People knew that we were going to have a board of directors meeting yesterday, and of course they know that the market is very tough right now. So when I left the mill at 9:30 and walked toward the big back door where the trucks unload, one of the millwrights said, "I hope you're not going to close the company today."
For most of the rest of the day, I sat in our tawdry conference room at Plant One while my partners -- businessmen, consultants, smart, tough financial men -- analyzed sheets of numbers.
It is still an uncomfortable role for me -- businessman/entrepreneur. Numbers make me dyslexic, and I cringe when people say, as they do all the time, "We're in business to make money." Most of all I am surprised by what has happened.
We bought Reading Industries Inc. a year ago. It was a very smart deal. We did a leveraged buy-out of a bankrupt company we had been studying for a year. I had little to do with it. I was a Washingtonian; an organizational consultant, primarily for public agencies; a partner in our consulting firm, but little interested in the acquisitions being pursued by my more entrepreneurial partners.
I came here during the final stage of deal-making, and spent a little time interviewing the few managers left in a compariy that had been in Chapter 11 for a year. I helped plan and execute a campaign to win approval of labor-contract concessions necessary for us to afford the company. But neither my partners nor I expected me to spend much time here after the $31-million deal was made.
It was November 15, 1982, when Reading Industries became ours. Suddenly, I owned more than 20% of a company with three plants, 420 employees, a company that refined copper from scrap, extruded it, and finished it, a company that produced about 12% of the water tube made in America and had revenues of about $85 million a year. I was particularly happy for my partner Carl Knutsen, who had also worked with me at the consulting firm: becoming president of this company was the realization of his life's dream.
Then, the workers in the largest of the three plants slowed down in protest of the wage cuts they had accepted. Carl asked me to stay briefly to advise him on the transition. We began to lose money at an alarming rate. I moved into the role of consultant to the plant manager. And, to save the company, we moved the manager of that plant into a sales position, and replaced him -- with me.
People who knew me were aghast, appalled at my bad judgment and even more at the judgment of my partners. I'm not a businessman or manager. Now, five days a week, I'm in Reading, Pa., managing a huge, dirty, incredibly noisy copper mill where 205 men work, and many of the 205 are angry and belligerent. From 5 a.m. until 7 p.m., I prowl the plant, talking to people and listening to them. I hold meetings, hear grievances and endless complaints, and guide the production of 125 sizes of copper water pipe and industrial tube. It is an unlikely place for me, an equally unlikely setting for any comparatively young, aggressive entrepreneur. The smart money these days, after all, is not on companies like this one, in places like Reading. This is one of the supposedly dying communities in the old industrial Northeast, a city that did well in the past, but now hobbles along with 14% unemployment.
The smart money is in Boston, at Wang, and in California, at Silicon Systems and other similar companies searching for excellence through MBAs, MBWAs [management by wandering around], and semiconductors and software.
That is the form of entrepreneurship that is being lionized these days. When it comes to companies like this one, what the clever people and the business magazines now glorify is a domestic version of capitalist colonialism. Bring in the team of young MBAs with their pinstripes, minicomputers, and analytic minds. Turn them loose in the old colony to see what they can salvage. Get rid of the unprofitable items, sell off, lay off, and make the company quickly profitable so that it can be turned over immediately for sale.
So, people here reason, if we're smart businessmen from New York and Washington, we must be doing that. Otherwise what would we be doing here? Clearly, they believe, we're here to make a quick kill and move on to the next acquisition. I suppose we could have done that. But it didn't appeal to us. There is a tradition here. A market reputation for quality and reliability -- old-fashioned values perhaps, but ones we found very appealing. The notion of restoration was attractive to us.
My plant, known as the "Tube," really shouldn't need restoration. When it was built, 14 years ago, this was the most advanced and highest-speed mill in the country. And it is still a very good plant. But it is troubled.
On Sunday, we start the press at 11 p.m. for the third shift. It is one of three huge, 6,300-ton Schloemann presses in the United States. It was made to extrude steel, and we use it to extrude into a coil a 980-pound copper billet which we refine at another of our plants.
Last Sunday, we had an accident on the first push. The billet mushroomed into a great spill. Accidents like this are common here. They're caused by little electrical failures. No one gets hurt, but they always cause great disruptions in production.
That was only the beginning of this week. On Monday, our great annealing furnace blew out one of its vast heating tubes and was turned off for 24 hours of intensive repairs. On Tuesday, a chain broke on one of the bull blocks used to reduce the coils off the press. On Wednesday, it was a finish line where a mysterious electrical problem was causing a scratch on 740 X 020, an industrial tube, one of the most difficult to manufacture and one of the highest-margin items we make. And on Thursday, one of the high-pressure pumps used to drive the press began to vibrate dangerously, and we turned it off.
