History of Proctor-Silex, 1788 to 1972
By Arthur L. Redstone
PART IV - PROCTOR ELECTRIC—PROCTOR SCHWARTZ - 1922-1972
Colonel Walter Schwartz, returning to the company from his service in World War I (1919), held two very firm convictions: that he would 1. fortify his organization with top flight assistants; 2. expand the company's orbit into constantly widening fields. He had already made strides in #2 by widening the scope of the company beyond the confines of the textile industry into tobacco, chemicals, plywood and ceramics, but he would not be satisfied until he had achieved direct consumer marketing, although he never broadcasted this hope. The name change from PTM to Proctor and Schwartz (P&S) in 1921 signalled this desire, although in the process, it also honored Josiah Proctor and C.W. and Walter Schwartz, the men most responsible for the growth of the company. The death of C.W. Schwartz at this time elevated Walter to be head of the company, a responsibility he would carry for thirty-seven years.
Under W.M. Schwartz ordinance inspection service, he found a highly capable assistant, Captain A.O. Hurxthal, a 1914 engineering graduate of the University of Cincinnati. Hurxthal owned an alert, perceptive mind and in field inspection, he had no patience with stodgy go/no-go type of decision. Where rejections ran high, he wanted to know why. Perhaps the standard was capricious. If not, he probed the source of the trouble and usually recommended the remedy. Hie operation so impressed W.M. Schwartz that he determined to have this man in his post war organization.
From 1919 to 1923, Hurxthal headed research activities at P&S until he was promoted to chief engineer. Hurxthal's younger brother, Fred, believed that the degree of "brownness" of a piece of toast would always be determined by its surface temperature. He proved this by leaving bread slices in an oven for long periods at various fixed temperatures. Therefore, all he needed to assure the desired color was to control the surface temperature of the toast while in the toaster.
With Fred's permission, A.O. Hurxthal took steps to produce the first thermostatic toaster on his own, hiring a P&S machinist on spare time, although W.M. Schwartz permitted him the use of company tooling. They, of course, made scores of revisions before perfecting a unit that really worked. A writer recalls fifty years ago seeing Mr. Hurxthal lean over a milling machine to point out to the operator just where to mill the next slot. The first successful model he completed in 1923 and applied for a patent in 1924. Walter Schwartz, an interested bystander, made no direct commitments.
The first signed agreement, in which Mr. Hurxthal was paid for an option to make his toaster) did not appear on the Proctor and Schwartz books until late 1925. However, since a saleable model toaster was displayed at the Sesqi-Centennial in mid 1926, there must have been sizeable tooling and pilot production in 1925. The exhibit, in a colonial setting presenting a pleasing six inch square box about three and a half inches high, with a tiny red light in its hinged top, was the first Proctor appliance. Charles Ellison, reporting to Mr. Kershaw, vice president, presented the Sesqui exhibit
In 1926, the Electric Co., a department of P&S, had practically no organizational structure. Sales were carried on through department stores and appliance distributors by W.M. Schwartz himself, Ben Frazer or by some personable machinery salesman drafted for the occasion. With 1927 shipments totalling $15,000, not much of a sales force could be supported and at thirty toasters per day, the production program must have been miniscule. A small assembly group on the fourth floor represented the sole unit in the shop dedicated to making toasters. Mr. Hershey, plant manager, headed all toaster manufacturing, and the parts were fabricated in the various P&S shops. A few tools and dies represented their total capital equipment and heavy stampings were subcontracted.
Fred Fulforty (P&S methods) spent lots of his time on toaster tooling and George Whitehead on planning. With the establishment of a divisional organization, both of these men became full time toaster employees. Fred Bittenger, an inventive tool maker, headed model improvement and testing, assisted by Fred Hurxthal. This sequence to tooling, make and testing would be the life story of the company, always trying to reach that optimum combination of beauty, economy and durability. It seemed that every step taken to improve one of these functions only worsened another.
A.O. Hurxthal made it clear that, other than consultant, he did not desire an active place in the electric organization, and the signals were clear to Schwartz that he must build his staff from scratch. Accordingly, he selected Joseph Tiers Jr. in 1927 to head sales and generally coordinate toaster activities. A highly personable nephew of Schwartz, in his mid-forties, Joe had twenty years of machinery sales experience. He exuded charm and persuasiveness, although very little taste for detail. Sales tripled to $50,000 in 1928. Cumulative loss reached $350 million.
Management was now convinced that the Electric Division must be supplied with its own organization dedicated only to appliances, in its own house and with its own facilities. Too often in the hybrid organization, critical manufacturing facilities and manpower were preempted for the parent outfit. Accordingly, P&S set up Proctor and Schwartz Electric Co. as a subsidiary issuing 500 shares of stock, 200 each to W.M. Schwartz and J. Tiers and 100 to Fred Kershaw. These three men comprised the first board. The mere formation of a corporation, in itself, solved no problems and, although sales increased by twenty-five per cent, the annual loss hovered at $150,000. Now cognizant that it would take too long for the new company to develop its own patents, tools and techniques, they decided by the end of 1928 to buy the Cleveland concern of __________.
LIBERTY GAGE AND INSTRUMENT CO.
