom Bell, who runs the Atlanta office. “He said, ‘Damn, that ought to be corporate policy.’”
Jon Snyder, a vice president of the company and a brother-in-law, says Petersen’s easy wit and outgoing nature is a valuable tool for a salesman. “He’s never met a stranger. He’s comfortable dealing with all different folks from all different walks of life, and that allows a lot of doors to open.”
While his sense of humor is a given in the industry, many of his coworkers and colleagues are quick to note that it isn’t a substitute for business sense.
“When you can manage your business through the tough times and still find a spot for humor, that’s a really neat trick,” says Mike Praksti, sales manager for U.S. Steel. “He clearly puts business ahead of everything else, but he can see his way to have a few laughs along the way.”
“A lot of people think of Mike’s humor first—and he’s a genuinely funny guy—but he’s also a serious businessman,” says Mike Murphy, a 15-year acquaintance from Alcoa. “It’s not like a Seinfeld episode where everybody’s laughing while the business is crashing around them. Mike and his team are laughing while the business is thriving.”
Along the way, he has made major contributions to his industry and his community in key leadership roles with both trade and philanthropic organizations. Petersen joins an illustrious group of metals distribution leaders as the 13th MCN Service Center Executive of the Year, and he certainly fits right in.
From seasonal boss to visionary
Petersen’s entrance into the family business was only slightly more conventional than his entrance into the 1998 National Association of Aluminum Distributors meeting in Tucson, where he appeared astride an enormous Brahma bull wearing an almost-as-enormous 10-gallon hat (see sidebar ). Upon graduating from Colgate University in 1977, Mike began working for his father full time, assuming more responsibilities each year. But his father, like most entrepreneurs, was loath to relinquish the company reins, even as his health began to fail.
“At one point, he started traveling down south for the winters, which we wanted to encourage,” Mike recalls. “One day, there was a legal document that had to be signed, and he was the only one empowered to sign it.”
Mike and others in the company urged Maury to appoint a secondary officer to avoid such a predicament in the future, but he appeared to brush off the suggestion. “Two weeks later he calls me into his office and hands me a box of business cards,” Mike recalls. “They said, ‘Mike Petersen, Summer Vice President, Winter President.’ He thought that was pretty unique.”
Mike transitioned from a “seasonal” to a full-time president in October 1987 when his father suffered one of a series of heart attacks. The company’s patriarch died near the Christmas holiday in 1996.
“He was a Depression-era baby. He wasn’t afraid to take risks and yet he was conservative financially,” says his son, who has followed that same philosophy. “I admired his moxie, and he was really fun to be around.”
Laying the groundwork
Maury Petersen, who had worked for Reynolds Aluminum, struck out on his own in 1965 with $5,000 to his name and a bank willing to loan him $20,000. He functioned primarily as a broker until receiving a call one day from a contact at Alcan, which had just bought out the aluminum division of Bridgeport Brass and Aluminum. His reaction to the call—recognizing and capitalizing on an opportunity—typifies the kind of can-do thinking that both he and his son have used to grow their company over the years.
“They had two million pounds in Chicago and nowhere to put it,” Petersen recalls. “One of Alcan’s sales guys called my dad on a Friday night and asked if they could use his warehouse to store the material. He said definitely—even though he didn’t even have a warehouse. But by Monday he did. He rented some space in Addison with a forklift truck and hired a warehouse guy.”
Two years later, the company took the next step in its evolution by purchasing an aluminum anodizing line in Schiller Park, Ill., which is still in operation today. With the line came a new customer base of roofing contractors, glass companies and sheet metal shops, companies using aluminum for exterior applications.
Around the same time, DeSoto, a paint manufacturer for Sears, was trying to expand the use of its Kynar product in the commercial market. Maury Petersen jumped at the opportunity to broaden his color palette at a lower cost per square foot than anodizing. Thus PAC-CLAD was born (PAC being derived from the company’s initials).
