Stack returned to Springfield and held a meeting with his managers. They saw three possible scenarios: Harvester would reduce its capital commitment to SRC, causing the plant to deteriorate in an agonizing process of layoffs and cutbacks; the plant would be closed; or the plant would be sold. "Then the light came on," Stack says. "I thought, 'Why don't we ask Harvester to sell the plant to us?"
Stack took the idea to the vice-president and the controller of Harvester's construction equipment division, to which SRC reported. Both men asked to participate as investors and operating officers. With Stack, they submitted a proposal to buy the plant for $6 million. While Harvester was considering the plan, Stack set about selling the idea to other potential investors. "I went to one of the biggest venture capital firms in Chicago," he recalls, "and the guy says, 'It's got no schmazzle. Redo the plan.' Hell, I was a grease monkey, and I produced a grease-monkey plan. But from all those rejections, I got better at it."
In the meantime, business conditions continued to deteriorate. By 1982, Harvester, burdened with close to $4 billion in debt, was desperately trying to stave off bankruptcy, and all signs pointed to the imminent liquidation of SRC. Seventy-six employees were laid off, and wages remained frozen at the November 1980 level. SRC's shining esprit de corps had descended to fretful paranoia."There was a lot of uneasiness," says SRC manager Robert A. Bigos. "Employees here would ask me if they should get married, if they should have a kid, if they should buy a car. I mean, it's pretty strange when someone asks you if they should get married."
To no one's surprise, Harvester soon began encouraging bids for sizable chunks of its business, including its five remanufacturing centers, which it preferred to sell as a group. As a result, Stack found himself in the uncomfortable position of describing SRC's merits to potential purchasers. "I did everything I could to help them," Stack says, "but they always wanted to know if the existing management team would stay on. I'd say I didn't know. I mean I honestly didn't know. On the other hand, now they weren't sure about their bid either."
Such niggling uncertainties did not deter Dresser Industries Inc., which bid on SRC in late 1982. At the last moment, however, the deal fell through. On the day before Christmas, Harvester informed Stack that it wanted to proceed with his earlier proposal -- but only if they could reach an agreement in one week. Stack nearly burst a major artery. How was he going to arrange financing and hire lawyers and incorporate and do everything else in one week? He absolutely had to have another month. Harvester agreed.
Stack described the opportunity before a meeting of his 12 managers, who reacted with tentative enthusiasm. "You know you want to do it," says executive vice-president Mike Carrigan, "but at times like that, you can't help thinking about what will happen if you lose your job." Nonetheless, they agreed to go for it.
Somehow, in the next month, all of the pieces fell into place. "No one remembers the Christmas of 1982," says Stack. The managers put up $100,000; the Bank of America lent them $6 million; and Harvester took back a note for $1 million. It was an all-out, mad rush to meet the deadline.
On the afternoon of Monday, January 31, human-resources manager Brown sat anxiously by his phone, waiting for a call from Stack, who was negotiating with Harvester at his lawyer's office in downtown Springfield.Since SRC did not want to assume Harvester's liabilities to employees for sick pay and vacation time, everyone in the plant had to be terminated as soon as the buyout was completed. Finally, Brown decided he could wait no longer, and fired everybody, including himself and Stack.
The negotiations dragged on into the afternoon of February 1. At 2:30 p.m., Stack called Brown. "It's done. We own it." That evening, the managers and their wives celebrated in a second-floor room above a local restaurant. "It was probably one of the most fantastic moments you could ever have in your life," says Stack. "It was total euphoria. We knew that if we started thinking about tomorrow, we might get scared."
In the next few weeks, the business literally had to be founded all over again. New stationery had to be printed, a name adopted, a corporate logo designed. More important, all of SRC's outstanding contracts had to be renegotiated, including several with Dresser Industries, which had purchased Harvester's construction equipment business and now represented 60% of SRC's annual volume. Of the 171 terminated employees, 115 were immediately rehired as fast as the paperwork could be processed -- about 30 per day.
Most important, the company had to choose a marketing strategy. According to industry observers, it chose wisely. Instead of selling through wholesalers to the thousands of job shops and assorted distributors -- the common industry practice -- SRC decided to sell only to original equipment manufacturers under private-label arrangements. With this stroke, the company spared itself a host of uncertain receivables and avoided the need to establish an extensive and costly distribution network. At the same time, SRC set out to diversify its market structure, eventually moving into four market segments: trucks, tractors and farm equipment, construction equipment, and automotive.
Meanwhile, the stakes had risen in the Game of Business, and Stack was not entirely sure the players understood the new rules. "I was frustrated because I couldn't get some people to see that it was a matter of survival," Stack says. "The question wasn't whether the johns were going to get cleaned or not. If things got down and dirty, we were going to have to come in and turn wrenches ourselves. This wasn't going to be any kind of administrative takeover."
