Outward Bound

Steve Player interviews Mary Rhinehart, CFO of Johns Manville.

SP: We know that Johns Manville has been working on a finance transformation. Can you take us through what your thoughts were leading into that transformation?

Rhinehart: When we started our transformation in 2004, I had just become CFO. We looked at the whole finance organization, starting with getting the voice of the customer. This was from our employees, our finance employees, our clients, and our key stakeholders, including the business leaders. Some were the outside customers as they touched the JM finance department, such as our credit organizations, as well as Berkshire Hathaway, which is our parent company.

SP: Let me just quickly ask, How is it working for a Berkshire Hathaway company? How is it working for Warren Buffett?

Rhinehart: It's wonderful. You couldn't ask for a better owner. You couldn't ask for a better parent company. I will tell you that no one, especially in times like these, understands economic downturns better than Warren Buffett, and no one stays the course as well. When you read things or when you see Warren speak, what you see is what you get. He is a very smart individual, but he's also someone who's very simple. He looks at the basics and understands the fundamentals.

SP: Remembering the long-term cycle is particularly important in looking at the housing market. With housing starts down, how are you weathering these difficult times?

Rhinehart: It's certainly a tough environment, but it's not the first time we have faced challenges in our 150-year history. We are seeing the softening around the globe now. So what we're really focused on (and what Warren expects us to focus on) are those items that are in our control. We also never lose sight of our customer and the reason that we are in business. It all revolves around the customer. So how can you differentiate yourself? How can you widen the moat (which is something that Warren always asks us to do)? As a result, we've really reduced our discretionary costs, our base costs, which include our fixed costs and our SG&A costs. We're trying to do everything we can to offset and mitigate inflation. Because this environment is not just about the downturn in the housing, it's also about tremendous inflationary pressures. We are constantly seeking cost and usage reductions in our energy, raw materials, and transportation costs.

SP: I notice that you emphasize energy-efficient products. Is this another way to counter, or respond, to customer needs as they try to reduce their costs?

Rhinehart: Absolutely. We look at ourselves as an energy efficiency and energy conservation company. In addition to building insulation and roof insulation, we also make reinforcement products, which are fibers that go into the wind energy markets. These fibers also reinforce plastics to make lighter-weight vehicles, appliances, etc. We are really focused on reducing energy usage. One of our goals is to be a leader in the manufacturing of environmentally responsible building products.