Established in 1914 Liberty originally specialized in electrical instrumentation. About 1919, they introduced a low priced hot plate that proved a big seller and then followed with a non-automatic toaster and a waffler. In 1925, Liberty was approached by Joseph Myers, a twenty-seven year old independent inventor, who held a patent on a thermostatic iron. He had developed this unit entirely on his own, having made 100 of them almost by hand in a small Jackson, Mich. machine shop. Lacking the capital either to make or to sell this iron, he had tried to interest the large manufacturers, with little success. Hotpoint said that the industry was not ready for it. American Beauty explained that they had worked on the idea and found it impractical. Landers Frary rejected it because it would not work on D.C.
In desperation, Joe turned to Liberty who bought the patent and retained him as a consultant. In the latter role, he developed for Liberty a line of switches and oven controls. Joe never held a position at Liberty which was operated by Ernst Zimmer, president and sales manager, and Lawrence Effirth in manufacturing. Liberty did fairly well from 1925 to 1928 but had neither the capital nor the organization necessary to properly make or to market a product as potent as their automatic iron. Accordingly, they accepted the P&S offer of $70,000 for ninety-one per cent of their stock.
After acquiring Liberty, P&S proceeded to physically incorporate them into the Philadelphia plant site but in a separate building. They were determined to bring from Cleveland only a limited amount of equipment and very few of the personnel. At this time, the capital was increased to 3000 shares of $100 each, 2800 held by P&S and 100 each by Zimmer and Effirth. The first officers, W.M. Schwartz and Fred Kershaw (president and secretary), with no salary, and Vice President Joseph Tiers ($7800), E. Zimmer ($5200) and L. Effirth (5200). The first board consisted of these five men plus A.O. Hurxthal. The company set aside from its reserves $350,000 in preferred railroad stocks to fund a four story 36,000 square foot building at the corner of 7th and Tabor The completion date of the building coincided with the 1929 stock crash. Several Philadelphia employees, such as Fred Hurxthal, went to Cleveland, but most of the organization stayed in Philadelphia working on the toaster development, styling and planning.
In December, 1928, they closed the agreement with Hurxthal, who received a nominal cash award, with the privilege of purchasing 270 shares of P&S stock at par. With only 9800 shares of stock outstanding, this represented three per cent of all shares, making Hurxthal the fourth largest stockholder outside of the family. From this time on, other than membership on the Electric Co. board, Hurxthal had little responsibility for its operation.
At the end of 1929, the parent P&S board authorized an additional diversion of $150,000 to the Electric Co., bringing the total transfer of funds to $360,000. Of this total, $200,000 credited to T&D and Good Will had little real value. The diversion of funds from the capital structure is not to be confused with annual losses, although they do bear a causal relationship. The courage of Schwartz in maintaining his faith in the Electric Co. is a tribute to his foresight, although it would be a long time before he was proven right.
The move from Cleveland into Building 12 proved complex and costly, but the problem of increasing sales, commensurate with the increasing overhead, provided more concern. Disenchanted with the result of Liberty's Zimmer and convinced that Joe Tiers needed the guidance of an experienced top level appliance man, Schwartz made a bold move. In April of 1930 he vacated the presidency and installed high pressure, Guy Hutchinson, as president, while he stepped up to board chairman. When Hutchinson was installed with full authority at the whopping salary of $2000 per month, both Zimmer and Effirth resigned. Despite the salary, equivalent to twenty per cent of the annual sales shipments, his regime was quite unproductive of anything but added expense. In exactly six months, his salary received a fifty per slice and by the end of the year, he resigned. W.M. Schwartz returned to the presidency. In the middle of the year, Bill Battersby of P&S accounting replaced Kershaw as secretary/treasurer, a job he would hold for twenty-five years.
After Liberty's move from Cleveland, Proctor retained Joe Myers, first as a consultant and then full time, to head research and product development. Most of the new products of model improvements for the next twenty years would be the result of his direction. In 1930, the Liberty hotplate and toaster were dropped and their waffler redesigned to incorporate thermostatic controls. The improvement of the iron proved to be the longest and the most expensive task.
In 1931 and 1932 depression, abetted by design and production problems, continued the losses, despite the increase in sales to $160,000 and reduction of expense from $23,000 per month to $12,500. Since expense is seventy per cent of the payroll, this economy involved layoffs and deep salary cuts. W.M. Schwartz personally had to combat parent board's reluctance to authorizing another $150,000 distribution into the Electric Co. Taking a firm stand, he stated, "Everyone is working at the limit and I strongly feel that their future is very bright. Without these funds they will not be able to get out the new iron or the new waffler. To postpone these would be penny wise and pound foolish. We must just hang on another year or so and things will improve!" Right on basic thinking; wrong on the time required.
In June of 1932, the parent P&S, recognizing the practical insolvency and nonexistent credit of P&S Electric Corporation, decorporated it. The parent company absorbed all the assets and assumed all the liabilities of the subsidiary. Fiscally, the Electric Co. was left only as a sales division of P&S, bereft of all assets except patents. Organizationally, however, they continued to operate with the same delegation of authority to the officers an board. The junior company's name was changed to the Proctor Electric Division of P&S. About this time, negotiations were opened for P&S to purchase Manning-Bowman who then would absorb Proctor Electric. The deal finally fell through.
In the 1931-1932 period, the board consisted of W.M. Schwartz (president), Joe Myers and Joe Tiers (vice president), T.W. Allen (secretary) and Battersby (treasurer). By 1933, J. Tiers passed away and his place on the board taken by Walter Schwartz Jr. Now twenty-five, Walter had started with the machinery division in 1928. Foreseeing the greater potential of appliances, he shifted to that division, where he would remain close to forty years. Caldwell replaced J. Tiers as active sales manager but, in fact, Schwartz Jr. would assume executive direction of sales very shortly. The parent company recognized the importance of both Schwartz and the appliance division by assigning a seat on the P&S board to Schwartz. Schwartz's policy would be dynamic. He recognized risk and always sought to minimize it, but he believed that little worthwhile could be gained without it.