The trick, of course, is to manipulate production in the midst of such problems so that customer shipment dates can be met and so that we can reliably send tube that is always round, always the right size, and never flawed.
There are weeks with few maintenance problems, but this is not one of them. In the quiet weeks, we work on preventive projects, fabricating and welding, organizing the stock of spare parts, and planning major repairs. But many weeks are like this one, in which the millwrights and electricians dance from machine to machine, trying to maintain equipment that has been neglected for years.
The condition of this plant is the company's condition. Companies decline gradually. This one began to slip when the family that had owned it since its founding in the 1940s began to change. The company passed from father to son to son-in-law to family friend; and, in hard markets, it was sold to a man who wanted to make the company great. He wanted it to be the biggest, most successful, most modern copper-tubing company in the nation.
He imported an engineering staff from England and hired outside managers. He moved the company's offices to a modern building in a suburb of this small city. He sold machinery used to produce the small, craftlike items the company had treasured, because he wanted to do big things.
Wage bases were changed, and an ill-conceived, piecemeal incentive system got so out of hand that cheating became easy. So the men cheated. Managers in blue frocks roamed the mill ordering changes they didn't understand. Company old-timers objected, but their objections were dismissed as reactionary. Sometimes the old-timers themselves were dismissed. The people who had been brought here were big-money and big-smarts.
It didn't fit. The city of Reading is small, unpretentious -- old and, some would say, drab. The people are kind and gentle, simple and straightforward. The older employees here believed in tough work, fair pay, reasonable supervision, and benevolent ownership. This is the kind of company it had been. But after 10 losing years, nothing was left but the hard work.
In 1981, the company slid into bankruptcy, and operated under Chapter 11 for a year before we bought it. During that year, the machines of this plant and the two others, which are even older, were patched. They weren't repaired, because no one wanted to buy replacement parts. The plants fell further into disrepair, and people stopped cleaning. They felt that they didn't know from day to day if the company would live. Then we came.
We are hardly regarded as saviors. People here are too cynical to believe that. They have seen too many owners and plant managers. It is something of a novelty to have a plant manager who is also an owner. But now, after a year, they know that even ownership power is no guarantee of immediate change, and that makes them feel even more insecure.
I've been here for a year, and Carl has built a house in Reading. Still, the people in my plant don't believe that we are going to be around for very long. Still, they believe that we are lying about the condition of the company, making a quick profit, writing off losses, and preparing for a timely exit.
I went down to the end of the mill to check progress on the rebuilding of the annealing furnace. One of the millwrights working there said to me as I climbed out of the furnace, "Tell me the truth. Should I start looking for another job? Are we going to make it? Are you going to give us more money?"
Gruffly asked, but plaintive questions from a 270-pound man whose forearms are each bigger than my neck, a 48-year-old worker who started here in 1953.
The people in this mill are not Route 128 computer programmers. They are men who sweat and get rashes from the copper dust and smoke that hang in the air. They are men who hate to wear earplugs in spite of the deafening noise of this place.
The people here are mostly middle European -- German, Czech, Lithuanian. They are all men, mostly high school graduates, veterans. This is a social structure, a culture; all plants are. People are characters. They have names like Harpo, Chicken Man, Boomerang, Whip, Buddha-Belly, and Wormface. If they had more choice in their lives, they would not be spending one-third of their time here, struggling with 850-pound coils of copper. They would be hunting, fishing, drinking beer.
There are three kinds of workers here, says Phil, the 30-year-old general foreman who started in 1972. There are those who don't give a damn, don't care if the company lives or dies. There are those who work here and do a job every day because that's what they're here for. And then there are those who care.
Grant, Stanley, and Vic are three who care. Grant was a chronic absentee problem, but he was the best spinner operator in the mill. Stanley was an angry press operator who could not bring himself either to look at me or to speak to me. Vic was the best drop block operator, an aristocrat in the plant, aloof and secure, working for himself. All three were alone in the mill. All had to be persuaded over months to become foremen. But the promotion of three natural leaders doesn't reassure men here. Nothing makes them feel that they have a future.
Carl came to meet with four of the men who operate one machine in my plant, the one that produces what are right now the most profitable items we make. We said that they are running their machine at 600 feet a minute, and we are going to ask them to begin running it faster.
They looked uncomprehending, and said, "Why should we? What will we get?" Then one of them took out of his pocket three little sheets of paper. "I have a list here," he said. "I've been writing down everything I can think of that's wrong with the plant -- and your management. I think you ought to do something about these things."
Everybody in this plant has lists. A 35-year man, a finish line operator who was a shop steward until he resigned recently after having been criticized for being too friendly with me, came in to yell at me today. "If I was the manager of this plant, I'd fire every foreman in the maintenance department. You won't do that, but that's what you ought to do."
People yell at me all the time. They're angry all the time. And I am tempted a lot of the time to give in to my feelings of self-righteousness. "I am a good man. Can't you see that? What's the matter with you?"