Adding roll-forming machines, the Petersens steered the company further away from a traditional service center strategy. With the roll-formers, the company turns slit coils into roofing panels and other architectural products. “They’re all custom made to order, all done project by project” Petersen says. “We run panels up to 65 feet long. We actually have some field forming machines mounted on trucks so we can go to job sites and roll panels out up to 80 feet long.”
In the years that followed, Petersen’s color-coated aluminum went head-to-head against a painted steel product made by the former Vincent Metals Goods called Color Clad. The Petersens were confident their product was superior, but they routinely lost orders to the more affordable Color Clad. It was clear that Petersen Aluminum needed to add steel to the product line.
“We really didn’t know what we needed to do to get into it. Being a small company, we kind of guessed and took a stab at it,” Petersen recalls. “Now we sell more steel than aluminum.”
Today, Petersen Aluminum has more than $100 million in sales, primarily to the commercial building market. Its products, most notably the PAC-CLAD brand of Kynar-painted steel and aluminum, have become a well-known commodity among architects, roofers and others in the building industry. Its colorful range of roll-formed roofing and wall panels can be seen on such recognizable structures as Burger King, Blockbuster, CarMax and Walgreen’s stores all over the eastern half of the United States.
Expanding their coverage
For Petersen, the growth of the product line didn’t just lead to geographic expansion—it demanded it. As the company moved more deeply into architectural products, making its product available in other locations—especially points south where construction is not so seasonal—just made sense. From its small imprint in the Chicago suburbs, it has opened four other locations throughout North America.
The first expansion outside Illinois occurred in Texas in 1985. Jon Snyder, Petersen’s brother-in-law, began his career with the company as a salesman and was given the opportunity to run a branch in Tyler. At the moment, Snyder’s operation is the company’s most successful, Petersen notes.
The Petersens reached outside the family for another growth opportunity. Mike Petersen had known Tom Bell for years through their work on various committees of the NAAD. Bell, who was employed with the distribution side of the Reynolds Aluminum business, asked Mike why his company didn’t have a physical presence in the Southeast and if Petersen had any plans to correct that. “No,” Petersen responded, “but if I do, should I give you a call?” Bell said yes.
A year later, in 1997, he was put in charge of a greenfield operation in Atlanta, serving the entire Southeast market. Like all Petersen Aluminum facilities, the operation is a near carbon copy of the 90,000-square-foot warehouse and processing center at the Elk Grove Village headquarters.
Petersen’s only acquisition occurred in Maryland, when the founder of a small distribution company intending to use Petersen as a material supplier turned to them as an acquirer. The branch has become a consistent performer, just the kind any boss would hope for in an expansion.
Petersen credits Kevin Riordan, a former sales standout at the company and now a valued member of his team, with making the Maryland operation a success. “I don’t have to spend half my life worrying about what’s going on in Maryland,” he adds. “I measure success if I can go home at night and sleep easy.”
The company’s most recent expansion was completed in 2008 when it opened a new facility outside Minneapolis. Prompting the move was a decision by a competitor to lay off several salespeople, who then contacted Petersen Aluminum seeking employment. Petersen and his team took advantage of the situation and developed a branch around them. “It wasn’t part of our master plan, but we decided it was an opportunity. In this case, it was the availability of sales talent.”
The next expansion, should it follow according to plan, will be west of the Rocky Mountains, Petersen says. The company doesn’t have much presence in the western U.S., which means it’s failing to capitalize on its brand awareness there.
The company does maintain one other facility, though it’s well outside the Petersen Aluminum mold. In 1973, Charleston Industries, Charleston, Miss., filed for bankruptcy protection. Maury Petersen was a supplier and member of the creditors committee. He soon realized the only way he would ever see the money the company owed him was to assume control. At the time, Charleston Industries manufactured light fixtures. Today, it has evolved into a successful sign manufacturing business under the leadership of Petersen’s brother-in-law (and John’s brother) Mike Palesny.
Building off of building products
Petersen Aluminum Corp.
