The Rider Tyre Acquisition
Content
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THE RIDER TIRE ACQUISITIO
In 1972 Rider Tire Company purchased the physical assets of the Collington 'hire plant of Trenton, New Jersey. Collington Tire was founded in 1925 by John F. Collington and remained a family-held corporation until the sale. Under pressure from major the firm pricing policies, Rider president Wilton Collington (John's son) in 1963 had decided to stop producing Collington's diversified tire line and concentrate on military tires. The firm continued to market a line of passenger and light truck tires that were produced by another small firm, under the Collington name. The company realized unexpectedly substantial profits as the Vietnam War escalated. This, however, created two problems. First, in order to meet their government contract obligations, Collington found it necessary to give in to greater and greater union demands in order to avert a costly strike. Second, the company needed to expand its facilities. Although land was available in the countryside near "Trenton, Wilton chose to build three extensions onto the existing plant. The extensions were inefficient, based on present-day manufacturing standards, but Wilton was opposed to borrowing money for a complete plant relocation. He had already borrowed heavily to pay off the inheritance tax on his father's holdings. He also realized the war would not last forever, and the company would soon need to reduce production while making the conversion to new products. As the war began to wind down and contracts diminished, Collington attempted to fill excess capacity by building light truck and passenger tires for the private brands market. Unlike the government market, this was an extremely competitive area. Collington underestimated the cost of new curing and building equipment needed for these tires and the impact of recently imposed government testing requirements. Within a short time, the company was losing money on its passenger tire business, which was no longer offset by cost-plus military contracts. The company made several attempts at merger and finally outright sale. One look at the wornout facilities convinced most of the major companies to stay away. Rider's offer to buy the physical assets was Collington's last resort. The Rider Tire Company The Rider Tire Company was also a privately held company, about the same size as Collington. It was a primary producer of specialty tires used on everything from lawn mowers to dune buggies. Located in Cadillac, a small town in northwest Michigan, Rider obtained its employees from the local population. The company was respected in the industry for its ability to compete successfully with the corporate giants of the rubber industry. Rider had been planning an expansion of its facilities for over two years, because a full 40 per cent of company sales was being produced at other firms' factories, subcontracted for marketing under the Rider name. These sales produced only 3 per cent return on investment, whereas the company could realize a 12 per cent return if they had the facilities to produce the tire themselves. Suitable expansion sites were being investigated in North Carolina, where labor and land rates were attractive. Expansion plans and the firm's success were largely attributed to the abilities of one man, Garland Pierce.
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Garland Pierce
Garland Pierce, age forty-seven, was married and had a son and daughter. He was taller than average, and quite thin. His blue-gray eyes tended to look through rather than at people and were in contrast to his boyish features. He had been brought up in Cincinnati and had earned a business degree while residing at home. He was an average student, being generally not interested in courses he did not consider relevant. He was active in campus politics but declined the nomination for class president. His reasoning was that he wanted to devote his efforts to becoming first-string center on the basketball team, a goal he never attained. After college, Pierce began working as an industrial engineer in the Thomilinson Corporation furniture factory in southern Michigan where he was recognized as a "comer." Within two years he was production manager of the firm; within eight years he had been made vice-president of manufacturing. Pierce developed a reputation as an unrelenting taskmaster at Thomlinson. His outspoken manner and abrupt rejection of poorly conceived ideas made Inns both respected and feared. Managers who reported to him learned quickly that they were expected to share Pierce's management philosophy as well as his unrelenting drive for success in all undertakings. Pierce was with 'Thomlinson for ten years when he met Dave Sumner, the president of Rider. Stunner recognized Pierce's abilities and in 1965 persuaded hint to join Rider as vicepresident of manufacturing at a considerably higher salary than he had been earning at Thomlinson.
Larry Rider During the five-year period prior to Pierce's starting with Rider, profits had declined steadily to the point that the company was just breaking even. Its principal stockholder and chairman of the board, Larry Rider (the founder's son), began taking an active interest in the company late in 1966. After lengthy discussion with top management, he was moved to action. A complete reorganization was begun in which several top management people were fired, including Dave Sunnier. Larry Rider took over the company presidency in addition to his duties as chairman of the board. Garland Pierce was made senior vice-president of manufacturing. In 1968 Pierce was elected as a member of the board. The Acquisition Over the next three years, Pierce distinguished himself as one of the leading union negotiators in the tire industry. Within the Rider Company, Pierce was considered an adept planner; his authority at Rider was rarely questioned by anyone, including Larry Rider. Rider was content to handle corporate public relations with dealers and the media, and let Pierce run manufacturing. One morning in January 1972, Pierce received a call from Wilton Collington. Collington had contacted Pierce six months earlier with a merger offer, but Pierce had turned him down. Now with the last of Collington's other merger possibilities gone, Collington suggested a sale of the company. Pierce declined, but offered instead to buy only Collington's physical assets. Collington had anticipated Pierce's offer and had decided to accept the proposal as a last resort. That afternoon, Pierce sent his plant engineer and production manager to Trenton to look over the facilities and equipment. Within two months Pierce had received the board's approval, and the sale was completed. Rider bought the land, buildings, and equipment for less than the equipment alone would cost on the used equipment market.
