Machine Maker Unhinged by Sales Emphasis
The Business: Manufacturing customized machines
Closed: September 1998
Primary Causes Of Death: Lopsided emphasis on selling rather than managing; propensity for underestimating price of contracts
Clay Cooper quickly established an enviable reputation as a builder of industrial machines. The company he founded in 1989, American Dixie Group Inc., specialized in making customized machines used in food processing, packaging, and plastics making. By 1996 the company had achieved a number of milestones: it employed about 30 people at its headquarters, in Albany, N.Y.; it boasted of customers like NestlÉ and Campbell Soup; and it reportedly claimed revenues of $4 million.
In fact, it appeared for a while that American Dixie Group itself was the CEO's most successful machine--the money-making kind.
"A case study in success" is how Stephen Derby, an automation-engineering professor at Rensselaer Polytechnic Institute, in Troy, N.Y., and a former consultant to American Dixie Group, sums up the company's early years. In 1995 a local newspaper, touting Cooper's problem-solving wizardry, even compared him to famed detective Sherlock Holmes. The next year Cooper began boldly expanding his business. He relocated operations to a 75,000-square-foot rental facility, tripling the company's space, and unveiled plans to enlarge its workforce to 75 people.
Yet, as American Dixie Group committed to more and more projects, its reputation crumbled, two former employees say. They recount how suppliers began griping about late payments, and customers became incensed about delayed deliveries and shoddy workmanship. "Instead of keeping customers happy, Cooper was shooting to get the biggest contract he could, the grand slam," recalls one customer, Joe Jacobson, vice-president of operations at PCI Delvco, a packaging and thermoform maker based in Philadelphia.
Before founding American Dixie Group in his midthirties, according to local press reports, Cooper, an engineer, had worked as the research-and-development chief of Cluett Peabody & Co., a shirt manufacturer based in Troy, N.Y. From there he recruited several coworkers to join him in starting his company. As long as the business stayed small, with no more than two dozen employees in the shop and a half dozen or so projects in the pipeline, the company apparently ran well enough. But former employees say that Cooper seemed more passionate about sales than he did about the nitty-gritty of management. "For Clay it was all about making a sale," says a former employee. "He liked to wave those big [down-payment] checks around at us."
By the end of 1997, as the number of projects under way neared 20, inattention to manufacturing quality and delivery schedules proved increasingly difficult to overcome, according to Derby. "With that many projects, they ended up just trying to put out fires," he says. "You cannot survive that way."
Cooper sought ever larger contracts, gaining them with low estimates. "The projects had to get bigger and bigger because the down-payment money from one project was used to try to finish the other projects" already in the shop, explains one of the company's former managers.
Last September, American Dixie Group filed for bankruptcy, at first seeking to reorganize under Chapter 11. In October it entered Chapter 7 liquidation. About 200 creditors with $1 million in claims had to scramble for assets valued at $57,000. Among the creditors was PCI Delvco, which had contracted with American Dixie Group in January 1997 for a $400,000 machine to make construction insulation. After collecting more than $120,000, American Dixie Group missed several deadlines and never delivered the promised machine, says Jacobson.
Cooper didn't respond to requests for comment, and his lawyer declined to answer questions. Now Cooper has a new job as a manager with OK Automation Co., a custom-engineering company based in Marlborough, Mass., that acquired American Dixie Group's assets and set up shop in the same location. Cooper is a "technical-support guy" with some sales responsibility, says Owen Kellett, OK Automation's majority owner. Kellett adds that "managing the business is my job."