Industrial America's graveyard is filled with companies just like Intermatic. But then, they didn't have Jim Miller.
Spring Grove, Ill. -- weathered barns, corn-stubbled fields, a dozen or so businesses with names like Millie's Mini Golf and Winn Auto Body -- is 50 miles north of Chicago, close to the Wisconsin line. It could be 50 miles from Hagerstown or Toledo or Youngstown or anyplace else that qualifies as smokestack America. So could the company housed in the long, low building just north of Route 12, identified by the name on the water tower out back. Internatic Inc., a manufacturer of timing devices and low-voltage lighting, ought to be just one more aging, tired American business succumbing to the onslaught of foreign competition.
In 1970, in fact, you wouldn't have given two cents for its chances. That year, it lost $629,000 on revenues of $15.3 million. It was behind on its payments on a long-term loan and on payroll deductions owed to the Internal Revenue Service. Vendors, if they were paid at all, got their money in six or seven months.Intermatic's assets barely covered its current liabilities, and long-term debt amounted to better than 50% of equity. The book value of the company's privately held stock had dropped 40% in one year, falling to about $200 a share.
Today, after 16 years that have been anything but auspicious for most U.S. manufacturers, the company is looking forward to sales of $80 million (up from $73 million last year), with aftertax earnings running a respectable 4.6% of sales. Its asset/liability ratio is healthy, its debt/equity ratio has dropped to roughly 25%, and its three principal owners -- Douglas M. Kinney and his two sisters, Joan K. Seppala and Barbara K. Sweet -- have in their possession stock that is now worth, remarkably, over $6,300 a share. It is an increase that even the inflation of the 1970s can't shortchange.
The roots of both the trouble and the turnaround go far back. Arthur H. Woodward, the current owners' grandfather, founded what was first known as International Register Co. in 1891. Woodward started out making fare registers for trolley cars, later expanding his product line to include items as diverse as bombsights and vending machines. But growth was slow and profits sporadic. By the time a man named Jim Miller joined the sleepy company in 1958, sales stood at $8.1 million, with a loss of $87,000. When Miller left nine years later, sales had shot all the way up to $8.2 million -- with a loss of $108,000.
At that point in its history, Intermatic was one of the largest suppliers of timers -- for washers, dryers, ranges, and so on -- to the appliance industry. But it was running into the time-honored problems of a small company supplying a large one in the original equipment manufacturer (OEM) market. "I remember a meeting with Frigidaire in 1970," recalls Edward F. Condon, Intermatic's vice-president of engineering. "They told us that we'd get a 6%, across-the-board increase. Our salesmen were ecstatic; it was the biggest increase we'd ever gotten. But we were already losing money on the old contract, and costs and labor were going up more than 6% that year." By 1970, a calamitous investment in an OEM plant in England had brought Intermatic to the brink. In January, the bank threatened to pull the plug unless the company did something dramatic.
"Dramatic," of course, meant a new man at the helm, and Miller, then president of Litton Industries Inc.'s Jefferson Electric division, was co-owner Doug Kinney's first choice. Miller was reluctant: "I'd never seen anybody make money there, and I didn't think it could be done," he says now. "I thought it was a game they played with paper in the accounting department." But Kinney pressed Miller to take over, and found an ally in Miller's wife, Joan. "She told me, I think you ought to go back, because it's the only opportunity you'll have to build the kind of company you have in your mind."
Miller today, at 56, is invitingly avuncular, a tall man with dark, curly hair, lazy hazel eyes, and a growing jowl. Though he is chairman of an $80-million company and the holder of an M.B.A. from the University of Chicago's executive program, his roots are pure blue-collar: his grandfather was a co-founder of the Chicago Federation of Labor, and his father worked for 34 years at the end of a rope, squeegeeing the grime from the windows of Chicago schools. Miller himself came of age shortly after World War II, and did a tour of duty bouncing Douglas Skyraiders off the deck of the U.S.S. Wasp.
In July 1970, like Douglas MacArthur returning to Corregidor, Miller came back to Intermatic. Right away, things began to change.
Intermatic was out of the OEM business, effective immediately. The OEM product line and the plant in England would be sold. As a result, there would be a dramatic reduction in the work force. "In his first six months, he performed major surgery," recalls Kinney, who had given Miller a free hand. "We went from 980 to 480 employees." It was a bloodletting that Miller regretted, but one that circumstances demanded. Incredibly, the company's revenues held steady despite the cutbacks, moving from $15.3 million to $15.4 million in fiscal 1971. Earnings climbed by $1.4 million. Intermatic was in the black.
"He pulled this company out from under," says Jeanne Wehrstein, a short, sunny woman who works as a clerk on the receiving dock. "People out back knew the company was in bad shape, and they were afraid for their jobs, but all they ever heard were rumors. . . Then Jim came and cleaned house, and told us what was happening."
Miller took customers and vendors into his confidence as well. "He came right to our office and told us the whole situation," remembers Ray Neil, executive vice-president and treasurer of Tri-Pack Corp., a Chicago manufacturer of corrugated cartons."He said, 'We need boxes and we have no money. Period. We need 120 days. Period.' We said, 'We'll give you cartons until we can't borrow any more money. . . We'll go with you for 120 days." Today, 16 years later, Tri-Pack is still an Intermatic vendor.
"It was like the Battle of Britain," Miller recalls of those first frantic days -- or like living through a case study back at the University of Chicago. The job required every skill he'd ever heard about, let alone learned. He restructured the staff, consolidating positions.He called every supplier the company owed more than $10,000 to, and rescheduled payments. "If you need money, call me up and I'll see what I can do," he told them. He paid off Intermatic's small creditors; told suppliers to call him, not the bookkeeper, when they had questions about their accounts; approved all purchase orders; and signed all checks. Occasionally, when the check was destined for an unproductive sales representative, he would add a personal note ("Have you died, and not informed us?"). Inch by inch, quarter by quarter, he pulled Intermatic back from the precipice.
