“He was very community-minded,” Snider told me, “so I said, ‘You know, you, Anchor, if you’re going to recruit anybody, you’re going to need good schools, you’re gonna need a good hospital.” In 1970, Hetzel and Snider organized a meeting in the hotel’s Jadite Room. Anchor executives, a couple of doctors, and Boo Miller, a prominent local attorney who’d long represented Anchor Hocking, agreed to mount a bond-issue campaign with Anchor Hocking’s full support. The bond issue passed, and the hospital was rebuilt.
In the 1970s, when the company was hit by a national shortage of cullet—scrap glass that is critical to making new ware—Anchor Hocking put out a call. Families loaded their cars with every bottle, jar, and tumbler they could spare. Lines of cars stretched across Pierce Avenue at Plant 1, and down Ewing Street at Plant 2.
When the Flints struck—and there were a couple of angry strikes—Lancaster rooted for both sides at once. Residents knew what working in a glass plant could be like, because they’d done it, or their fathers, mothers, or children had. On the other hand, they knew how important Anchor, Anchor executives, and Anchor wives were to the life of the town.
Anchor’s leaders—and the leaders of Lancaster’s other industries, too—usually reciprocated the devotion. They gave land or money or both to charities and civic organizations.
When William Fisher died in 1970, his widow gave $400,000 to build a new Catholic high school. I graduated from William V. Fisher Catholic. Today, the Lancaster High School football team plays on Fulton Field.
Some concluded that Collins was a hard man—true—and that Lancaster hadn’t gotten into his bones the way it had so many others. He had interests elsewhere. He owned race horses and spent much of his later years in Florida, where he was a regular at the tracks.
But still, he never really left. Even as a very old man, Collins liked to sit at a back table of the country club bar, where he was a somewhat imposing presence. (I met him there. When I was introduced, he shook my hand and said, “Hello, young man.” I was about eight years old.) He did give some land to the community, though the donation wasn’t publicized. Once, as he was being driven down 33, he looked out the car window at the passing farmland and sighed, “It sure is fair fields.” The skinflint reputation persisted, though, stoked by a well-known Lancaster tale: Not long before his death, in 1975, just before turning 101, his Lancaster attorney pointed out to Collins that, unlike other top executives around town, he’d left no provision for the city in his will. Collins brushed off the suggestion. “I gave them all those jobs,” he countered.
THREE
Triggering Events
July 1987
Nobody imagined it would end. In the 1970s, Lancaster watched steel mills in Youngstown, the NCR (National Cash Register) Corporation in Dayton, and the GM plant in Lordstown lay off thousands. But just as Forbes predicted, the furnaces continued to blaze at Anchor Hocking and Lancaster Glass. Stuck made molds. Drew made shoes. Diamond Power made soot blowers, and Ralston made snacks.
Collins semi-retired in the late 1950s. Fisher more or less ran the company—the Anchor Hocking board was notoriously weak—but soon decided to bring in an outsider, John Gushman, a Toledo lawyer who’d long worked for glass clients; he’d been involved in the 1937 merger between the Hocking and Anchor Cap. Under Gushman, Anchor Hocking kept growing. Profits rose. The company expanded to include more than forty plants, distribution centers, office locations, and research and engineering labs.
For all its impressive size, the company was managed like a giant family enterprise, not with the new scientific, business school techniques that had come into vogue. Gushman did turn Anchor into a modern corporation, but without “a killer atmosphere,” said Peter Roane, a longtime container division official. “It sounds trite, but it was one big family. I didn’t like all of them, and not all of them liked me, but there was no corporate brutality. We fired some people, but usually people could find their level of competence in Lancaster.”
The family ethos sometimes went deep. When Herb and Nancy George faced marital trouble that led to a divorce, Herb’s boss called Nancy and asked if she’d like him to transfer Herb out of town.