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On the first Monday in April 1972, Collington workers arrived to find the gates closed and locked. Workers were told by Collington top management stationed at the gate that their personal effects, severance pay, and pensions would be sent to them at their homes. At the next board meeting, Pierce made a presentation outlining a contingency plan for the Trenton plant. Ile believed the plant could be reopened on a profitable basis if a new union contract could be negotiated drat would substantially cut the salaries and benefits formerly paid by Collington. Pierce reasoned that negotiations for land in North Carolina would not be completed for another month and a new building could not he erected before the beginning of 1973. The new plant would cost five times the amount paid for the Collington acquisition. Pierce concluded by saying:
“I don't intend for this to be a permanent solution. The plant is inefficient and operated at high cost. Its only advantage is that we can go into production within two months and be that much further ahead. In three years, when the next contract tunics up, we can he ready to move out if the union shows signs of making outrageous demands.”
As expected, the board (which was comprised of a majority of Rider executives) gave its approval, contingent on the negotiation of a new union contract.
Reorganization
The union was less than happy with Rider's proposal, but Collington had been the largest rubber company in the Trenton area, and its closing severely reduced the union's membership. The union was impressed by Pierce's open style and obvious abilities. It even agreed to allow Rider to rehire only the Collington employees Rider was certain had not been troublemakers. The union, however, issued a final warning:
These wages may be acceptable in upper Michigan, but are below standard in Trenton. You may find it difficult to get any of the old-timers to return, or hire new workers for that matter.
Pierce had hired John MacDonald as his special assistant three months before the acquisition. MacDonald had been the plant manager in a small tire firm in central Michigan. Pierce approached MacDonald with the idea of making him plant manager when the North Carolina deal was completed. MacDonald had readily agreed. He had been brought up in Georgia, and jumped at the opportunity of returning to the South. John, age thirty-five, had an engineering degree from Georgia Tech, and had been a standout on its football team. He had begun work at a major tire company in Akron and had advanced to production manager at the company's Iowa plant before accepting the position in central Michigan. In previous management positions, John was well liked by his subordinates for his easygoing manner and openness with all people. MacDonald encouraged worker participation in making decisions that affected them. To familiarize himself with the concerns of his workers, he often joined them for informal discussions during coffee breaks. John attended church regularly, and was devoted to his wife and two boys. He took the boys to sports events and played with them at every opportunity. He was less happy about moving to Trenton, but reasoned the situation might be temporary. In any event he was determined to try his best. The remainder of the Trenton staff was not as easily hired. Without adequate additional production, supervisory, and technical staff at Cadillac to staff the Trenton plant, the decision was made to hire back all the Collington technical stall still available, and some of their production super-visors. Pierce wanted to make sure the plant was started properly with Rider's philosophy and proven record of success. Most of the individuals at
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Cadillac who had the necessary experience rejected the offer when approached for transfer. As a trade off, Pierce decided to transfer younger staff members who were considered competent in their fields, but had no previous management responsibilities. Pierce reasoned that their aggressiveness would compensate for their lack of experience. Those who were transferred from Cadillac received a 20 per cent salary increase. Pierce also believed that these new managers could get all the help they would need from the experienced people remaining in Cadillac. (A list of the important Trenton personnel in major management positions is given in Table 1. The new plant organizational structure is shown in Figure 1.) Rider had maintained a policy of testing both white- and blue-collar workers before hiring. The blue-collar workers were required to take standardized tests that gave an indication of mechanical aptitude and personality profile. In addition to personality profile, secretaries and clerical employees were given spelling and basic mathematical ability tests. These were generally conducted in the office, and acceptance was based upon a minimum test requirement that the company had correlated with job performance. White-collar workers above the technician level were sent to East Lansing, where they were tested for one or two days by a private testing institute. The results of the test and the psychologists' recommendations went into the employee's personnel file for future reference.
Plant Operation Trouble began the second week after start-up when several of the rehired Collington workers walked off the job to protest work conditions. MacTABLE 1
Jim Hunter Age 31 Position Technical Manager Background Had been with Rider for three years as a tlire engineer. Prior to that had five years experience with an Akron tire firm. Had been with Rider six years as a maintenance foreman. Two years of college. Hired directly to the Trenton plant from a carbon black firm where he had been assistant to the personnel manager. Had been with Collington for eleven years, most recently as building room foreman. No college. Had been with Collington for twenty-six years, most recently as vice-president of sales. Had been with Rider three years as an industrial engineer.