Despite the general resurgence of business in 1933, the next five years would see little change in the loss pattern at Proctor Electric. Sales volume, however, rose dramatically from 1933-1938. Sales were helped by large orders from Con Edison, Sears and GE, all taken at low prices to lift the volume. In 1933, Charles Culber took over sales under Schwartz Jr.
The five years 1933-1938 brought new items, model changes and experimentation. An oven roaster was developed; an egg cooker brought out; a hot plate marketed and various furniture supplements tried out and abandoned. The magic stand iron offered, also the first cord attached iron. In 1937, the old standby, the 1410 horizontal toaster had to be replaced by the 1430 well type toaster. The old design just could not be made at a competitive price. At the same time, the Mary Proctor name was evoked and the Neverlift Iron was begun. The company was expanding, growing, trying. New designs that seemed thoroughly proven and tested regurgitated new problems after exposure to general usage. If the item seemed basically OK, the corrections would be made to the line. If the defects were inherent to the model, it would be phased out. In either case, sizeable losses occurred. Without the parent company's support, Proctor Electric would have expired before this.
In order to set up a dependable cost-expense budget, the company retained consultants who made a lengthy survey. The company followed these schedules so exactly that heavy losses resulted and the schedules abandoned within nine months. In 1933, with no assets remaining, Liberty was decorporated. When 1937 produced an excellent year for P&S but another loss for Proctor Electric, pressure was again put on W.M. Schwartz to cease the drain on the parent company. After all, the cumulative loss now reached $1,300,000. W.M. Schwartz's reply in the minutes could have been predicted, "I can give you no magic formula that will solve these problems. These steps require time and everlasting effort, but I am sure that their difficulties will be overcome, and one day the Electric Co. will be the major producer of the corporation." His logic, combined with his control of the majority of the voting stock, carried the day. 1937 was, in fact, the turning point, and from 1938 losses did occur, but they were exceeded by profits.
1938-1940 - the beginning of profit - saw shipments soar from $900 million to $1,800 million and Schwartz Jr. installed as president of Proctor Electric. From this point on, the personal supervision of W.M. Schwartz Sr. receded rapidly. The Neverlift Iron caught on, although the peak expansion would not take place until after the war. World War II breakout in Europe in 1939 had little immediate effect on the appliance industry. by late 1940, however, the collapse of western Europe before Hitler, created shortages in chrome, nickel and various components. These materials were diverted to Britain under U.S. Government Priority System.
By 1941, appliance shipments reached three million dollars per year, fifteen times the rate of 1930 when we moved into Building 12. All the signs now read "GO!" Business in general was good; our product lines and our production system ad been well de-bugged and the organization under W.M. Schwartz Jr. functioned smoothly. The board now consisted of Henry Hild (vice president of engineering), Al Caesar (vice president of manufacturing), Joe Myers (vice president of research), Bill Battersby (secretary treasurer) plus Joe Keefe and Ira J. Williams. Roscoe Imhof, though head of sales, did not sit on the board. We were on the way to a quarter million dollar year net profit with space as the one limiting factor.
By this time, the Electric Division employed 600 on a three shift basis, under extremely crowded conditions. Congestion lowered efficiency and production and raised expense. To alleviate this condition, the board allocated half a million dollars to buy the existing 120,000 square foot building at 3rd and Hunting Park. The move cost a great deal of time and money, but the quadrupling of sales in four years left no choice. The current cycle inevitably induced inflation and the men in the shop averaged eighty cents an hour
On June 5, 1941, Schwartz Sr. told the board that Schwartz Jr. had resigned to enlist in the RCAF as a combat aviator, "While some may feel that Walt should not be leaving the company at this time, he is doing what he thinks is right and is making a sacrifice to do it." Who could have guessed that, in another six months, we would all be in it.
Sensing the possibility that civilian production might be hampered, Jack Wilson (with Ordinance and Chemical Warfare contract experience) set up at 3rd St. to bring in military contract. They shortly received exploratory orders for fuses, gun mounts and twenty mm. shell cases. Progress in this area remained slow partly because few large contracts were available and, also, the company's reluctance to divert man power and production facilities away from booming appliance orders. However, civilian production began to falter due to our inability to secure sufficient chrome, nickel or stainless steel without Defense Contract Priority Ratings. Before Pearl Harbor, there were no "freeze" orders forbidding us from making appliances. Were were just unable to fill our purchase needs. Materials were ordered further and further ahead, hoping to glean enough by sheer seniority and mass purchases. So our backlog of unfilled purchases kept escalating, while the mills gave routine replies to our please, "Your place on the schedule has been preempted by defense rated orders."
December 7, 1941 - Pearl Harbor! This was it! No more appliances. War Production Board's Limitation Order L-41, issued in February, 1942, completely forbade fabrication or material purchases of a listing of eighty appliances covering every item that we made or were likely to make. The choice was not very simple. Get into war work or get out of business. Fortunately, there would be plenty of war work for those who had the capital and the intelligence to do it. We had both.