When corporate decisions were made, spouses felt free to opine. In 1978, a man named J. Ray Topper was promoted to president. Topper was not a glassman, nor was he a Lancaster man. Cursed with the hypercompetitiveness of the insecure, he soon gained a reputation around town as a man who would cheat at cards or kick his ball out of the rough on the golf course—venial sins in most places, but not in Lancaster, where people could tell you what John Gushman ate for breakfast. Still, Topper was promoted—first to vice president in charge of the tableware division, then to company president. Days after that promotion, Jim Miller—the son of Boo and also an attorney—and his wife, Sarah, celebrated their twenty-fifth wedding anniversary by hosting a party in their backyard. The wife of another executive cornered George Barber, who was CEO at the time. “Eve Burns pushed that George Barber up against the fence, and she said, ‘You’ll bring this company down! You are making wrong choices!’” Miller told me. “Boy, she was tough.”
But while life went on within Lancaster and Anchor Hocking, American business and finance changed. Big-box stores like Walmart, with their intense pressure on suppliers to reduce wholesale prices, nibbled away at Anchor’s margins. When Sam Walton realized that Anchor shipped its ware in its own fleet of Anchor Hocking trucks, from its own Anchor Hocking distribution center, thus saving freight costs, he demanded those savings be passed on to Walmart, rather than to Anchor’s bottom line.
Cheap gasoline evaporated into Saudi riyals and Venezuelan bolívars. Customers waited in lines to buy gas; stations no longer had to entice them to the pumps with a free tumbler. Brewers and food producers poured more of their product into cans, and soda companies turned to plastic for their bottles.
Anchor Hocking had long been a large exporter of glass. From Africa to Germany to Brazil, tables were set with Anchor ware. But by 1980, imports were beginning to attack Anchor Hocking at home. The French company Durand Glass (now part of Arc International) and smaller outfits in Poland and Turkey were sending cheap glass into the United States.
Anchor had also developed middle-aged corporate spread. Managers had become infamous for boozy hotel bar lunches that could stretch to dinnertime. Whereas executives had previously held meetings and retreats at the hotel, or at the lowly Holiday Inn just north of town on Route 33, they now started taking a corporate jet to Florida.
A big blow was self-inflicted by Topper. When he took over the tableware division, salesmen were paid on commission. The most productive made six-figure incomes that approached, and sometimes might have exceeded, Topper’s own. Personally galled, Topper approved a decision to turn the sales force into salaried employees—effectively mandating a severe pay cut. Many of the best left the company.
Anchor Hocking was slow to respond to these challenges, but eventually it did. In 1975, in an effort to improve margins in the container division, Gushman hired Boston Consulting to map out a strategy to help Anchor compete against container giant Owens-Illinois. One of the consultants was a freshly minted Harvard M.B.A. named Mitt Romney.
“It was probably my first project,” Romney told me. “The overall objective of the study, as I recall, was to say, ‘What can the company do to be more successful, to grow sales, to be profitable?’ I think people recognized that the industry was seeing decline in demand, number one; and number two, Owens-Illinois was such a strong, if not dominant, player. The question was: How does a smaller company like Anchor Hocking compete successfully and survive and thrive?”
There’s an old saying about consultants: They’re like seagulls. They fly in from the coast, shit on your company, and fly back. The smart boys from Harvard were not welcomed. On a tour of Plant 1, Romney was hazed when his guides paused the walk-through just as they stood between two furnaces.
“Now, we’re maybe four or five feet from a furnace on each si
de,” Romney recalled. “It’s got to be well over 120, maybe 150 degrees where we’re standing. I was thinking to myself that they were saying, ‘Okay, which of us is going to blink first?’ They were used to the heat, and, of course, we didn’t want to act like we were total newbies, so we stood there, acted innocent, asked questions about the process. We stood between these two furnaces for what seemed quite a long time, as the perspiration was beading down our foreheads and down our shirts.” The point was made. This was the life the workers led, and they did it willingly. But they didn’t appreciate tassel-loafered Ivy Leaguers teaching them about the glass business.