Bill Wagner Mike Smiley
32 3 7
Plant Engineer Personnel Manager
Dick Shiner 9 Gene Wiley 5 Brian Yamokoski 8
2 5 2
Production Manager Automotive Sales Manager Industrial Engineer
Donald notified Pierce, who in turn instructed MacDonald to lire the violators and not let them hack in the plant. He then notified the union of his actions. The union complied with Pierce's decision. Finding new workers to fill these vacancies and the remaining available
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G. Pierce Vice President – Manufacturing
J. MacDonald Plant Manager
Jim Hunter Technical Manager
Bill Wagner Plant Engineer Maintenance
M. Smiley Personnel
Dick Shiner Production Manager Line Supervisors
B. Yamokoski Industrial Engineer
O. C
Lab
Eng.
Fac. Serv.
FIGURE 1. Trenton plant organizational structure. (Note: Gene Wiley, Sales Manager, moved to Cadillac).
positions was difficult. The low wages generally attracted only minority groups from the central city; 90 per cent were unable to pass the written or medical tests given. Of the applicants remaining, only one-half showed up for work. One in five hirees continued to return to work after his last six weeks on the job. When contacted by Mike Smiley, former employees generally stated they quit because the pay was too low. All new employees were put on trial for their first ninety days on the job. Workers who failed to meet production quotas by this time could be fired or moved to a new position at the company's discretion. In the latter case, the transferred employee would begin a new ninety-day trial period. The plant was not designed to enable a marginally adequate work force to maintain three shifts for five months after plant start-up; production workers were therefore asked to work double shifts to make up for lost time. By that time many of the old Collington employees had found higher-paying jobs and had left. In many cases inexperienced workers were left to train the newly hired employed. The production defect rate ran as high as 10 per cent of production totals. The Maintenance Department was the most difficult group to staff. Qualified mechanics and electricians were being paid 20 per cent more in other industries within Trenton. But Pierce believed the company could not meet this demand without causing production workers to demand higher wages too. In addition, it would create too large a differential between the two Rider plants.
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Breakdowns became a daily fact of life. After repeated calls to the beleaguered plant engineer, frustrated supervisors told production workers to go back to work if the machine would still run or shift to another task. The breakdowns and constant shifts to new jobs extended the learning period for the workers and reduced their individual productivities, monitored daily by Brian Yamokoski. MacDonald and Pierce talked daily by telephone. MacDonald kept Pierce informed of equipment breakdowns, production achievements, and productivity of the new workers. It was generally agreed that the start-up was taking much longer than planned, but that there were extenuating circumstances that hadn't been considered. In early November 1972, after the close of the fiscal year, the profit-loss statement showed that the Trenton plant had dragged profit down further than management's worst expectations. Pierce disliked giving excuses as notch as he disliked accepting them. Ile was determined that the plant would begin producing near its break-even point within the next two quarters. Up to this time, Pierce had rejected a sales request to start up a line old passenger tires at Trenton. Sales had received several calls within the past two months from a large discount house eager for tires. These tires could be produced on the old Collington equipment and cured in molds owned by the discount house. Pierce considered this and reasoned that if the specialty tire production remained constant and the passenger line started, the plant would break even. He gave in to pressure from the Sales Department. A task force of Cadillac personnel was organized. It was charged with getting the new product lime into production while holding present production constant. The task force was composed of the Cadillac plant engineer, technical manager, production manager, a production scheduler, six maintenance men, and one foreman from each department to aid in training. The group stayed one month at the plant. Time spent at Trenton was considered "banishment," so each member of the task force was flown home on week-ends to alleviate this feeling. The task force succeeded in starting up the passenger tire line and actually increased production of the four specialty lines by 10 per cent. Although everyone at Trenton recognized the task force's contributions, few were sorry to see the group return to Michigan. One production foreman summarized the general feeling:
“They descended on us like a conquering army and treated us like a bunch of incompetents.”
By February production had declined 15 per cent from the previous high, and the first shipment had yet to be made to the discount house. Workers and supervisors were asked to work on Saturdays and then on Sundays. Unfortunately this increased absenteeism on straight-time days by as much as 10 per cent. John MacDonald's daily conversation with Pierce became more argumentative. MacDonald had presented a program to Pierce that would expand the production work force above the minimum level needed. The program would expand the production and maintenance staff to compensate for the number of people in training. In addition he proposed hiring qualified supervisors from other rubber companies. Rider would need to pay them accordingly. He also believed the workers should participate in more decisions, and their opinions should be solicited. Pierce disagreed. First, there was no money available to hire excess workers or experienced supervisors; personnel would have to come out of either the Cadillac or 'Trenton organizations. Pierce lectured MacDonald:
“John, there are only three things to managing people: tell them what they have to do, be certain they know how to do it, and follow up to see that it's clone. Participative management is sharing your responsibility with the worker. Once int r oduced, you'll never he able to make a decision without its being questioned.”
