Inflation Being Here to Stay Has PPG Preparing More Price Hikes

PPG Industries Inc. is repeatedly raising prices of the paint and coatings it sells to customers across industries as inflation in raw material and logistics costs pressures the $40 billion business.

The Pittsburgh-based company that gives Ford Motor Co. cars their color and sells sealants to the likes of Boeing Co. and Airbus SE anticipated an inflationary environment early this year, Chief Executive Officer Michael McGarry said in an interview. PPG was first to raise prices once, then a second time, he said.

Inflation Being Here to Stay Has PPG Preparing More Price Hikes

“What we’re obviously studying now is the need to be out with a third set of price increases,” McGarry said. “Inflation is across-the-board, it’s obvious” and customers “don’t have a lot of good ways to counter the argument that we need to have price relief.”

With customers in the construction, consumer product and industrial sectors, plus manufacturing facilities and affiliates in more than 70 countries, PPG has a wide window into how the global economy is functioning. It’s feeling the pinch from the prices of oil, freight and distribution going up and raw materials running scarce. McGarry, 62, quibbles with the idea this is a temporary phenomenon related to reopenings from pandemic lockdowns.

“I’m not seeing this as transitory,” he said. “This work-from-home phenomenon is going to lead to additional wage inflation, because people are going to have the opportunities to figure out where they want to work.”

McGarry is already witnessing this in the U.S. and expects to see the trend spread to other regions. PPG plans to offer employees some flexibility, he said, with some expected to be in the office two or three days a week. Its staff in the U.S. are the most keen to work from home, followed by Europe and Latin America, the CEO said.

Inflation Being Here to Stay Has PPG Preparing More Price Hikes

The price of paint going up would add to raw-material cost headwinds for automakers including Ford and Stellantis NV, who are among PPG’s biggest customers, according to Bloomberg supply chain analysis. While copper, steel, aluminum and other materials have been getting more expensive, the industry is coping well because the global semiconductor shortage has limited production and boosted their pricing power.

PPG generates about 40% of its revenue in the U.S., where the general consensus among Federal Reserve officials is for inflation pressures to ease after temporary factors associated with a rapid reopening of the economy wane. The Fed’s preferred consumer-price gauge rose 3.9% in the 12 months through May, the fastest since 2008.

So far, PPG has been successful at passing on higher costs. It’s boosted pricing for 17 consecutive quarters, and McGarry expects to extend that streak through the rest of this year.

While the challenge of developing products and people are areas of concern when the bulk of work is taking place outside offices, “it’s hard to argue that working from home hasn’t worked out when you’ve had three record quarters in a row,” McGarry said. “The math says that we can do this.”

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