Change was grudging, but the company adopted at least part of Boston Consulting’s plan for the container division. Anchor sold a bottle plant in Northern California and installed new, more efficient machines in other plants.
Anchor also innovated. It had its own research, design, and engineering facility on the western edge of town near the distribution center, and engineers there were put to work developing new mold materials and glass formulations. The company raced Durand to engineer new machines with more mold stations so more ware could be made in the same amount of time, lowering the per-unit cost. A new generation of promotional outlets replaced gas stations: In 1980, sixteen million Anchor-made commemorative Empire Strikes Back glasses were distributed through Burger King franchises.
The company gained market share, thanks to the demise of smaller companies like Jeannette Glass, in Jeannette, Pennsylvania, Federal Glass, in Columbus, and the Brockway Glass Company’s tableware factory in Clarksburg, West Virginia, which closed in 1979.
These were tactics Anchor Hocking understood: Make better products, make them more cheaply, and sell more of them. In 1981, sales rose 11 percent for the year, to $953 million (about $2.5 billion in 2016 dollars). Margins and net profit continued to fall, but the company had low debt—and no short-term debt—and was able to raise its stock dividend to shareholders. (It had paid dividends for sixty-eight years without interruption.) The company employed over seventeen thousand people, about five thousand of whom were in Lancaster. It had the financial firepower to invest in the face of a changing market.
But in the dawning world of 1980s finance, none of that mattered. “They would have turned it around,” said Ben Martin, former head of the company’s international division. “But with Carl Icahn trying to buy them—well, they didn’t. You couldn’t talk about that then, but we would have been…” Martin paused and looked at a catalog of Anchor ware he held in his lap. “We would have made it.”
* * *
In the spring of 1982, a sharp-eyed employee in the company’s finance department noticed that Anchor Hocking stock—long a boring widows-and-orphans investment—was unusually active. She reported her observation. When officials investigated, they found that Icahn Capital Corporation was buying up Anchor shares.
Nobody had to tell them what that meant. Armed with borrowed money and marching under the flag of reform, Carl Icahn had recently begun his assault on corporate America. He argued that corporations had become too flabby, too clubby, too inefficient. The free market demanded profit for shareholders, but management was not making all the profit it could. Icahn would buy up enough shares to demand one or more seats on the board from which, he claimed, he could agitate for change. He was doing it all for America—and for fellow shareholders. Naturally, corporate leaders wished Icahn would go away, and he sometimes did, for handsome payoffs that came to be known as “greenmail.”
Icahn didn’t specialize in any industry. He went after Chicago’s great department store, Marshall Field’s. He attacked a textile company and a can company, and now he was onto Anchor Hocking. By late summer he owned 6.1 percent of Anchor’s shares. (He bought Owens-Illinois shares at around the same time, as part of an attack on the glass container business.) Anchor Hocking was one of the first victims of what became a wave of corporate raiding.
Ray Topper had been elevated to the CEO slot just a few weeks before Icahn began buying shares. He was precisely the wrong man in the wrong place at the wrong time: George Barber would later say his endorsement of Topper was the worst mistake of his life.
Topper called Icahn and asked for a meeting. Topper and several other company officers met with him in the boardroom in Lancaster. Icahn criticized the container division as inefficient and demanded a board seat. Instead, Anchor offered to buy him off.
On August 17, 1982, Anchor repurchased Icahn’s shares at a premium of $3.75 per share—about $3 million of profit for Icahn. “It was like taking candy from a baby,” Icahn’s deal analyst Alfred Kingsley told author Mark Stevens for his biography King Icahn.
Icahn’s raid passed quickly—and $3 million wasn’t going to bankrupt the company—but the episode ultimately changed Lancaster forever by inducing panic at Anchor headquarters and by putting Anchor Hocking “in play” by turning the old-time manufacturer to chum in shark-infested financial waters.