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By early April results of the second quarter showed the company had lost more ground. There were several environmental factors which made the loss appear worse than could be attributed solely to production. The prime rate, fuel costs, and raw materials costs had all increased, while the company's tire prices were held in the price freeze. Nevertheless, it was apparent no real improvements had been made in Trenton. The attitude toward Pierce by both the board and the banks began to be strained. Pierce took decisive action. On April 8 Pierce arrived in Trenton and called the department heads together:
“I am sorry to announce that I have terminated John MacDonald. John has tried hard here, but we keep losing money. I think John was misplaced. He'd make a good plant manager at a settled plant. But this plant calls for innovation and a firm hand, and John doesn't have either. I'm not going to name a successor immediately. I'll be staying at the plant for three or four days a week, however, so you'll be answering directly to me.”
The more time Pierce spent in the Trenton plant, the more he realized that a great deal of time was being wasted as a result of poor scheduling of priorities on the part of the department heads. He believed their youth and lack of experience was to blame. This, he believed, could be overcome if the managers were provided with proper training in the use of planning devices such as Gantt Charts. He, therefore, worked with each manager for a full week during which time he outlined the use of managerial devices and helped the manager set up his priorities. These "blitzes," as they came to be known among the department heads, were unpopular. Pierce's presence was difficult to deal with and his visits to their offices for hours on end disrupted their work. Each manager had become accustomed to spending at least twelve hours per day at the plant, and usually worked all of Saturday and part of Sunday. 'They felt that the meetings with Pierce undermined their status with their subordinates; the presence of Pierce in a manager's office became a sign to others that the manager was "in training." Within two months, Dick Shiner was promoted from production manager to plant manager. The promotion came as a surprise to the production workers and office staff alike. One production foreman remarked:
“He never made a good foreman under Collington and he's been a pretty poor production manager here. I wonder why Pierce thinks he'll be a good plant manager? I gave Pierce more credit than that.”
Nonetheless, Pierce had been impressed with Shiner's aggressiveness, neatness, and efficiency. Although Shiner spent more time at the plant than anyone else, the staff saw him as largely uneducated, unintelligent, and incompetent. He was generally distrusted by the production foremen because, as production manager, he had skillfully passed blame for low production onto them. Production workers generally disliked his inconsistent behavior toward people and his failure to admit that he did not understand the production process. Shiner soon developed a reputation for emulating Pierce. As Jim Hunter told Brian Yamokoski:
“You can tell when Pierce has been talking to Shiner. Afterwards, Shiner will call you in, and he'll look, act and sound just like Pierce. Unfortunately, no brains; it's a recording!”
Weekly staff meetings were instituted by Pierce through a memo issued by Shiner. The staff considered this more efficient than MacDonald's method of meeting with each department head separately. But the meetings as conducted by Shiner consisted of making weekly assignments and warning the staff:
You people have to get this plant moving. We can't afford any more losses.
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In early June the discount house canceled the remainder of its order. They had not been satisfied with Rider's shipments. In looking for another supplier the discounter had been offered a complete line of new concept radial tires which would be made in the supplier's molds. The Trenton plant by this time was producing six lines of specialty tires in a full range of sizes. Pierce decided to replace the discounter's passenger line with two more lines of specialty tires and to introduce a new line of farm service tires. Jim Hunter was less than pleased, and approached Dick Shiner:
Jim: In a little over one year, we have had to develop forty-two different tires for production here. These new specialty tires will add twelve more. The farm tires are something else. There isn't a person in this company who has ever seen a farm tire produced. We've got our hands full just trying to take care of problems caused by poor equipment and poorly trained workers. The farm tires are altogether different; who's going to train the people needed for this new line? I just can't see the reasoning behind this. DICK: The farm tires are high profit. We can't afford not to produce them. If you need help, call Cadillac. Jim: I've tried that and I've been put off. Cadillac doesn't know our equipment! DICK: We'll manage. Just see that you do. Under Pierce's guidance, the specialty lines were in production by September. Development problems delayed the farm service line until mid-October. The fiscal 1973 figures published in November indicated an overall loss for the company of $500,000. In an emergency session of the Board of Di-rectors, Larry Rider outlined his plans: The banks have called for a review of our Trenton plant. In accordance with their wishes, I have hired a consultant to review the operation to see if it can be made profitable. I believe it would be beneficial if I personally spent a good deal of time viewing the problems firsthand. For the next three weeks, Rider talked with Trenton production personnel getting opinions and viewing the operation. At the end of the visit, he had a number of ideas which he talked over with Pierce. Pierce agreed to all but one, to which he objected strongly. Rider thought the farm tire program should be abolished and emphasis placed on producing passenger tires. Pierce objected. He had been relieved when the discounter had canceled his order. Pierce felt the passenger tires had caused a high loss in scrap and were too difficult to produce. He stated:
“We don’t have the caliber of people or equipment at I rennin to produce those tires. I can't see us getting back into them.”