1005 Tonne Rd.
Elk Grove Village, Ill. 60007
Web site: http://pac-dad.com
Facilities: Elk Grove Village, Ill.; Annapolis Junction, Md.; Acworth, Ga.; Tyler, Texas; Fridley, Minn.
Subsidiaries: Charleston Industries, Charleston, Miss. Petersen Finishing Corp. Schiller Park, Ill.
Annual Revenue: $124 million (for fiscal year ended June 30).
Management Team: Mike Petersen, president; John Palesny, vice president; Jon Snyder, vice president; Mike Palesny, vice president; Tom Creigh, vice president; Kevin Riordan, Eastern Regional manager; Tom Bell; Southern Regional manager; Josh Jacobi, Southwestern Regional manager; Jason Meister, Northwest Regional manager; Dominic Buccini, purchasing manager; Marlane Palesny, national credit manager; Robert Hartman, comptroller; Mark Goyke, general warehouse manager.
Equipment: Red Bud blanking and cut-to-length lines with Herr Voss levelers; Iowa Precision shears; Lockformer rollformers with in-line Herr-Voss levelers; Bradbury rollformers; McKay cut-to-length line; Samco rollformers; RAS brake presses; Cincinnati brake presses; Combi-Lift sideloaders.
Products: Pre-finished steel and aluminum (finishes in stock include Kynar, polyester and anodized); Mill-finish aluminum; roll-formed roofing and wall panels; aluminum and steel corrugated wall panels; slit coil; custom fabricated shapes; precision blanking.
The emergence of the PAC-CLAD system was the crucial moment in Petersen Aluminum’s transition from a traditional distributor to the service center/manufacturer hybrid that exists today. Petersen still sells some mill-finish aluminum for various industrial applications.
“PAC-CLAD is the brand name, and from there we don’t care if you choose steel or aluminum,” Petersen says. “For most applications across the country, steel is a perfectly adequate substrate. When you get to the coastal areas and some of the acid rain areas, aluminum is a better choice.”
Petersen manufactures metal roofing panels, solar panels, wall and soffit panels, composite panels, column covers, flashing, trim and exposed fastener panels. The process starts with coated coils sourced from two companies, neighboring Pre Finish Metals or Precoat Metals in Indiana. The coils are coated with a special Kynar 500/Hylar 5000 paint system, available in 37 colors, that is designed to withstand the rigors of external exposure for decades. Then they are roll-formed into various products.
Petersen prefers to inventory the material himself so he can test and monitor its quality. “I’ve got a 20- and sometimes 30-year warranty on products. I want to make sure I’ve got a good T90 coating thickness on galvanized. I want to make sure the paint is 1 mil. (0.0001) thick like it’s supposed to be, and I can’t control that unless we inventory it ourselves.”
Valspar, the company’s primary coating supplier, has been with Petersen since PAC-CLAD was created and remains a committed partner. Valspar’s Al Dunlop, who has known Petersen for more than 20 years, appreciates the loyal relationships that Petersen cultivates with select vendors.
“He wants to be loyal to his suppliers, as long as the supplier is loyal to him,” says Dunlop. “We must have pretty close to 100 percent of his business over the last five years. We earned it.”
Petersen admits that he prefers to work with a small number of suppliers, which includes his main mill partners. He purchases most of his steel from U.S. Steel and Nucor, and most aluminum from Alcoa and Aleris. “We don’t spread it around too far and wide. We want to be a profitable account for our suppliers, and we want to combine our buying power to the extent we can be a significant customer,” he says.
Taking the brand to market
Developing the building products focus was only half the battle for Petersen Aluminum. Getting the material in front of the decision makers was an entirely new endeavor. Petersen Aluminum spends close to $2 million annually in marketing. Even before taking over control of the company, Mike Petersen’s was the guiding hand on the promotional strategy.
“We researched the market, exploring what people were doing not only in our business but in similar businesses, marketing products to the architect community. We developed an ad program, a catalog program and a Web site to max out our exposure to the architectural profession. It takes a really dedicated effort, extended over a long period of time,” he says.