* * *
In 1962, distinguished University of Chicago economist Milton Friedman published the book Capitalism and Freedom. It was reviewed in economics journals—but almost nowhere else. Friedman himself acknowledged that the views he expressed in it were, at the time, far removed from the mainstream.
President Franklin Roosevelt, father of the New Deal, had died in office only seventeen years before, and John F. Kennedy, an heir to Roosevelt’s political legacy, now occupied the office. Both had won their elections against small-government conservatives; Friedman was a small-government conservative. But despite the slow gains among lay readers, Friedman’s book ended up as a founding document of what became the resurgent conservative philosophy that finally flowered in the 1980 election of Ronald Reagan.
Had he lived long enough, B. C. Forbes would have endorsed Friedman’s philosophy. As a young government economist in the 1930s Friedman endorsed some parts of the New Deal. But by 1962 he viewed it as a disaster because, he believed, it substituted government for individual self-interest. He preached an almost absolute faith in the wisdom, rationality, and rectitude of business, and a trust in the unfettered market to automatically improve the welfare of all. The free market—and Friedman, quoting British legal scholar A.V. Dicey, explicitly favored “a presumption or prejudice in favor of individual liberty, that is, laissez-faire”—was responsible for nearly all the progress the United States had made since the Great Depression. Yes, Americans were better fed, housed, clothed, transported, and educated. Class distinctions had narrowed. Minority groups were less oppressed. But all this, Friedman claimed, had occurred in spite of, not because of, labor unions, minimum wages, civil rights laws, or any government-imposed reforms. “We have been able to afford and surmount these [government] measures only because of the extraordinary fecundity of the market. The invisible hand has been more potent for progress than the invisible hand for retrogression.”
Friedman wasn’t just writing about economic well-being. He linked threats to the free market with existential threats to America itself. New Deal–like government interference in the market was of a piece with Soviet nuclear missiles. The implication was clear: To oppose his strain of thinking wasn’t just wrongheaded, it was unpatriotic.
Friedman framed some of his theories in less academic language for an influential New York Times Magazine article published in September 1970. He laid down a “Friedman doctrine,” arguing that business had only one social responsibility: delivering profits to shareholders. Businessmen who concerned themselves with “employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers” were “preaching pure and unadulterated socialism.”
“Businessmen who talk this way,” Friedman wrote, “are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”
In a fit of willful blindness to America’s own industrial and social histories—as if he had never read Ida Tarbell’s The Histo
ry of the Standard Oil Company, which exposed John D. Rockefeller’s oil trust, or Upton Sinclair’s The Jungle, the harrowing novel about the American meatpacking industry that led to the passage of the Pure Food and Drug Act—Friedman believed that a market free of government regulation “forces people to be responsible for their own actions and makes it difficult for them to ‘exploit’ other people for either selfish or unselfish purposes. They can do good—but only at their own expense.”
Friedman would have disdained Lancaster’s symbiotic relationship with its businesses. “It may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects.”
But such motives made social responsibility mere “hypocritical window dressing.” “I can express admiration for those individual proprietors or owners of closely held corporations or stockholders of more broadly held corporations who disdain such tactics as approaching fraud.”
The Friedman doctrine told every executive, financier, and shareholder not only that it was okay to make a profit, but that making as much profit as possible, without regard to some broader social responsibility, was a duty. The regulators, the unions, the environmentalists—people many executives already loathed—weren’t just thorns in the side of a company. They were un-American.
Milton Friedman was awarded the Nobel Prize in economics in 1976, for his studies of money supply theory and consumption (not business and social responsibility). Four years later, he became an economic adviser to then–presidential candidate Ronald Reagan. After Reagan’s successful 1980 campaign, Friedman served as the most prominent member of the new president’s Economic Policy Advisory Board. Eighteen years after Capitalism and Freedom was first published, the once-fringe Friedman doctrine had found its place at the center of government power.
Glass House Page 6