THE RIDER TIRE ACQUISITIO
In 1972 Rider Tire Company purchased the physical assets of the Collington 'hire plant of Trenton, New Jersey. Collington Tire was founded in 1925 by John F. Collington and remained a family-held corporation until the sale. Under pressure from major the firm pricing policies, Rider president Wilton Collington (John's son) in 1963 had decided to stop producing Collington's diversified tire line and concentrate on military tires. The firm continued to market a line of passenger and light truck tires that were produced by another small firm, under the Collington name. The company realized unexpectedly substantial profits as the Vietnam War escalated. This, however, created two problems. First, in order to meet their government contract obligations, Collington found it necessary to give in to greater and greater union demands in order to avert a costly strike. Second, the company needed to expand its facilities. Although land was available in the countryside near "Trenton, Wilton chose to build three extensions onto the existing plant. The extensions were inefficient, based on present-day manufacturing standards, but Wilton was opposed to borrowing money for a complete plant relocation. He had already borrowed heavily to pay off the inheritance tax on his father's holdings. He also realized the war would not last forever, and the company would soon need to reduce production while making the conversion to new products. As the war began to wind down and contracts diminished, Collington attempted to fill excess capacity by building light truck and passenger tires for the private brands market. Unlike the government market, this was an extremely competitive area. Collington underestimated the cost of new curing and building equipment needed for these tires and the impact of recently imposed government testing requirements. Within a short time, the company was losing money on its passenger tire business, which was no longer offset by cost-plus military contracts. The company made several attempts at merger and finally outright sale. One look at the wornout facilities convinced most of the major companies to stay away. Rider's offer to buy the physical assets was Collington's last resort. The Rider Tire Company The Rider Tire Company was also a privately held company, about the same size as Collington. It was a primary producer of specialty tires used on everything from lawn mowers to dune buggies. Located in Cadillac, a small town in northwest Michigan, Rider obtained its employees from the local population. The company was respected in the industry for its ability to compete successfully with the corporate giants of the rubber industry. Rider had been planning an expansion of its facilities for over two years, because a full 40 per cent of company sales was being produced at other firms' factories, subcontracted for marketing under the Rider name. These sales produced only 3 per cent return on investment, whereas the company could realize a 12 per cent return if they had the facilities to produce the tire themselves. Suitable expansion sites were being investigated in North Carolina, where labor and land rates were attractive. Expansion plans and the firm's success were largely attributed to the abilities of one man, Garland Pierce.
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Garland Pierce
Garland Pierce, age forty-seven, was married and had a son and daughter. He was taller than average, and quite thin. His blue-gray eyes tended to look through rather than at people and were in contrast to his boyish features. He had been brought up in Cincinnati and had earned a business degree while residing at home. He was an average student, being generally not interested in courses he did not consider relevant. He was active in campus politics but declined the nomination for class president. His reasoning was that he wanted to devote his efforts to becoming first-string center on the basketball team, a goal he never attained. After college, Pierce began working as an industrial engineer in the Thomilinson Corporation furniture factory in southern Michigan where he was recognized as a "comer." Within two years he was production manager of the firm; within eight years he had been made vice-president of manufacturing. Pierce developed a reputation as an unrelenting taskmaster at Thomlinson. His outspoken manner and abrupt rejection of poorly conceived ideas made Inns both respected and feared. Managers who reported to him learned quickly that they were expected to share Pierce's management philosophy as well as his unrelenting drive for success in all undertakings. Pierce was with 'Thomlinson for ten years when he met Dave Sumner, the president of Rider. Stunner recognized Pierce's abilities and in 1965 persuaded hint to join Rider as vicepresident of manufacturing at a considerably higher salary than he had been earning at Thomlinson.
Larry Rider During the five-year period prior to Pierce's starting with Rider, profits had declined steadily to the point that the company was just breaking even. Its principal stockholder and chairman of the board, Larry Rider (the founder's son), began taking an active interest in the company late in 1966. After lengthy discussion with top management, he was moved to action. A complete reorganization was begun in which several top management people were fired, including Dave Sunnier. Larry Rider took over the company presidency in addition to his duties as chairman of the board. Garland Pierce was made senior vice-president of manufacturing. In 1968 Pierce was elected as a member of the board. The Acquisition Over the next three years, Pierce distinguished himself as one of the leading union negotiators in the tire industry. Within the Rider Company, Pierce was considered an adept planner; his authority at Rider was rarely questioned by anyone, including Larry Rider. Rider was content to handle corporate public relations with dealers and the media, and let Pierce run manufacturing. One morning in January 1972, Pierce received a call from Wilton Collington. Collington had contacted Pierce six months earlier with a merger offer, but Pierce had turned him down. Now with the last of Collington's other merger possibilities gone, Collington suggested a sale of the company. Pierce declined, but offered instead to buy only Collington's physical assets. Collington had anticipated Pierce's offer and had decided to accept the proposal as a last resort. That afternoon, Pierce sent his plant engineer and production manager to Trenton to look over the facilities and equipment. Within two months Pierce had received the board's approval, and the sale was completed. Rider bought the land, buildings, and equipment for less than the equipment alone would cost on the used equipment market.
