By Mike Boyer
The Cincinnati Enquirer

James J. O'Brien, chairman and CEO of Ashland Inc., talks with shareholders Harold (left) and Margie Messick of Fort Wright during the annual shareholders meeting Thursday in Covington. (Gary Landers photo) | ZOOM |

COVINGTON - Presiding over his first shareholders meeting as Ashland Inc.'s chairman and CEO, James J. O'Brien said Thursday that the Covington company is gaining momentum.

O'Brien, who succeeded Paul Chellgren in the fall, wants to transform Ashland into a more energetic, focused company delivering consistent results to shareholders and innovative products to customers.

O'Brien, 48, has taken the helm at a particularly challenging time for the 79-year-old oil products and specialty chemical company.

The prospect of war with Iraq is sending tremors through the price of oil, a feed stock in nearly all the company's products.

Fluctuating oil prices affects the entire U.S. economy, he said.

"The economy doesn't grow when crude is above $24 (a barrel)," he said.

Investors have been spooked by the company's ongoing asbestos liability from a product it no longer sells.

In the first quarter, the company increased asbestos reserves by $95 million after an analysis of its insurance and claims history.

The company had a disappointing fiscal 2002, with net earnings down 70 percent. Last week, the company reported a fiscal first-quarter loss of $92 million, or $1.35 shares, after increasing asbestos liability reserves.

Ashland's shares, which are down about 40 percent over the last year, closed Thursday at $27.25, down 63 cents.

Still, O'Brien, a 26-year Ashland employee, remains philosophic.

"When you come into the situation as CEO, it's never easy. There's always challenges," he said after the shareholders meeting at the Metropolitan Club.

To achieve his goal of a reinvigorated, focused company, O'Brien has detailed an eight-point profitability improvement plan encompassing anything from selling two of the company's four aircraft to improving organizational effectiveness.

O'Brien said the company is on target to cut general and administrative expenses by $25 million annually starting in the March quarter, but those cuts haven't come without pain.

The company has trimmed between 400 and 500 jobs from its worldwide payroll of 24,300, including a handful at its Covington headquarters.

O'Brien said Ashland has tried not to use a meat-ax in its cost-cutting by selling the aircraft and closing its London office.

But he admitted: "People are affected. We don't like it."

The company will also be more judicious in future giving through its Ashland Foundation.

"We will fulfill our past commitments," he said, while being more selective in future giving.

Part of the profitability plan includes studying parts of the company's highway construction and specialty chemical operations for possible divestiture. He said no decisions have been made but could be later this year.

He said the company isn't looking to make acquisitions, focusing instead on cutting its debt.

O'Brien has committed to cutting the debt-to-capital ratio, now running at 46 percent, to 35 percent as soon as possible.

The firm has done a good job of managing its asbestos liability over the last 15 years, O'Brien said.

But he conceded the estimates of future claims are based on past experience.

"Our estimates are only as good as our past experience. I'm highly confident in those estimates," he said, adding: "It's a variable thing. We'll have to see how it plays out."

Shareholders elected George A. Schaefer, Fifth Third Bank president, to the board.

E-mail mboyer@enquirer.com