Woman of Steel

 

A market slump. Competition from China. Geopolitical unrest. Tamara Lundgren tackles the challenges — without getting trampled.

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On a late September evening, about 25 women, many financial officers and managers of Oregon companies, gathered on the fourth floor of the Portland Art Museum for a dinner and networking event hosted by Wells Fargo. Tamara Lundgren, president and CEO of Schnitzer Steel, was the featured speaker. During her 20-minute speech, Lundgren, elegant in a black cape dress, talked about what it was like to take the reins of the 109-year-old-company in 2008, months before the global financial crisis hit.

“It was like I moved into the house of my dreams only to find the floor had collapsed,” she said. But despite the challenges, leading the Schnitzer team through turbulent times was a privilege. “When you’re getting battered by outside factors, it really creates a sense of common purpose, and enables people to focus on what’s important and rise to their best.”

In her ten years with Schnitzer, one of the country’s largest steel and scrap metal producers, Lundgren, 57, has steered the company through several economic crises and, today, still faces a trifecta of challenges: a market slump, growing competition and an ever-shifting geopolitical landscape.

But Lundgren, who in addition to running a $2.6 billion company, serves on the board of the Federal Reserve Bank of San Francisco and this year became chair of the U.S. Chamber of Commerce, is not waiting for the world markets to turn around.

1114tamaralundgren schnitzer 112905 073335px“I’m very rewarded when we can grow a company, but I’m also very rewarded when we can impact our own results even in a tough environment,” says Lundgren, who met me in August in the company’s KOIN Tower headquarters. “There are a lot of things we are able to do to drive our own destiny.”

Navigating the global steel industry

An archetypal industry associated in this country with immigrant peddlers — including one Sam Schnitzer, a Russian immigrant who started the company as a one-man scrap business in 1906 — the metals recycling business burst onto the global radar about 10 years ago, as developing countries began to modernize. As Lundgren points out, in an emerging economy, steel is one of the first industries to get established. Most of the steel in the world is made by melting down scrap metal, and since developing countries don’t have enough scrap to feed the steel machine, they depend on developed countries like the U.S. to supply the raw material.

“It’s that supply-demand imbalance that is in favor of consumer-driven economies that generate the scrap we export,” Lundgren says.

That cycle was in full swing in 2004. “Vietnam, Malaysia, Indonesia, the Middle East — there wasn’t a country that wasn’t investing in infrastructure, energy, roads and bridges,” Lundgren says. “All of that requires steel.” 

Then the financial crisis hit. Demand plummeted in 2009. Schnitzer lost almost half its revenue, and its share price dropped from a peak of $118 in the summer of 2008 to $16.45. A strong recovery followed as developing countries continued to grow. But the 2011 European crisis took a different path, Lundgren says. “That’s when emerging markets started a decrease in their growth trajectory.”

The result has been “turmoil in the industry and a lot of excess capacity,” says Brent Thielman, an analyst who follows the steel and scrap markets for D.A. Davidson in Lake Oswego. Thielman points to signs of a "slowly" recovering market, fueled by an uptick in commercial construction. “But there is more competition than existed 10 years ago. Slow is the word.”

At Schnitzer, business has improved since 2009. But profitability is a challenge and the stock price, now around $22, has remained flat for the past few years.

Lundgren, who made $3.4 million in total compensation in 2013, is unfazed. “I’m focused on things we can control,” she says. 

A laser focus on strategy, away from the media spotlight

At 5-foot-2, the auburn-haired Lundgren is noticeably petite, with a conservative sartorial style  —  black pantsuit, heavy gold jewelry — and a down-to-earth but firm demeanor. Despite her high powered board and executive positions, Lundgren is surprisingly media-shy and guards her personal life closely  —  although she bristles at the suggestion she keeps a low civic profile in Oregon, where the company employs 800 people. "I view myself as very active in public policy, not only in Oregon but across the country and around the world." Lundgren points to Schnitzer’s many charitable activities  — including the Oregon Food Bank and a new nonprofit foundation, Race Against Hunger. John Carter, Schnitzer Steel’s board chair, is the chair of the Oregon Business Plan.