In accordance with the freeze order, we promptly cancelled all our purchases, mostly steel. For months, the mills had been telling us that our steel orders were stalled, but when these cancellations hit the mills, they all simultaneously reported that our steel was either in the finishing department or on the loading platform. Ninety per cent of the steel was delivered in four weeks in trucks and carloads. Since most of it had been ordered to sizes which would be obsolete after the war, the great mass of it was later written off and scrapped.
With the start of the war, Jack Wilson returned to 7th St. and Kay Schwartz, vice president of defense programs, operated out of 3rd St. assisted by George Whitehead and John Powischill. Mr. Allen assumed temporary presidency during Walter's war leave. Tom James, of sales, capably handled our largest defense customer, Curtiss Wright. During the years 1942-1945, Proctor Electric shipped over $4,000,000 average per year, 2 million bomb fuses, 5 million cartridges and later 900 huge Curtiss C-46 wing flaps. Production problems centered on tooling, subcontracting and material delays. Inspection, at times, seemed unduly harsh, but there was always the thought on cartridge cases, "What if Walt's plane were downed because his gun jammed on an oversized case made by Proctor Electric."
Joe Myers, who claimed draft deferment on religious grounds, offered to resign if his action embarrassed the company, but a happy solution emerged. Joe would not touch war products but would, for the duration, concentrate on designing post war models. Mr. Allen set up a post war planning committee of Imhof, Myers and Henry Hild to investigate post war models, markets and improved plant engineering. It was largely due to this group's planning that cut the reconversion lag to a minimum. The board set up a very large reserve to cover obsolescence of pre-war inventory.
These reserves, plus taxes and renegotiation charges, took great bites out of current operating profits. In a late war year, we would show a $900,000 net reduced to $280,000 after adjustments. Walter Corson supervised renegotiation, assisted by Mr. Tyler, a white haired little Dickensian character. The first serious labor trouble broke out during the war when OPA regulations prevented us from granting a six cent per hour raise with which the company was in agreement. We made a strong appeal to the government to permit us to raise wages, to which they finally agreed. An upside down world!
With the defeat of Germany in May, several war contracts were cut back, giving Proctor a chance to prepare for civilian work, then with Hiroshima in August, set up complete reconversion. Customers were no problem, for everyone wanted appliances; the P&S board approved $200,000 for tools and machinery at 3rd St. The peak war production rate of $580,000 per month in May slid to $150,000 in September.
An appeal to OPA for a price increase for the Machinery Division was refused because the corporation as a whole was currently doing as well as in the 1936-1939 base period when Proctor Electric's operation depressed the total figure. The OPA agreed that, if the two companies were now operating separately and independent figures were available for the base period, then each application could be considered separately. This consideration, along with Walter Schwartz's safe return from a German prison camp, clinched the decision to reincorporate Proctor Electric. Starting in January, 1946, the structure consisted of 6000 shares preferred and 9800 shares of common owned by P&S. In addition, 1500 shares of common were allocated for key Proctor Electric executives who thus held about a fifteen per cent minority interest in Proctor Electric. Joseph Keefe, W.M. Schwartz Jr. and Ira J. Williams resigned from the parent board to serve on Proctor Electric along with T.W. Allen, Battersby, Caesar, Hild, Myers and Bob Oliver, who had replaced Imhof in sales.
The new organization started out with a bang, concentrating on irons and toasters accelerating shipment 400 per cent to 600,000 within six months. W.M. Schwartz Sr.'s 1937 prediction came true, for in the years 1946 to 1948 the Electric Co. produced net profits of 3 1/2 million dollars, while the machinery division could show only half as much. These three great years put Proctor in a new orbit. The post war models were essentially simple, with emphasis on high production rates to fill post war needs. The pump model of the steam iron developed after the war proved costly and not productive because of basic design defects. Eventually this model steam iron had to be abandoned.
The 1946-1948 boom collapsed in 1949. The country simply could not continue to absorb appliances at the post war rate. The $11 million shipment rate of 1946-1948 plummeted to $6 million in 1949 and even that rate built up a huge inventory surplus. We had not really witnessed an era of basically greater appliance consumption. Sixth grade arithmetic would show that, with no appliances produced in the four years between 1942 and 1945 we had seven years of demand to fill in the three years between 1946 and 1948, after which time our demand should drop to normal. We proved these figures at P&S in the tobacco dryer program cut-off, also during the four war years where our backlog in 1945 was exactly what we would have sold in the four years. Reluctant to shut down a smoothly running production line, they contacted market research consultants who said that the lull was temporary and that the accelerated demand would return. A poor report! We followed their advice, producing at full speed for four more months until our warehouse was filled by unsaleable units. Shutdowns, layoffs, inventory write-offs and unabsorbtion spilled red ink all over, and we lost $471,000 in 1949. Although not a factor of the fiscal loss, employee acceptance of the IUE spelled trouble for the following decade.
The $200,000 per year average net profit (6 1/2 per cent of investment) varied from a top $1,600,000 in 1959 down to 1/2 million dollar losses in 1954 and 1956. The 50s were years of trial and change in product lines, plant procedures and locations. At the start, they opened up Baltimore under John Millar, producing in twin plants, ironing boars and controls. Harvey Hortman followed in active control in Baltimore from 1952-1957, followed by Al Steinbach and Campagnolli. This operation produced very well despite labor problems in 1957. Actually, from 1953-1956 Baltimore shipped half of all sales. The period between 1952 and 1954 represented a low point in iron and toaster shipments, down $3,000,000, only two per cent of the irons and seven per cent of the toasters sold in the U.S. This situation stemmed partly from high production costs induced by labor troubles in Philadelphia. Desperately in need of direct hours to absorb shop overhead, the company accepted large government contracts for airframes, shipping five million dollars in this 1953-1954 period. (Twenty per cent of all sales.) Unfortunately, the net loss of $550 million on this program, combined with the low sales of appliances, produced a three year net loss of $650,000. The excellent profit on the ironing boards was tempered by the low gross on the pads which we bought. So in 1954, we opened a 25,000 square foot plant in Lansdale, Pa. under J. Moore to make the pads. They produced the batting for lining at 7th St. on a Proctor garnett line.