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On the first Monday in April 1972, Collington workers arrived to find the gates closed and locked. Workers were told by Collington top management stationed at the gate that their personal effects, severance pay, and pensions would be sent to them at their homes. At the next board meeting, Pierce made a presentation outlining a contingency plan for the Trenton plant. Ile believed the plant could be reopened on a profitable basis if a new union contract could be negotiated drat would substantially cut the salaries and benefits formerly paid by Collington. Pierce reasoned that negotiations for land in North Carolina would not be completed for another month and a new building could not he erected before the beginning of 1973. The new plant would cost five times the amount paid for the Collington acquisition. Pierce concluded by saying:
“I don't intend for this to be a permanent solution. The plant is inefficient and operated at high cost. Its only advantage is that we can go into production within two months and be that much further ahead. In three years, when the next contract tunics up, we can he ready to move out if the union shows signs of making outrageous demands.”
As expected, the board (which was comprised of a majority of Rider executives) gave its approval, contingent on the negotiation of a new union contract.
Reorganization
The union was less than happy with Rider's proposal, but Collington had been the largest rubber company in the Trenton area, and its closing severely reduced the union's membership. The union was impressed by Pierce's open style and obvious abilities. It even agreed to allow Rider to rehire only the Collington employees Rider was certain had not been troublemakers. The union, however, issued a final warning:
These wages may be acceptable in upper Michigan, but are below standard in Trenton. You may find it difficult to get any of the old-timers to return, or hire new workers for that matter.
Pierce had hired John MacDonald as his special assistant three months before the acquisition. MacDonald had been the plant manager in a small tire firm in central Michigan. Pierce approached MacDonald with the idea of making him plant manager when the North Carolina deal was completed. MacDonald had readily agreed. He had been brought up in Georgia, and jumped at the opportunity of returning to the South. John, age thirty-five, had an engineering degree from Georgia Tech, and had been a standout on its football team. He had begun work at a major tire company in Akron and had advanced to production manager at the company's Iowa plant before accepting the position in central Michigan. In previous management positions, John was well liked by his subordinates for his easygoing manner and openness with all people. MacDonald encouraged worker participation in making decisions that affected them. To familiarize himself with the concerns of his workers, he often joined them for informal discussions during coffee breaks. John attended church regularly, and was devoted to his wife and two boys. He took the boys to sports events and played with them at every opportunity. He was less happy about moving to Trenton, but reasoned the situation might be temporary. In any event he was determined to try his best. The remainder of the Trenton staff was not as easily hired. Without adequate additional production, supervisory, and technical staff at Cadillac to staff the Trenton plant, the decision was made to hire back all the Collington technical stall still available, and some of their production super-visors. Pierce wanted to make sure the plant was started properly with Rider's philosophy and proven record of success. Most of the individuals at
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Cadillac who had the necessary experience rejected the offer when approached for transfer. As a trade off, Pierce decided to transfer younger staff members who were considered competent in their fields, but had no previous management responsibilities. Pierce reasoned that their aggressiveness would compensate for their lack of experience. Those who were transferred from Cadillac received a 20 per cent salary increase. Pierce also believed that these new managers could get all the help they would need from the experienced people remaining in Cadillac. (A list of the important Trenton personnel in major management positions is given in Table 1. The new plant organizational structure is shown in Figure 1.) Rider had maintained a policy of testing both white- and blue-collar workers before hiring. The blue-collar workers were required to take standardized tests that gave an indication of mechanical aptitude and personality profile. In addition to personality profile, secretaries and clerical employees were given spelling and basic mathematical ability tests. These were generally conducted in the office, and acceptance was based upon a minimum test requirement that the company had correlated with job performance. White-collar workers above the technician level were sent to East Lansing, where they were tested for one or two days by a private testing institute. The results of the test and the psychologists' recommendations went into the employee's personnel file for future reference.
Plant Operation Trouble began the second week after start-up when several of the rehired Collington workers walked off the job to protest work conditions. MacTABLE 1
Jim Hunter Age 31 Position Technical Manager Background Had been with Rider for three years as a tlire engineer. Prior to that had five years experience with an Akron tire firm. Had been with Rider six years as a maintenance foreman. Two years of college. Hired directly to the Trenton plant from a carbon black firm where he had been assistant to the personnel manager. Had been with Collington for eleven years, most recently as building room foreman. No college. Had been with Collington for twenty-six years, most recently as vice-president of sales. Had been with Rider three years as an industrial engineer.