{pullquote}I'm very rewarded when we can impact our own results even in a tough environment.{/pullquote}

As the only female CEO of an Oregon public company, Lundgren occupies a unique position in the state’s business pantheon. But she doesn't dwell on gender, and when the issue does, inevitably, come up, she prefers to steer the conversation toward "creating equal opportunities for everyone." It's a simultaneously pragmatic and big picture approach that seems to characterize her executive leadership at Schnitzer, a commodity business that employs 3,371 workers at 120 facilities in the United States, Canada and Puerto Rico. These include metals manufacturing and recycling facilities, as well as a network of used auto-parts junkyards.

It’s a gritty industry and a far cry from the hallowed halls of law and high finance, where Lundgren spent much of her career. After receiving a law degree from the Northwestern School of Law in 1982, she worked in private practice before moving on to Goldman Sachs as the investment-banking boom took off. She lived in New York and then London for a decade, helping shape the emerging field of securitization as a manager of Deutsche Bank.

In 2005, Lundgren was approached by Carter, a longtime colleague and former Bechtel executive who had come out of retirement to lead Schnitzer and was searching for strategy officer. In 2006, Lundgren was elected chief operating officer and in 2008 became CEO.

Six years later, Schnitzer’s board, which awarded Lundgren a $615,000 bonus in 2013, heaps praise on her performance. “The reality is that it is a tough global marketplace, and economies are not expanding or growing at the rate they were 10 years ago,” Carter says. Since  joining Schnitzer, Lundgren has implemented a company-wide cost-cutting and “productivity” program, he says, and “has done a terrific job impressing on management that these are tools that [impact] how you stack up against competitors.”

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Making an old industry new

To understand Lundgren’s strategy for boosting profitability and growing volumes — “my actions are all driven toward those two goals” — start with the fact that Schnitzer’s vertically integrated operations mirror in many ways the global scrap-steel dynamic. The company’s steel mill in McMinnville makes steel products for buildings and infrastructure. A metals recycling division buys “end of life” vehicles, manufacturing waste and demolition materials, then processes and sells the materials to 20 countries around the world. Operating under the brand Pick-n-Pull, the auto-parts business consists of 62 self-service auto yards, where customers can pry off hubs, fenders, trims and other parts.

1114tamaralundgren schnitzer 062507 052500px“When the car has been in inventory long enough, we take it off the lot, crush it,” Lundgren says. “Then it goes to the recycling division, shreds it, and it goes to steel making. The steel in the car turns into steel used to build one of the bridges or a high rise.”

Lundgren has focused on making this cycle more efficient; she is also positioning Schnitzer to capitalize on 21st-century social, economic and technology trends. In 2013, for example, the company expanded its Pick-n-Pull network by 20%, with most of the new sites located near its metals recycling operations as well as a network of seven deep water ports the company either owns or has exclusive rights to. The goal, Lundgren says, is to drive synergies between the business divisions. Likewise, Schnitzer has also invested in advanced technologies that extract smaller and smaller pieces of metal “so less goes to the landfill, more gets recycled and we have more to sell.”

Steel, Lundgren likes to say, is the most recycled material in the world. She touts the company as a sustainability leader — “we’ve been about sustainability before that was cool, before it was probably a word” — in an era when being green has cachet not just for consumers but sustainability investors as well. “That’s what’s been fun,” Lundgren says. “Making this very old industry and company relevant to the world today.”

A foray into the sharing economy qualifies as another example. Last year Schnitzer launched an online marketplace called Row52 featuring pictures of the Pick-n-Pull inventory, as well as cars from other yards —  around 115,000 vehicles. The site has created a new crop of micro-entrepreneurs called “Parts Pullers”  who register with Schnitzer, buy parts and sell them at a mark-up to people around the country.

“I love creating jobs; it’s a real driver for me,” says Lundgren, who credits her father, a pediatrician, and her mother, a former homemaker turned stock broker, with raising her with the expectation she would contribute to the community. “My way of giving back seems to be that I always gravitated toward a platform that has growth potential,” she says. “I have never been attracted to caretaking businesses.” 

Schnitzer has made several rounds of layoffs since the 2008 and 2011 financial crises, including a 7% reduction in the workforce last year.


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Linda Baker

Linda Baker is the editor of Oregon Business

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