In 1953, management decided to improve toaster and iron production and phase out products not producing profits. Within a year they discontinued the pressure cooker, electric blankets; diverted from the Neverlift iron and organized Proctor Manufacturing Co. to produce irons in Puerto Rico. The first plant of 25,000 square feet in which they started at once and then in 1959 augmented one of similar size for caribe castings. Puerto Rico plant managers were as follows: Bingham, Brooks, Tucker, Berrer and Knorr. Operations there varied from good to poor but, generally, labor problems, language barriers and distance precluded performance that the company needed. In 1963, after ten years of exhaustive effort, the plant closed and iron production moved to Southern Pines.
In 1955-1956, with shipments up 2 million dollars a year (mostly toasters and irons), with Puerto Rico operation less costly and most of the airframe losses already written off, profits rose to $850,000 for the two years. Reports from Canadian operations were also encouraging. After a very serious strike in Philadelphia in 1957, management, upset by the extremity of their demands and the viciousness of their attacks, determined to move the toaster operation out of Philadelphia. Shortly, they contracted for a 100,000 square foot plant in Mt. Airy in western North Carolina. Toast Realty Corporation, set up for the purpose of securing the property, eventually turned the title over to a third party, who leased the plant back to Proctor. The start up problems, as usual, were great and hit the year 1957 for $500,000 write-offs. However, under Jack Instone, it soon operated profitably and continued so under succeeding managers: Fowler, Jones, Dugger and Key. Shortly following this, all operations were discontinued at 3rd St., and the administrative offices moved to 7th St. where they remained to this day.
During the decade, important organizational changes occurred. Joe Myers, who had taken an inactive part in 1951, resigned in 1957. Roger Turner, Joe's assistant, assumed active charge of research and the vice presidency in 1951, although not a board member until 1953. Roger led research until his retirement in 1967. He has remained active and is today a director of the Penn Central R.R. Research programs accelerated, reaching $350,000 per year by 1959. In 1954, Myron Fleming, P&S vice president assumed directorship on the Proctor Electric board, where his attitude generally was skeptical. He resigned in 1959. John Witmer replaced Bill Battersby, long time treasurer, in 1957 to remain only three years. Normal Miller had filled in as controller at this time. Harvey Hortman, while still in Baltimore, had been made head of manufacturing, but it was 1956 before he returned to Philadelphia as vice president in charge of all manufacturing functions. Henry Hild, vice president of engineering resigned and this function came under Harvey.
Conditions improved greatly after 1957. Employment reached 1000 and labor relations settled down with the defeat of the union in Mt. Airy and Baltimore. Canadian shipments topped a million with $100,000 net. The new steam iron sold and worked well, and a series of sales programs coordinated stamp sales, door to door and automotive and discount chains. Meanwhile, major TV programs acted as a potent back up for sales. All of these activities, supported by a lively economy and then inflated by nearly $2 million in tax carry-over and special credits, produced a banner annual report for 1959 on shipments of $18 million.
T.M. Neelands, Wall St. specialist, was currently sitting on a $1,800,000 tax carry-over at the Silex Corporation with little probability of accruing enough profits to consume this juicy rebate. Neelands' problem: to dig up an appliance company that expected to show a viable profit for the next few years. Neelands knew which restored $8 million of equity of Capital's stockholders who had given up hope of any recovery. He and Stanley Ford, president of Silex, approached W.M. Schwartz Jr., who was receptive, provided an equitable merger formula could be established. Here were the basic facts:
Since the IRS ruled that a merger between Silex and P&S Machinery would be a purchase and would kill the carry-back, it became necessary that the owners of Proctor Electric acquire the stock of P&S so that the child became the parent. With this accomplished, Proctor merged into Silex on an 8/1 split.
Frank Wolcott, in 1919 at the age of 32, started a company in his own name as a distributor of electric heaters and appliances, using the trade name Torrid. In 1924, he bought from H.M. Bridges, the Silex Co. of Malden, Mass., which had introduced into the U.S., the German vacuum coffee maker. (We were not able to secure additional information about the Malden concern, even from Mr. Wolcott Jr. who is still living in Essex, Connecticut.) The Connecticut Silex Co.began to make Silex and other appliances as a subsidiary of the Wolcott Co. with Bridges as president, Wolcott as treasurer and C.W. Turner as secretary (capitalized at $100,000). In 1928, Bridges resigned and A.M. Bouvier, a Hartford financier, replaced him, Wolcott remaining as treasurer and still head of the parent Wolcott Co. besides Silex, the company made an iron and several domestic helps. In 1929, Wolcott resumed as president of Silex and Ed Garvin became secretary, a job he would hold until 1951. Considerable expansion occurred about 1930, both in product lines and in opening up a subsidiary in Iberville, Quebec.
