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Independent, Together


Regionality is the biggest strength of the independent lubricant manufacturer, says James L. Kudis, vice president of Allegheny Petroleum Products of Wilmerding, Pa.

We are regional companies and closer to our customers. We can manufacture multiple products and service them better. At Allegheny, we can take three base oils and 50 additives and make 300 finished products in three or four hours, Kudis contends. A major might need three or four days to process the order.

But life isnt a just bowl of cherries for independent blenders.

Independent blenders today are deeply concerned about the costs of raw materials and about their ability to secure competitively priced supplies, says Kudis, who will become the 40th president of the Independent Lubricant Manufacturers Association, at the Alexandria, Va., based trade groups annual meeting this month.

Base oils, additives, all prices are escalating. Its difficult to keep your pricing structure up. We get two days notice on base oil price increases, and in the last 20 months weve had 13 increases.

Allegheny Petroleum Products, founded in 1987 by Kudis and company president Scott Schober, manufactures industrial lubricants and gasoline and lubricant additives, and provides chemical management services. Since opening a second plant to manufacture viscosity index improvers in 2003, the company has expanded its motor oil production.

We buy the same chemicals as additive companies, notes Kudis, and the times are different. Some suppliers are sold out, and theres often no competitive pricing.

Another challenge for independents, particularly on the motor oil side of the business, is the price squeeze, says Kudis. When major oil companies raise base oil prices but dont increase prices on their finished lubricants, many independents find their profit margins or market share disappearing.

Successful independents often grow by branching out beyond lubricant blending. They find the right niche markets, and they are excellent at servicing their customers. While relationships continue to be important in the business, some products have been commoditized, Kudis notes. Often today, its an online bid or a reverse auction.

Reverse auctions have gained popularity for high-volume commodities, including lubricants, particularly industrial products, Kudis says, but they dont work when a company wants 300 items delivered to 72 locations in small volumes.

Forward with ILMA

ILMA is actively working for its members on a number of fronts, and my priority as president is to be sure we keep moving forward, says Kudis. The number one issue is our ethics effort. Were meeting with API [the American Petroleum Institute, which represents the major oil companies] and ACC [the American Chemistry Council, which represents the additive industry] to explore areas of cooperation in an expanded program.

ILMA initially adopted an enforceable Code of Ethics in 1984, and last year revised and expanded the Code to include not just Manufacturing members but all members. ILMA is now looking at the possibility of participating in or expanding APIs aftermarket lubricant quality audit program, to put more teeth into its Code.

Health and safety issues, fair access to product licensing programs such as General Motors and DaimlerChryslers automatic transmission fluid programs, and spill prevention and control are just some of the ongoing areas in which ILMA is working on behalf of its members.

Were here for our members. Were financially solvent, we have a strategic plan, and we follow it, Kudis asserts. The association continues to represent its 135 manufacturing members in Washington, D.C., and holds two membership meetings each year.

ILMA meetings are essential to business, says Kudis. Meeting with suppliers and sharing information is very, very valuable. Ive developed relationships in ILMA which have helped us tremendously in growing our business. At the same time, Kudis says that ILMA meetings will become even more important for many members who are finding their suppliers cutting back on regular plant visits to smaller accounts.

The future of the independent lubricant manufacturing industry looks promising to Kudis. Independents will always have challenges to face, but with the support of ILMA we will meet those challenges head on. Were always going to be here. Were survivors.

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