Bill Wagner Mike Smiley
32 3 7
Plant Engineer Personnel Manager
Dick Shiner 9 Gene Wiley 5 Brian Yamokoski 8
2 5 2
Production Manager Automotive Sales Manager Industrial Engineer
Donald notified Pierce, who in turn instructed MacDonald to lire the violators and not let them hack in the plant. He then notified the union of his actions. The union complied with Pierce's decision. Finding new workers to fill these vacancies and the remaining available
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G. Pierce Vice President – Manufacturing
J. MacDonald Plant Manager
Jim Hunter Technical Manager
Bill Wagner Plant Engineer Maintenance
M. Smiley Personnel
Dick Shiner Production Manager Line Supervisors
B. Yamokoski Industrial Engineer
O. C
Lab
Eng.
Fac. Serv.
FIGURE 1. Trenton plant organizational structure. (Note: Gene Wiley, Sales Manager, moved to Cadillac).
positions was difficult. The low wages generally attracted only minority groups from the central city; 90 per cent were unable to pass the written or medical tests given. Of the applicants remaining, only one-half showed up for work. One in five hirees continued to return to work after his last six weeks on the job. When contacted by Mike Smiley, former employees generally stated they quit because the pay was too low. All new employees were put on trial for their first ninety days on the job. Workers who failed to meet production quotas by this time could be fired or moved to a new position at the company's discretion. In the latter case, the transferred employee would begin a new ninety-day trial period. The plant was not designed to enable a marginally adequate work force to maintain three shifts for five months after plant start-up; production workers were therefore asked to work double shifts to make up for lost time. By that time many of the old Collington employees had found higher-paying jobs and had left. In many cases inexperienced workers were left to train the newly hired employed. The production defect rate ran as high as 10 per cent of production totals. The Maintenance Department was the most difficult group to staff. Qualified mechanics and electricians were being paid 20 per cent more in other industries within Trenton. But Pierce believed the company could not meet this demand without causing production workers to demand higher wages too. In addition, it would create too large a differential between the two Rider plants.
6
Breakdowns became a daily fact of life. After repeated calls to the beleaguered plant engineer, frustrated supervisors told production workers to go back to work if the machine would still run or shift to another task. The breakdowns and constant shifts to new jobs extended the learning period for the workers and reduced their individual productivities, monitored daily by Brian Yamokoski. MacDonald and Pierce talked daily by telephone. MacDonald kept Pierce informed of equipment breakdowns, production achievements, and productivity of the new workers. It was generally agreed that the start-up was taking much longer than planned, but that there were extenuating circumstances that hadn't been considered. In early November 1972, after the close of the fiscal year, the profit-loss statement showed that the Trenton plant had dragged profit down further than management's worst expectations. Pierce disliked giving excuses as notch as he disliked accepting them. Ile was determined that the plant would begin producing near its break-even point within the next two quarters. Up to this time, Pierce had rejected a sales request to start up a line old passenger tires at Trenton. Sales had received several calls within the past two months from a large discount house eager for tires. These tires could be produced on the old Collington equipment and cured in molds owned by the discount house. Pierce considered this and reasoned that if the specialty tire production remained constant and the passenger line started, the plant would break even. He gave in to pressure from the Sales Department. A task force of Cadillac personnel was organized. It was charged with getting the new product lime into production while holding present production constant. The task force was composed of the Cadillac plant engineer, technical manager, production manager, a production scheduler, six maintenance men, and one foreman from each department to aid in training. The group stayed one month at the plant. Time spent at Trenton was considered "banishment," so each member of the task force was flown home on week-ends to alleviate this feeling. The task force succeeded in starting up the passenger tire line and actually increased production of the four specialty lines by 10 per cent. Although everyone at Trenton recognized the task force's contributions, few were sorry to see the group return to Michigan. One production foreman summarized the general feeling:
“They descended on us like a conquering army and treated us like a bunch of incompetents.”
By February production had declined 15 per cent from the previous high, and the first shipment had yet to be made to the discount house. Workers and supervisors were asked to work on Saturdays and then on Sundays. Unfortunately this increased absenteeism on straight-time days by as much as 10 per cent. John MacDonald's daily conversation with Pierce became more argumentative. MacDonald had presented a program to Pierce that would expand the production work force above the minimum level needed. The program would expand the production and maintenance staff to compensate for the number of people in training. In addition he proposed hiring qualified supervisors from other rubber companies. Rider would need to pay them accordingly. He also believed the workers should participate in more decisions, and their opinions should be solicited. Pierce disagreed. First, there was no money available to hire excess workers or experienced supervisors; personnel would have to come out of either the Cadillac or 'Trenton organizations. Pierce lectured MacDonald:
“John, there are only three things to managing people: tell them what they have to do, be certain they know how to do it, and follow up to see that it's clone. Participative management is sharing your responsibility with the worker. Once int r oduced, you'll never he able to make a decision without its being questioned.”
