An interview with GAWDA’s 2007 Industry Keynote Speaker
Ricardo Malfitano, executive vice president of Praxair, Inc., and a 29-year industry veteran, sat down with Welding & Gases Today to talk about his experiences and where he sees the future of the industry. Malfitano will address delegates to the Annual Convention on Sunday, September 16.
How did you get started in this industry?
I started out as a welding engineer with White Martins, Praxair’s subsidiary in Brazil, in 1978. But they started moving me around, and eventually I ended up working in industrial gases. My first job with Praxair in the U.S. was to enhance our sales and marketing capabilities after we spun off from Union Carbide.
You came to Praxair’s U.S. headquarters in 1993. What was the biggest surprise for you in moving from Brazil to the United States?
How competitive the U.S. packaged gas market is compared with other markets in the world. At the time, Praxair had a very large share of the market in Brazil. The dynamics are very different here in the U.S., where no one player has a majority of the market share. I don’t think there is any market in the world today that is as competitive as this one.
What topics are you planning to cover in your keynote address?
First, an overview of who Praxair is and the strategy of Praxair Distribution, Inc. (PDI), our packaged gas business arm in the U.S. and Canada. Second, product availability, primarily argon and helium. And third, safety, and how a faulty or inconsistent quality system can affect a company’s safety performance and the reputation of the entire industry.
You also mentioned the issue of product availability. How does Praxair respond to gas shortages?
First, we let our customers and distributors know that we have a shortage so everybody can respond to the situation properly. Our second concern is we want to make sure that we are not squeezed between the changing cost structure that a shortage will provoke and the ability of our customers to squeeze the supply chain in terms of price. If that happens, we could lose margin, and if we lose margin, our ability to keep supply reliable is in jeopardy.
How does Praxair balance the needs of its independent distributors with the needs of its own distribution arm?
Praxair cannot cover the whole North American territory by itself. There are some regions we don’t want to cover directly because we would not be competitive. So we are more than glad to have long-term, trusting relationships with independent distributors to supply certain markets.
What do you see as the major trends in the industry today?
There are two major trends going on in the U.S. industrial gas distribution and welding market. First is consolidation, and second is that we are seeing much better strategies being developed in terms of value creation—not only pricing, but also cost management.
What is Praxair doing in terms of value creation?
We have introduced a new system for price management that allows us to slice and dice our product offerings in such a way that we can identify sales variations from the list price. We then work with the sales force to introduce price increases if necessary and as contracts permit. A very focused group of people are disciplined in implementing this process. We also create customer value with a total package—gases, hardgoods and applications technology arising out of our own research. This is backed up by the broader knowledge and expertise of the rest of Praxair, which is the only fully integrated industrial gases company in the U.S.
Where do you see independent distribution going over the next five years?
I see consolidation continuing. I don’t think it will be as strong as it has been for the last ten years or so, but it will cause the industry to become a little smaller. Praxair’s experience with independent distributorships is that they tend to be very high quality businesses. The people managing these businesses are getting better and better. I see independent distributors continuing to improve the quality of their businesses, in terms of both financials and personnel.