In 1936, The Wolcott Co. absorbed Silex decorporated it and then changed the name of Wolcott to Silex. During this period, Wolcott served as president and Wes Becher as vice president and Garvin as secretary and Oliver Ellsworth of the Riverside Trust Co. as a fiscal representative until the Proctor merger. In 1941, conversion to war work was completed. To supplement their war period income, they marketed a brand of coffee for use with their percolator. The Silex Co. shipped an average of $4 million a year during the war period, doubling their net worth through average profits of $350,000. Frank Wolcott passed away in 1944; Frank Wolcott Jr. replaced him. Shortly after this, they rented space at Circleville, Ohio and at Muskogee, Oklahoma. Wolcott Jr. remained only through 1948, guiding the company through the same "roller coaster" post war cycle that Proctor had experienced. Woodson Baldwin acted as treasurer in this period. For 1946-1947, they averaged $10 million shipments per year, netted $550,000 and nearly doubled their net worth. During the boom, they produced daily 1200 steam ons, 3000 Kwik Kup coffee makers. Then in 1948-1949 the bottom dropped out! Shipments fell to under four million with an annual net loss of $600,000, while net worth slid to $1,300,000. They wrote off a half million in excess and obsolete parts on irons and Lox In Filters. Trying desperately to produce the steam iron at a budget cost, they could not get below an 804 excess. The board voted to merge through Blyth & Co. and also to buy their Silex toaster from Proctor, although neither move materialized. They also negotiated a settlement with Corning to stretch out a quarter million dollar excess glass order, to be distributed over a twelve month period. Management liquidated the dry iron, scrapped thousands of heater elements and severely truncated their entire research program.
By this time the company's credit had been overextended and the financial members of the board insisted on a review of the company's operation by consultants. In June of 1948, Louis Chick replaced Wolcott Jr., while Lawrence Dewey, as controller, filled the duties of treasurer, formerly held by Baldwin. Conditions picked up some in 1950 but not to the satisfaction of the fiscal members of the board, who were agents of institutions holding overdue loans and who were sitting as watch dogs. The board brought in a new team with Monroe Smith as president. Harry Whitehead, vice president of manufacturing (replacing Walter Drake) plus three other financial men: Ellsworth, Jainsen and Wilde. Still unhappy with the results, the board called Tom Neelands, a fiscal expert of sick companies, who recommended that Stan Ford, president of Chicago Electric, be put in charge and given a free hand.
Accordingly, in 1952, Ford took over, first as general manager and then as president. Stan, at the time -- 1947, had come to Chicago Electric after the war, having spent years with GE. A New Englander and a Colgate graduate, he was thoroughly respected in the appliance trade as one who knew the business. However, the downward slide in sales and the inadequacy of the Silex Hartford facilities and procedures, produced a net loss of $350,000 in Ford's first year. James Logan replaced Whitehead as vice president of manufacturing while Carl Hellberg was brought in from Chicago. By now it was evident that the Silex Hartford plant was beyond redemption. Silex's real value to a highly fiscal minded board would be as pawn for a merger. Since Ford was brought from Chicago Electric to Silex, a merger must have been a consideration. The heavy write offs and losses incurred in 1952 certainly enhanced the attractiveness of Silex as a merging partner. In February of 1953, Silex secured control of Chicago Electric by obtaining transfer of 385,000 shares (seventy-eight per cent) of that company from El Cord, the prominent auto maker.
In 1945, Cord assumed complete control of the company and Howard Ames replaced the elderly Preston as president. Stan Ford came in as vice president of sales, Harry Kimelman was promoted to general superintendent. In 1948, Ford ascended to the presidency. Adam Hepp, who came to Chicago Electric in 1946 shortly after graduating from DePau University took over sales managership under Ford in 1953. Len Hoyle, formerly with Republic Steel, joined the accounting department in 1944 at the age of thirty and rose to chief accountant and then controller by 1956. Although the Silex-Chicago merger occurred fiscally in 1953, Hartford and Chicago operated separately as the eastern and western divisions, Logan in charge of Hartford operation and Oetjens in Chicago. Each plant shipped around 3 1/2 million and made a satisfactory profit.
It was soon decided, however, that since it was not feasible to modernize the Hartford plant and organization, the less profitable items should be dumped and the rest moved to Chicago, retaining the corporation headquarters only at Hartford. The plant there would be liquidated.
Silex maintained that name of Chicago Electric as a division of Silex for three years and then dropped. When Silex finally moved out of Hartford in 1957, the lines not moved to Chicago were just dropped or sold at the best obtainable price. Today the percolator is the only direct descendant of the Silex line. Besides toasters, Chicago produced freezers and laundry and garden equipment. In 1955, Silex, with an investment of around a million dollars of preferred stock, took over a Philadelphia company.
Started in 1864 by T. Henry Asbury (1840-1907), a Henry Disston apprentice, the company first produced a molasses pump for discharging barrels. In 1866, they incorporated and moved to 3rd and Dauphin Sts., where they operated very successfully as a maker of home and store equipment for grinding, chopping and slicing meats, coffee and fruits. They then patented a detachable sad iron and handle. This permitted reheating one iron while the other was in use. This iron proved a bonanza and at the turn of the century, they hired 1200 people, including 160 molders. They shipped $6 million dollars per year. Oddly enough, although a leader in the sad iron business as that line tapered off by 1912, it never occurred to them to make an electric iron. Charles W. Asbury (1870-1935) continued the business which included a large number of catalog items, millers, grinders, a lard press and a sausage stuffer. But in the entire line there were few innovations; Asbury was primarily a conservator. Their last successful line, a no clamp food chopper, went over so big that it caught the eye of Stan Ford, who was looking for anything that would give Silex a lift. At this time (1955) T. Henry Asbury II, anxious to dispose of Enterprise, accepted Ford's offer of preferred stock for the control of his business. Personally, T. Henry Asbury did extremely well, for he put a large share of his proceeds of the sale into the market in 1956 and liquidated it in 1967. Silex did not do as well as Asbury, for within seven years every item in the Enterprise line evaporated.