7
By early April results of the second quarter showed the company had lost more ground. There were several environmental factors which made the loss appear worse than could be attributed solely to production. The prime rate, fuel costs, and raw materials costs had all increased, while the company's tire prices were held in the price freeze. Nevertheless, it was apparent no real improvements had been made in Trenton. The attitude toward Pierce by both the board and the banks began to be strained. Pierce took decisive action. On April 8 Pierce arrived in Trenton and called the department heads together:
“I am sorry to announce that I have terminated John MacDonald. John has tried hard here, but we keep losing money. I think John was misplaced. He'd make a good plant manager at a settled plant. But this plant calls for innovation and a firm hand, and John doesn't have either. I'm not going to name a successor immediately. I'll be staying at the plant for three or four days a week, however, so you'll be answering directly to me.”
The more time Pierce spent in the Trenton plant, the more he realized that a great deal of time was being wasted as a result of poor scheduling of priorities on the part of the department heads. He believed their youth and lack of experience was to blame. This, he believed, could be overcome if the managers were provided with proper training in the use of planning devices such as Gantt Charts. He, therefore, worked with each manager for a full week during which time he outlined the use of managerial devices and helped the manager set up his priorities. These "blitzes," as they came to be known among the department heads, were unpopular. Pierce's presence was difficult to deal with and his visits to their offices for hours on end disrupted their work. Each manager had become accustomed to spending at least twelve hours per day at the plant, and usually worked all of Saturday and part of Sunday. 'They felt that the meetings with Pierce undermined their status with their subordinates; the presence of Pierce in a manager's office became a sign to others that the manager was "in training." Within two months, Dick Shiner was promoted from production manager to plant manager. The promotion came as a surprise to the production workers and office staff alike. One production foreman remarked:
“He never made a good foreman under Collington and he's been a pretty poor production manager here. I wonder why Pierce thinks he'll be a good plant manager? I gave Pierce more credit than that.”
Nonetheless, Pierce had been impressed with Shiner's aggressiveness, neatness, and efficiency. Although Shiner spent more time at the plant than anyone else, the staff saw him as largely uneducated, unintelligent, and incompetent. He was generally distrusted by the production foremen because, as production manager, he had skillfully passed blame for low production onto them. Production workers generally disliked his inconsistent behavior toward people and his failure to admit that he did not understand the production process. Shiner soon developed a reputation for emulating Pierce. As Jim Hunter told Brian Yamokoski:
“You can tell when Pierce has been talking to Shiner. Afterwards, Shiner will call you in, and he'll look, act and sound just like Pierce. Unfortunately, no brains; it's a recording!”
Weekly staff meetings were instituted by Pierce through a memo issued by Shiner. The staff considered this more efficient than MacDonald's method of meeting with each department head separately. But the meetings as conducted by Shiner consisted of making weekly assignments and warning the staff:
You people have to get this plant moving. We can't afford any more losses.
8
In early June the discount house canceled the remainder of its order. They had not been satisfied with Rider's shipments. In looking for another supplier the discounter had been offered a complete line of new concept radial tires which would be made in the supplier's molds. The Trenton plant by this time was producing six lines of specialty tires in a full range of sizes. Pierce decided to replace the discounter's passenger line with two more lines of specialty tires and to introduce a new line of farm service tires. Jim Hunter was less than pleased, and approached Dick Shiner:
Jim: In a little over one year, we have had to develop forty-two different tires for production here. These new specialty tires will add twelve more. The farm tires are something else. There isn't a person in this company who has ever seen a farm tire produced. We've got our hands full just trying to take care of problems caused by poor equipment and poorly trained workers. The farm tires are altogether different; who's going to train the people needed for this new line? I just can't see the reasoning behind this. DICK: The farm tires are high profit. We can't afford not to produce them. If you need help, call Cadillac. Jim: I've tried that and I've been put off. Cadillac doesn't know our equipment! DICK: We'll manage. Just see that you do. Under Pierce's guidance, the specialty lines were in production by September. Development problems delayed the farm service line until mid-October. The fiscal 1973 figures published in November indicated an overall loss for the company of $500,000. In an emergency session of the Board of Di-rectors, Larry Rider outlined his plans: The banks have called for a review of our Trenton plant. In accordance with their wishes, I have hired a consultant to review the operation to see if it can be made profitable. I believe it would be beneficial if I personally spent a good deal of time viewing the problems firsthand. For the next three weeks, Rider talked with Trenton production personnel getting opinions and viewing the operation. At the end of the visit, he had a number of ideas which he talked over with Pierce. Pierce agreed to all but one, to which he objected strongly. Rider thought the farm tire program should be abolished and emphasis placed on producing passenger tires. Pierce objected. He had been relieved when the discounter had canceled his order. Pierce felt the passenger tires had caused a high loss in scrap and were too difficult to produce. He stated:
“We don’t have the caliber of people or equipment at I rennin to produce those tires. I can't see us getting back into them.”