The company advertises in more than 30 different magazines, primarily aimed at architects, designers and contractors. Ultimately, finding their way into builders’ specifications is the goal.
“When you are designing a building, you come up with a book, about the size of a dictionary, of the products that will be used. For the section devoted to metal roofing or wall panels, typically they’ll specify three main manufacturers. Our objective is to get in that initial spec and lock it down into an order after that,” Petersen explains. The way in, he discovered, was branding, “taking a generic product, Kynar-finished aluminum or steel, putting a brand on it, and marketing the heck of it over a 30-year-period.”
Petersen knew his branding effort was gaining traction when advertiser surveys showed that PAC-CLAD resonated with readers, but Petersen Aluminum did not. From then on, PAC-CLAD was front and center in all marketing endeavors.
“We started figuring out, as far back as 15 years ago, that people did not know us as Petersen Aluminum. We needed to start pushing PAC-CLAD, PAC-CLAD, PAC-CLAD, like Kleenex,” he says.
Such an approach is evident on the Internet, where the company’s Web site is www.pac-clad.com. Petersen is proud of the company’s early recognition of the value of the site, particularly with its 24-hour access for existing and potential customers all over the world.
Indeed, the growth of PAC-CLAD’s brand awareness almost demands that the company continue to expand. “With a national marketing program, if you’ve done it right but you’re not there to answer the demand for your products, you’re just creating opportunity for someone else,” he says, adding, “I’m sure we’ll expand west at some point. Maybe that will be for the next generation of management.
Parsing the next generation
For Petersen, the question of the next generation of management is one that occupies more and more of his time. Unlike the case with his father, a simple solution is not in the cards.
Petersen family ties extend deep throughout the company, with some interesting branches. Both his brothers-in-law, Jon Snyder and Mike Palesny, are vice presidents, while the latter is also the brother of longtime Vice President John Palesny. John Palesny’s wife Marlane is the company’s national credit manager. Their son Roy is a salesman.
In Atlanta, Regional Manager Tom Bell is no relation to the Petersen family, but already has a son-in-law working as a salesman for him. “He says they’re the kudzu on the Petersen family tree,” Petersen says with a smile.
Among Petersen’s immediate family, wife Laurie has remained, intentionally, removed from the operation. Their daughter Claire, 19, a sophomore at Colorado College, and son Will, a 17-year-old high school junior, have not made any decisions about their career plans.
Their father—unlike his father—will not be pressuring them into joining the family business. In fact, should they be interested, they may have to look outside for work before they can assume a role in the company.
“I’m not going to be quite as obsessive about my kids going into the business. In hindsight, I wish I’d had an opportunity to work for someone else,” Petersen says. “Looking ahead toward the third generation coming down the line, it will be important for any of the kids who want to come into the business to get experience somewhere else. It’s good for you to find out your worth in a more objective setting than what you might find in a family business.”
Petersen is not averse to finding an outside party to guide the company in the future. He points to O’Neal Steel’s seamless transition from complete family control to the leadership of Bill Jones, now the company’s vice chairman, as a blueprint for family businesses. “They’re comfortable having non-family senior management and they’ve been very successful. I look at that as a model if we’re going to remain independent.”
Confessions of a serial volunteer
In 1991, Mike Petersen agreed to sit on the National Association of Aluminum Distributors board of directors. Little did he know the chain of events that decision would set in motion.
Under ordinary circumstances, his agreement to join the board would have started an 8- to 10-year climb up the leadership ranks. But the aluminum distribution industry was already in the throes of consolidation madness, and his slow ascent was hastened considerably as existing board members suddenly found themselves out of jobs. By 1997, he was chairman of an organization that just a generation earlier wouldn’t even have his small company as a member.
During his tenure, discussions began to heat up about a potential merger with the then Steel Service Center Institute. As a representative of an independent distributor, Petersen became a target for the SSCI to get the rest of the NAAD members on board. “It was a concern that to make the merger work, you had to get the support of the family-owned, independent distributors,” he says. “Knowing how hard we had to work to get people to staff our committees, and with membership declining, I knew the writing was on the wall. There would be a lot more value-add for our membership [through the merger].”