Sometimes, regrettably, I do give in. A furnace man criticized me, snarled at me the other day for spending "his money," the money he gave up in the wage concession, to buy a scale. "You don't need another goddamn scale." And I yelled back at him, "Don't you know we need that scale to get control of inventory? Don't you know that if we don't get control of inventory we won't buy metal and we won't make tube and you won't have a job?" He doesn't believe that, of course.
A fine person came to me today to say that he wants my help in getting another job. It was payday, always a day of great dissatisfaction in the mill. He showed me his paycheck for the week, $212.35, and said, "How can I live on this? You've got influence. You can find me a job."
I tried to talk him out of it. There are no jobs in Reading, I said. You don't want to leave after 17 years. I used all the usual arguments. Wait to see if we make it. You know we're going to pay good wages. "But it's now I can't live," he said. I asked him what he needs to make, and he told me that he wants to take home $300 a week. Not very grand objectives and a little hard to quarrel with.
There are other people I wish would leave. Not everyone here is a virtuous and hardworking person, a noble worker led astray by bad management. Some are laggards, some are cynical beyond redemption. I didn't give a reprimand here for the first five months I was here; everyone got a new chance. But reprimands and suspensions have become common. Yet even those people, as full of rage as they are, don't want the company to fail. They know that there are few jobs in Reading; and those that do exist require people with more skill than most of the people here have. So although people are sour and hostile, they are also afraid.
There is a persistent rumor in the mill that the company is about to close. It replaced an earlier rumor that the company was going to close. And when the deadline for this "closing" passes, the current rumor will be replaced by another.
The wife of one of the men in the plant called me last week. She was crying because her husband, who was laid off for more than a year, is now carrying home that rumor. "You don't know me," she said, "and I know what some people say about you owners. But I hope you can keep it going."
That sentiment, shared by employees and customers who kept the company alive when it should have died, is a powerful current here. It is not merely that if we fail the people won't find other jobs -- although they won't. It is not only that after seven years without a wage increase people in the company are hungry -- although they are. It is that people here want to believe.
We are not going to close the company or sell it unless we fail. And if management skill makes a difference, we won't fail. Since coming here, Carl has toughened pricing and curtailed discounts, which are traditional in this business. He has reduced the collection times, shaving outstanding receivables by 20%, earned terms from copper suppliers, managed cash intensively, disciplined our inventories, and switched production to products with higher margins -- the industrial tube we make for the manufacturers of stoves, air conditioners, and other goods that require copper pipe.
In the meantime, this plant has gradually increased production from 350 to 550 tons a week. We're more flexible, and can switch from product to product with less disruption. We have improved maintenance, scheduling, communication, and, most of all, quality control and reliability.
Sales in the company are up 35%. We have called back all of the laid-off employees of this plant, and have even hired a few new people. The mill works 24 hours a day now, and when it is working well, its capacity is extraordinary. At the end of our first year of operation, we will show no profit, but we have had profitable months.
We know what we're doing, but we also know that skill may not be enough. Copper tubing is an intensely competitive business, and we bought this company at a terrible time in the recent history of copper. We knew that. We knew that the would be burdensome. We knew that we'd have little capital for a company that needed big investments for improvement. But we believed that skill and commitment can make a difference, and we wanted to try.
So when I returned to the mill after the board of directors' meeting yesterday, people looked at me for some hint about the critical decisions they believed we had made there. No one said anything until Gary, a superior foreman whose father and brothers worked for this company, said with a slightly embarrassed smile, "So did you do anything today that we should know about?"
There really was nothing important for the board of directors to do. The really important work is not being done there. It is being done here in the offices of Reading Industries, by our financial manager, a tough and relentless man who just joined us. It's being done by the mill scheduler and the longtime commercial sales manager, and the young woman who's working nights and weekends to think of new ways to sell higher-profit items.
Something holds these people here. Despite all the cynicism and despair, they are attached to this company, feel that they stayed here during the worst of times, and they want to see whether their efforts can make a difference.
Even now they feel there is something special at Reading. "We make the best tube," they say about an industry which, the conventional wisdom says, produces products without differentiation. "The company has been pretty good to me," they say about a company that has scarcely paid them a living wage.
Organizational culture, a concept so in vogue these days, is not confined to the supposedly "excellent" companies of the country. Every company that has existed for more than a few years has a culture, and most of those cultures have elements of value. They're not all as perfect as some would have us believe the cultures of the excellent companies are. They may even have deteriorated, as the culture of this company has.
But this culture has survived, and there is a strong belief in what this company can be. Perhaps the real challenge these days is to find companies that have struggled to survive against hostile markets and poor management. Perhaps it is those companies that offer the most promise of revival. Certainly it is the effort to revive them, to live with them, to keep them, not to sell them, that offers the rich experience and the humane challenge.