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CORPORATIONS: Through a Stone Wall

4 minute read
TIME

Tough-minded Textileman Royal Little, 58, says he got bald the hard way: by “butting into stone walls.” As boss since 1928 of Textron, Inc., he built up a $55 million firm on the theory that what the textile industry needed was a fully integrated company that produced everything from the staple to such finished goods as negligees, blouses and bedspreads. Until 1948 the theory worked well, and Textron prospered with the rest of the textile industry, but when the industry went into its postwar slump Textron’s profits turned to losses. Little found out that in the textile field, especially in finished products, it is hard to cash in on a brand name, since consumers buy according to the style of the blouse, not the brand of the cloth.

Little reversed his field, abandoned integration, and went in for diversification by buying non-textile companies. Five years ago, he ran into a stone wall of another sort—a stockholder’s suit charging that Little had set up a maze of charitable trusts which owned some of Textron’s property, and that through them, he had pocketed profits that should actually have gone to Textron. Little settled the suit by paying $600,000 back to Textron. A year ago, he lowered his head at the thickest stone wall of his career: he started a fight to 1) take over money-losing American Woolen Co., the largest U.S. maker of woolens and worsteds, and 2) merge it with Textron.

Last week Royal Little crashed through the wall. At meetings in Boston and New York, stockholders of American Woolen, as well as those of Robbins Mills, overwhelmingly approved a merger with Textron. With 13,600 workers and 43 textile and other plants, the new Textron American, Inc. will be the sixth biggest textile company in the U.S. It will have $160 million in assets, and estimated 1955 sales of some $180 million. On top as chairman will sit Little; his president will be Robert L. Huffines Jr., president of Robbins; Joseph B. Ely, onetime governor of Massachusetts and for the past nine months head of American Woolen, will be chairman of the executive committee. Said Little: “The merger was the quickest one ever accomplished. It took only one year.” Added Ely: “It was a hell of a year.”

Unbeatable Combination. That year was filled with fights, recriminations and adjourned stockholders’ meetings as American’s management tried to keep its own identity. Little finally settled the matter by buying American Woolen common stock with Textron cash and preferred stock, until he had 47% control. Meanwhile, he had also acquired 42% control of Robbins Mills, a synthetics producer with modern machinery.

On the surface, American Woolen was far from a prize catch. Once the powerhouse of the woolen industry, it saw its sales plummet in two years from $253 million to $73 million in 1953. In the past three years its losses have totaled more than $30 million. Only recently did it make a halfhearted attempt to get into synthetics; its northern plants are antiquated and its invasion of the South consisted of buying an old tobacco warehouse and an ancient mill. But Royal Little’s reasons for wanting American were plain: it has $28 million in working capital and a $30 million tax loss that can be used to offset future profits. Said a Little man last week: “Textron has the management, Robbins has the plants, American Woolen has the money.”

50-50 Split. With the money, Chairman Little expects to broaden Robbins’ synthetics markets and further the wide diversification program that has already enabled Textron to turn the profit corner again (1954 net: $1,000,000). His non-textile plants last year turned out $40 million worth of products ranging from vibration testers to radar antennas, v. Textron’s 1954 textile sales of $60 million. As for Little’s tax-free trusts (no longer connected with Textron’s control), they will be used to provide pension funds for the new company.

Little plans to keep Textron American’s northern mills producing fancy woolens and worsteds. But convinced that diversification is the only way to stabilize earnings in the feast-and-famine textile industry, he has already set up Amerotron, a sales subsidiary for all three divisions. Little will add more new products, hopes to see sales of $300 million by 1956, with a 50-50 split between textiles and other goods.

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