Petersen notes proudly that within two years after the 2001 merger, virtually every major player from NAAD had joined the newly named Metals Service Center Institute.
At the time of the merger, Sandy Nelson of EMJ was serving as chairman of MSCI, but was only planning to stay in the post for a single year. He called Petersen with an offer. “Mike, I think you’d be a great chairman of the MSCI. You can make this work,” Nelson said, urging him to fill out the term. Thus, at his very first MSCI meeting, Petersen wore dual badges: First-Timer and Incoming Chairman.
His association with the trade associations is something he takes quite seriously. “I highly recommend board service and getting involved with trade associations,” Petersen says. “From a networking standpoint, the value has been immeasurable. I found my southern regional manager through the group, and I’ve met all the big players in the industry. I’ve been able to measure myself against my peers.”
Several years ago, Mike and wife Laurie were making monthly volunteer visits to the Good News Community Kitchen, a food pantry loosely affiliated with the family’s Kenilworth Union Church, which feeds 150 needy people on Chicago’s north side. During one of his visits, while under the mistaken impression his term on the NAAD board would soon end and he’d have more time, he casually asked a staff member if the organization had a board. Before long, he found himself the board’s chairman. “I don’t say no. I’m a serial volunteer,” he says. “That turned out to be the most stressful job I’ve ever had. But I’m proud of what happened at the kitchen.”
Under his leadership, the Good News Community Kitchen began its evolution into a sustainable, $400,000 per year operation. Now serving as past president of board, he and Petersen Aluminum remain committed to the organization. The agency is now growing from its roots as a simple kitchen into an advocacy group, working on job opportunities, affordable housing and improvements in community safety. “We will have accomplished our mission when these needs are met,” he says.
Leading a Collegial Corporate Culture
Loyal. Collegial. Leader. Those three words are consistently used to describe Mike Petersen by his coworkers, customers, suppliers and peers in the industry.
Few colleagues know him as well as John Palesny, who has been with Petersen Aluminum longer than its president and worked under both Maury and Mike Petersen.
“His father could be more confrontational, while Mike is more collegial. He solicits opinions and makes decisions, but lets others work,” Palesny says.
That’s the quality that most endears him to fellow company executives Tom Bell, Jon Snyder and Mike Palesny. “He hires good people and he lets them do what they need to do. He doesn’t look over your shoulder. He has enough faith in his people to let them do their jobs,” Mike Palesny says.
They also appreciate the philosophy, passed down from Maury, of pouring revenues back into the company. That gives them the wherewithal to stock the best product and buy the best equipment.
From his suppliers’ point of view, Petersen’s loyalty stands out above all else. “He believes in developing good relationships and not letting the ups and downs become a disadvantage to suppliers. It’s fun when you have a customer who will stick with you when you go through some tough times,” says U.S. Steel Sales Manager Mike Praksti.
That loyalty has been on display to Valspar’s Vice President of Sales Al Dunlop for a long time. “He treats people fairly and expects people to treat him fairly. I wish all my customers were like him,” Dunlop says.
Around the service center industry, Petersen has developed a reputation as a popular leader through his work with both the MSCI and NAAD. Petersen was chairman of NAAD when the aluminum group decided to become part of the larger service center institute.
“He was instrumental in making the merger a success,” says Don McNeeley, president and chief operating officer of Chicago Tube & Iron Company in Romeoville, Ill. “He was absolutely a driving force, which is why he was the next chairman for the MSCI. It showed how highly we thought of him and his leadership abilities.”
“I’m very excited for Mike,” says Dave Hannah, chairman and CEO of Reliance Steel and Aluminum Co. in Los Angeles. “He has not only demonstrated his ability to run a successful company, he’s further demonstrated his leadership ability in the industry by taking on job after job and challenge after challenge.”
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