Brambles CEO to retire in November

Incoming Brambles chief executive Tom Gorman says his first priority is to ensure the successful upgrading of its American pallet business.

06.10.2009 09:06 AM

Incoming Brambles Ltd chief executive Tom Gorman says his first priority is to ensure the successful upgrading of its American pallet business worth almost $300 million over the next three years.

Mr Gorman, who is Brambles' current group president of CHEP Europe, Middle East and Africa (EMEA), will take over from Mike Ihlein when he steps down on November 1.

Mr Gorman is also the former president of Ford Australia.

Mr Ihlein, who has been chief executive since 2007, will remain an executive with the company until March 1, 2010 to enable a smooth transition.

Brambles revealed the succession plans on Tuesday in conjunction with the results of a seven-month review of its CHEP USA pallet business, which issues, collects and repairs distribution pallets in North America.

The review will pave the way for a new premium pallet specification system to be introduced as well as an immediate upgrading of the CHEP USA pallet pool to a new minimum standard.

The new programs will have ongoing costs of $US50 million ($A56.98 million) annually plus $US110 million ($A125.36 million) in acceleration costs over the next three years.

"The first major priority for me is to ensure we successfully execute our comprehensive response to the CHEP USA review and I look forward to working closely with the CHEP USA team to deliver this new service and quality offering for our customers," Mr Gorman said.

Brambles shares, which had been in a trading halt before the announcements, lost 20 cents, or 2.61 per cent, to close at $7.45.

The CHEP USA business has undergone significant cost and inventory reductions in response to the US recession and faces pressure from competitors using pallets made from alternative materials to timber.

Mr Ihlein said the review confirmed the long-term sustainability of wood pallets.

"One clear view out of the USA review is that wood is here to stay," Mr Ihlein told analysts in Sydney.

"Pool wood is the best supply-chain solution ... it's the best economically, it's the best environmentally, it's also the best from a health and safety perspective compared to alternative offerings in the US today."

CHEP uses about 10 million plastic pallets worldwide and alternative pallets would always be present in the marketplace, he said.

"The key is that there are some competitors who are prepared to offer sub-economic offers in terms of particular platforms, but the real question for the broader supply chain and our customers is, is that sustainable?"

The results of the review will position CHEP USA for medium- to long-term strength in a market worth $US10 billion ($A11.4 billion), Mr Ihlein said.

"We have $US1.2 billion ($A1.37 billion) of that, so there is massive opportunity here and it is very important that we are positioned to capture that," he said.

Mr Ihlein, 53, will be entitled to a cash payment of $1.18 million upon his retirement, plus any accrued annual and long-service leave.

His short-term and long-term incentive awards are yet to be determined.