More Than One Way To Break Up A Company

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"It was a very comfortable marriage and a very comfortable divorce," John P. O'Neil, president of Converse Inc., comments.

"I felt like I had just gotten out of prison," says Richard E. Genth, president of Murray Chris-Craft Cruisers & Sportsboats Inc.

Like two men who have just shed their respective spouses, O'Neil and Genth have widely divergent views on the institution of marriage, corporatestyle -- views based on experiences as unlike as they could be. O'Neil reflects on Converse's 11 years as an owned company -- first by Eltra Corp. and later by Allied Corp. -- with equanimity. The years were productive and, in many ways, enabled the company to survive on its own. But Genth, like a husband who has been henpecked, harassed, and had, is barely able to control his anger.

Converse, now the nation's largest maker of athletic footwear, was founded in 1908 and grew slowly but steadily -- the result of conservative Yankee management -- until 1971. At that time, the Stone family, of Brockton, Mass., decided to sell the company it had controlled for 38 years. The company was solid, with annual sales of about $60 million, "comfortable" earnings, and adequate capital sources for ordinary times. But it was ill-prepared for the tough times down the road.

Eltra, a $450 million conglomerate, brought a new energy, sophisticated management techniques, and significant financial resources to Converse. Two years after its own purchase, Converse was able to acquire the footwear division of B.F. Goodrich & Co., once its principal competitor. "Eltra had the resources available to make it possible," notes O'Neil. "We wouldn't have been able to do it otherwise." From 1970 to 1975, Converse's earnings nearly tripled.

But it was in the area of survival, rather than growth, that the relationship proved invaluable. In the mid-1970s, foreign competition -- high-quality goods from Adidas, Nike, and Puma -- took over the marketplace. "It was very bad," remembers Richard Loynd, then president of Eltra. "The foreign competition took our business all the way down to zero profits in 1977 -- 78."

Loynd, now chairman of Converse, was forced to "redo" the company. "We emphasized our top-of-the-line shoes, eliminated the bottom end completely, closed five plants. We shrunk the company substantially and turned it into a profitable operation again. John O'Neil and I went through hell to get that to happen," he recalls.

By 1979, when Eltra was acquired by Allied, Converse was moving again. "Sales were increasing by 20% a year, and profits were growing even faster," says O'Neil. "We were earning 8% to 9% after taxes. Normal for the industry is under 5%." But the company, the only consumer-products division among Allied's holdings, had no place in Allied's long-range Plans: Converse Rubber Co., as it was then named, was put up for sale.

Loynd and O'Neil decided that they wanted the company to be their own. "I don't think there's any motivation quite like having a piece of the action," O'Neil confesses. The two men assembled 36 manager/investors and put together a complex, $100 million package, $70 million of it borrowed from Manufacturers Hanover Trust Co. and Morgan Guaranty Trust Co.

The signing took place on March 1, 1982, and, since then, Converse has been performing. This year the company expects to report record sales and licensee revenues of approximately $200 million. If Eltra made it possible for Converse to survive and thrive -- and Loynd suspects that it did -- then the marriage of conglomerate and company can be counted a success. The same can hardly be said in the case of Chris-Craft. "We're not even talking auymore," grumbles Richard Genth, who, in December 1981, purchased the venerable boat division from Chris-Craft Iudustries Inc. (CCI)

Founded in 1876, Chris-Craft is the oldest name in American boatbuilding. Now known for its sleek white yachts, the Bradenton, Fla.-based company had also become the world's largest manufacturer of power boats by 1960 (with sales of $47 million). But its fall from prominence was precipitous.

The privately held company was sold in 1960 to NAFI Corp. But, in 1968, the corporation (then CCI) was acquired in a stock takeover led by Wall Street wizard Herbert J. Siegel. Siegel's organization (Baldwin & Montrose Chemical Co., later CCI) had made killings with television, film, chemical, aaad industrial divisions, but its plan for boats was hardly seaworthy.

"Chris-Craft had a fairly sizable cash reserve -- some $15 million to $20 million," recalls Gordon Houser, director of advertising and public relations. "Immediately after the Siegel group gained control, the money was bled off in an [unsuccessful] attempt to obtain Piper Aircraft Corp. After '69, ChrisCraft was pretty much a downhill, lossburdened company."

CCI's management of Chris-Craft didn't help. "New York was raising prices but not developing any new product. As a resuIt, it had to shut down plants," explains Genth. "Dealer morale suffered as the company shrank and other manufacturers became more aggressive." Hoping to turn the company around, CCI brought in a series of presidents. ("We had six of them under CCI, " tallies Houser.) Geuth, a flamboyant, retired fighter pilot who had already bailed out two other boat companies, was the sixth and final choice.

He introduced an expanded sportboat line to prime Chris-Craft's cash flow and began to update its cruisers. But he soon realized that he was fighting a losing battle. "I kuew there was no way on God's green earth that CCI would ever make a go of boats," he explains, "so I told the board, 'I'll clean the company up for you . . . and my suggestion is that you sell it, because you don't need to be in the boat business."

Genth trimmed the company's payroll, sold off inventory, and increased sales, generating a small profit in fiscal 1980 ($50,000), the first CCI had seen, and, shortly thereafter, CCI announced that it was selling the boating division.

Approached by Fort Lauderdale businessman WaIter Schumacher, Genth was persuaded to become one of the buyers (along with Schumacher, Hilton Head businessman G. Dale Murray and attorney F. Lee Bailey). The $7.8 million sale (NAFI had spent $40 million in 1960) was concluded on December 4,1981.

Since then, Genth has set Chris-Craft on a course that he -- not some distant and indifferent corporation -- has charted. He has signed on more dealers, plans to reintroduce an aluminum line, hired legendary designer Charley Morgan to do trawlers and motor sailers, and is moving into houseboats. The result: "We did about $2 million in profits on $60 million in sales our first year out," Genth reports proudly, "and expect to do $93 million next year, with profits in excess of $5 million."

As far as he is concerned, the less said about his ex, the better.