The CEO Who Came in from the Cold

Tweet

"It was a very good and steady account," Rautenberg recalls, quickly adding, as a point of honor, that he always billed his Valley-branch customer 10% to 20% less for export-documentation services than he charged most of his regular commercial customers. Those services -- which include issuing airway bills; lining up export licenses; and preparing commercial invoices, customs declarations, and insurance papers -- often account for most of a freight forwarder's revenues.

"It was, for me," he says, "a loss leader. It was a volume discount. I wanted to prove to Air Asia's suppliers" -- which included the cream of Southern California's aerospace establishment -- "that I could do a good job for them. My goal was to do a service for my country and build up my business."

One problem did surface early on. The CIA-run ASF office inherited a team of union workers from the previous CIA-run packing operation, AOPS. "I needed union problems like I needed a hole in my head," Rautenberg says, recalling his concern that, with a nose in the ASF tent, the teamster camel would soon push all the way into Rautenberg's growing but nonunion work force. His fears were justified; shortly after the Valley branch opened, teamster organizers began visiting the real ASF facility and talking to employees. Worried, Rautenberg called in lawyer George Elmendorf from O'Melveny & Myers.

"I don't know exactly how they solved the problem," Rautenberg says. "But I do know they sent someone to talk with union officials in Washington." The result: the next contract between the CIA-run ASF Valley branch and the union included a provision stipulating that the teamsters would not attempt to unionize the real ASF office.

"When these guys wanted to get something done," Rautenberg says, still savoring the moment, "it got done."

Initially, most of Rautenberg's time was consumed with working out the operational details of his silent partnership with Uncle Sam, so much so, he says, that he was forced to neglect the commercial side of his freight-forwarding business. There were paperwork hassles to divert tax and customs authorities; the need to camouflage sensitive shipments, for example, led to a number of creative approaches, like the special labeling of crates whose true contents still had to be insured, requiring yet another set of documents. While ASF's annual CIA-related revenues skyrocketed to more than $40 million in the mid-1960s, its commercial revenues sagged.

Rautenberg, however, sensed a bigger opportunity. While he was losing small customers left and right, he started replacing them with more sizable accounts from the ranks of the commercial CIA suppliers who had grown accustomed to working with the CIA-run branch of ASF. "I knew that we were really two separate entities," Rautenberg says, "but the suppliers didn't know that. All they knew was that Air-Sea Forwarders was already doing a great job for them."

It was not uncommon, for instance, for a CIA-ASF shipment to be picked up one afternoon, clear customs the same evening, and be on a plane by midnight. "That kind of speed and efficiency was unheard of in the freight-forwarding business," Rautenberg notes, explaining that the CIA-owned Air Asia had a special arrangement with the U.S. Customs Service. "Their stuff moved like greased lightning," he says.

With the CIA helping to build customer loyalty, Rautenberg worked tirelessly at parlaying his growing market niche. "I made my money off Air Asia's suppliers," he says, referring to the many aerospace companies that had a variety of freight-forwarding needs not connected to servicing Air Asia or the CIA. "They sought me out." Although he was not able to offer those commercial customers the same unusually rapid service provided by the CIA-ASF branch, the real ASF was still quite a bit quicker than most of the other freight forwarders, especially when it came to shipping aircraft parts and supplies.

Rautenberg used a variety of techniques to build his clientele. Long before it became fashionable in the freight-forwarding industry, he emphasized customer service. ASF's main office ran a night shift, unusual in those days, and stayed open on weekends. Customers could drive up at any time and drop off freight or check on incoming shipments. Meanwhile, Rautenberg and his crew worked the phones constantly, soliciting business and shepherding goods around the world.

ASF began to grow in earnest, adding an office in San Francisco in 1960. In 1962 it opened a Tokyo office, mainly to expedite Air Asia shipments to Southeast Asia. Commercial customers were also clamoring for an ASF presence in Europe. "They would tell me they wanted to use ASF everywhere," Rautenberg recalls. The Paris office opened in 1965, creating a lucrative pipeline from Southern California's aerospace industry to Europe's burgeoning airlines. At the same time, Rautenberg was busy putting together a string of domestic ASF offices strategically located near the major Air Asia suppliers that now made up the core of his customer base. Additional ASF offices soon opened in San Diego, New York City, and Newark.

 PREV  1 | 2 | 3 | 4 | 5 | 6  NEXT