The combined Silex-Chicago Enterprise line did reasonably well through 1956 with shipments of $9 million and a modest profit. Control of the company remained with Ford, Hepp, Oetjens and Hoyle. The board, other than Hoyle, consisted of non-operating personnel: Asbury, Wolcott, Hellburg and from banking/insurance interests: Neelands, Wilbur Cowett, Oliver Ellsworth and Wilson Jainsen. The latter group were mostly concerned with the liquidity of their investment and a severe cleanout was imminent.
The entire Hartford plant and all its programs were cleaned out with large losses. The plant was written off, including inventories, patents and equipment. The vacuum coffee maker was sold to Corning; west coast warehouses were closed; vending machine and AeroMatic coffee units were phased out; MusKogee glass assembly shut down; Philadelphia land and buildings auctioned; moving expenses written off; and, finally, to make certain that no write offs were missed, reserves were set up to cover unforeseen contingencies. It all added up to a fiscal hysterectomy and, after everything was added up, the operating loss for 1957-1958 - total $1,200,000; added to $1 million special write off - a $2,300,000 reduction in net worth and a $2 million tax carry forward. Whether this drastic liquidation was an integral part of a planned tax credit or whether it was motivated by sound accounting principles is hard to say.
Silex stock, which had fluctuated between two dollars and three dollars on the American Exchange in 1958, slowly rose to five dollars by August 1959. At this point, apparently inflated by the grapevine that something was about to happen, the stock shot up to ten dollars by the end of the year when the Proctor Silex merger was consummated. With a D.V. of three dollars per share, the ten dollar bid was obviously based on hope, At the time of the merger, Silex sales subdivided into coffee makers, thirty-three percent; freezers, sixteen per cent; laundry and garden equipment, thirteen per cent each; and toasters, food choppers and broilers, total twenty per cent. Merging Silex and Proctor Electric sales on a one to two basis, the total mix would be toasters and irons, forty-four percent; ironing boards, eighteen per cent; coffee makers, eleven per cent; and about five per cent each for controls, laundry equipment, garden equipment and freezers.
The merged Proctor Silex began operation on March 1, 1960 with Walter Schwartz Jr. as president, Witmer as treasurer (but followed in six months by Stan Ford),Walter Corson as secretary, Stan Ford headed the appliance division with Roger Turner and Harvey Hortman as vice president. The board consisted of all these officers plus Joseph Carpenter, Carl Hellburg, W.F. Kurtz, Tom Neeland, Ira J. Williams and Walter Sibson. During the next six years, the only changes were the replacement on the board of Walter Sibson by J.R. Johnson and the 1964 promotion of F.J. Davis to vice president of appliance sales.
Fiscally, the merged Electric Companies (excluding P&S Machinery) fared pretty much the same in 1960-1964 as they had averaged totally in 1955-1959. $25 million a year in 1959 was close to the $30 million per year in five years after the merger. The average net after taxes of $220,000 for the five years after did not quite equal the pre-merger five year average, ignoring the million dollar Hartford plant write-off The $220,000 post merger on a $6 million worth was not adequate; however, the figures for 1965-1966 are vastly better.
Physically, the years 1960-1965 covered many changes, primarily within the pattern of product specialization. In 1962, the plant at Ibervill, Quebec moved to Picton, Ont. and Canadian shipments enlarged. Eliminated in this year were Silex laundry and garden equipment and Proctor Electric controls which were sold to RPA. These sales not only netted cash but they also yielded a fringe benefit in the higher degree of concentration on the remaining products. The company sold all the real estate in the various plants and withdrew from all operations in Puerto Rico. To replace Puerto Rico's iron production, the company had built for them and later sold and leased back for $70,000 a year a 125,,000 square foot plant in Southern Pines, N.C. This plant managed by Tucker until 1965 was later headed by A.M. Knor, W.O. Dow and Parkent.
Weeding out of unprofitable items continued. Of fifteen items displayed in the 1958 Silex catalog, only three of the same functional items are still being made. The success of the Product Specialization program on irons and toasters is shown by the rising figures for P&S share of the U.S. total:
Constantly more attention was given to the Canadian Division which would rise over $7 million by 1970 - fifteen per cent of the company's total sales. Silex management in 1951 consisted of Monroe Smith as president, Lewis Duncan as vice president and general manager and Oliver Ellsworth as board member. By 1954, Stan Ford held the Canadian presidency, Lewis Duncan still general manager, but Reg Buzzel as secretary treasurer. This organization stood firm until after the P&S merger in 1960 when the Canadian Frank Martin Co. was purchased for $100,000 or 18,500 shares of Proctor Silex. The company set up Proctor Silex Ltd. and moved, in 1962, to Picton, Ont. into a new 50,000 square foot building to house all Canadian activities. The organization, from 1963-1967, was headed by Ford and Vice Presidents Frank Martin, sales and Lewis Duncan, finance, and Gary Harris in manufacturing.
Proctor Silex in 1965-1966 experienced an upward move similar to Proctor's in 1959. Annual sales jumped to $37 million and an operating net profit of $1,600,000 before taxes. Because of an extremely liberal tax credit, the $1,600,000 was also the final profit after taxes, and eighteen per cent return on net worth. The SCM Corporation, headed by expansive Emerson Mead, constantly sought acquisition. Mead and Schwartz conferred and agreed on a one to three merger which seemed reasonable as shown:
The combined $75 million net worth of the two companies before the merger would represent a book value of about nineteen dollars per share. This was a neat increase, for $5.50 (P&S shares split) x 3 = $16.50. The market gyrations of SCM stock then and for the next three years is unexplainable. When a stock climbs 600 per cent in eight months, reaching five times net worth and six times the earning average of three years, there should be some tremendous improvement in the making to justify a ninety-two dollar quote. Actually, in the next six years, the net worth never exceeded twenty-six dollars a share. Of course, the bubble broke and the stock slid to fifteen.
The merger situation was most amazing and very pleasant to old employees who must have done some reminiscing. We knew men (not necessarily in the family) who held ten shares of PTM/P&S stock in 1903. Without any technique of any kind on their part, the stock split six to one (1906) x six to one (1921) x eight to one (1946) x two to one (1958) x eight to one (1960), so that in 1966 they held 46,100 shares of Proctor Silex, which could have been sold for $1,300,000 in 1966. These figures are factual. There must have been a lot of good management over the six decades.
From the time of the 1966 merger into SCM, all phases of the P&S machinery division operation were removed from Proctor Silex, Emerson Meade, and Paul Ellicker sat on the board (Meade as chairman) with Walter Schwartz remaining in active charge as president. Schwartz sponsored product specialization and the elimination of line that could yield neither current profit nor future growth. Proctor Silex officers consisted of Stan Ford as vice president and treasurer and Walter Corson as secretary. On the board were all the men listed above plus P.K. Schwartz of P&S and G.R. Boller and George Burns of SCM.
Shipments of Proctor Silex group (excluding Shetland and P&S Machinery) rose gradually from 43 million in 1967 to 58 million in 1972. The Canadian operation accounted for fifteen per cent of the sales. This rise in sales was accomplished, despite the attrition of lines dropped. Louis Sellick, a Fordham graduate, joined the staff as general counsel in 1966, while Adam Hepp was promoted to vice president of advertizing in 1967. Roger Turner retired as research director, followed by Ken Richards. To expand the base, the in curious disregard to production specialization, the company merged.
THE SHETLAND CORPORATION
Louis Zaiger in 1919 started signal manufacturing to make auto parts: rear view mirrors, fans and dash boards in Salem, Mass. They remained relatively small through the depression when Hunley Smith became superintendent in 1934. Bob Lappin, Zaiger's son-in-law, took over signal management in 1946 and three years later they introduced a line of floor scrubbers. For legal reasons, this line could not be marketed under the name Signal, so Lappin set up the name Shetland for their floor products; Signal continued with the old lines and name. Shetland, under Lappin, did well with their floor care products and, in 1960, they bought out the cannister vacuum division of Lewyt Corporation.
Founded by Alex Lewyt, the Brooklyn Co. made electrical and mechanical parts, including a cannister vacuum. In the early 1950s the company enjoyed growth under Lewyt with Walter Daly as vice president of sales and Arnold Wolf as vice president of manufacturing. Then in 1954, Lewyt transferred the assets and organization of the vacuum cleaner to a separate company - Lewyt Corporation - the old company continuing as Lewyt Manufacturing. Bob Lappin bought out the former company only in 1960, Lewyt remaining but one year with Shetland.
In 1962, when Lewyt had merged with Shetland, Bob Lappin was president, Beatrice Zaiger, treasurer and Marian Lappin, secretary, having succeeded Martin Levine. In 1964, with Huntley Smith in charge of manufacturing and J.B. Dugan in sales, the company hired 300 and seemed to be doing well. Shortly after this, Ray Finberg assumed a top position in sales. After SCM set up the merger with Shetland in 1967, Lappin continued to head the actual operation under Walter Schwartz. Then, Lappin, Zaiger and Smith resigned and the new board was set up with Mead, Ellicker, George Hall, Walter Corson and W.M. Schwartz as president. Rideout succeeded Smith in manufacturing at Salem and then he was succeeded by Bill Sullivan. Many problems have arisen in manufacturing of Shetland. Losses have risen and since twenty-two per cent of all company shipments are accounted for by Shetland, it is mandatory that this situation be cleared up.
Shortly after the Shetland merger, the Silex Chicago plant was shut down and replaced by one in Altoona, Pa., where freezers, juicers, mixers and small motors are made. Baltimore makes tables and vacuum cleaner parts. Mt. Airy and South Pines are still on toasters and irons. A fire in Lansdale plant brought that operation under Moore of Philadelphia, where it was finally liquidated in 1970.
On June 30, 1971, after forty-four years of service, Walter Schwartz resigned as president of Proctor Silex. At this time the company was absorbed into the Consumer Products Division of SCM under George Burns in New York. Mr. E.P. Larmer assumed responsibility of vice president and general manager of the Proctor Silex operation. Currently, at 80 million a year shipments, 38,000 employees and close to $17 million of net worth, there seems little to remind us of the miniscule operation of forty years ago. Yet, one common threat is perpetual: new difficulties crop up and new problems have to be solved. Unless we have the wit and the will to meet these problems head on, our future will not duplicate our past.
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