After the job was finally done in Kramatorsk, it was clear that Hill had not won the respect of the staff. At the suggestion of Marino and Lona the company hired a management consultant during my absence. The consultant said what we all should have known: control of pricing and terms of sale should be removed from the salesman's hands. Our problem was much deeper.
We had no chance to make a profit from the induction heating business under the situation that Rowan had created. IPE was becoming well established in the induction heating for forging business using their power supply and a fully owned subsidiary of Inductotherm. Hill continued to market the resistance heater but stayed away from induction heating. In effect he had given up Cheston's exclusive worldwide rights to induction heating.
I had spent too much time in the Ukraine. Lona had completed a vacuum melting for Howmet in England. Klingerman was in the process of completing a five ton furnace for Western Electric and working on the design for a vacuum heating facility for Wyman Gordon for a new type hot pressing process. Flynn was busy completing the design for a new melting furnace for Certified Alloys in California.
IHI in Japan decided to enter the field of vacuum melting to produce a master alloy for investment casting in Japan. Their target was the turbocharger to be used in Japanese made cars. This new requirement caused me to travel to Tokyo and stay in my favorite hotel on the Ginza.
This was the first time I met Toru Yamaguchi and his little operation was called IMM. Rowan was in Japan at the time on other business and our common sales agent Fuji invited him to attend the sales presentation. I sold a very simple melting furnace that was almost a carbon copy of the furnace sold to Firth Sterling while I worked at Ajax in 1962.
I asked Rowan to have dinner with me that evening to bring him up to date on my future plans. He agreed that a merger of vacuum melting operations with Consarc made sense and told me to work up a plan.
Cheston had earned enough money to utilize the tax advantage of the loss carry forward but my stock had not increased in value enough to cover the interest on my bank loan. Each year it was difficult to convince the board of directors to give me a bonus to pay the interest to the bank. My salary had been fixed for ten years, and inflation was eating away at our standard of living. We had already paid for the fancy building but the Inductotherm accountants still had it on their books and wanted to continue to make a return on the investment.
I wrote a letter to Rowan explaining how we could merge with Consarc. Rowan gave to green light to start the process.
Dick Hill was in California on business. His family moved there after his separation from his wife. A trip to LA was made to explain why the planned mergers would be best for all concerned. Hill did not like it at all and let me know his feelings.
Another reason for the merger was to free some cash to make a proper settlement with Jody for a divorce that would soon be a reality. My first sales pitch to the group at Consarc failed. Summer came with no result on the merger.
John Haubenstein, vice president of sales at Consarc, finally got on my side and we began to make progress. The staff had many questions about the merger, like who would go where, and so forth. Hill had settled down and saw the merits of the change. After Rowan gave the green light to the merger he stood aside to let us settle the details.
Consarc had been a thorn for Rowan over the years, beginning with his long and bitter fight with his friend and original fifty percent partner in Consarc.
Stan Myers, the new President of Consarc, sat on the board along with Inductotherm directors. He had the only line to Rowan, who set the pay and bonus level of his officers. Roberts was the vice president in charge of engineering. He had some very clever ideas in his area of technical expertise. Haubenstein was Consarc's sparkplug. John understood Wooding and kept some balance during the dog fight with Rowan. He was a good salesman, and I would fit well as his technical support and large project man. He was perfect for my method of being the boss from the bottom.
Henry Raufer returned from his tour of duty as manager of Inductotherm Brazil and became a salesman for Consarc. Raufer became the only employee shareholder in Consarc, and was the individual who convinced the other three to buy stock. Before they bought the stock, Consarc paid a dividend to reduce the value of the company. Raufer became one of, the first, if not the first Inductotherm person to receive a dividend.
Consarc owned its land, so they felt that it was undervalued and gave me an advantage in the merger. A plan was made to sell all the excess land to Inductotherm to make their values higher. Consarc had inventories that were overstated, and they had not reserved enough for a high risk job they had on the books. Cheston, on the other hand, had little or no inventory. My action to avoid taxes had kept the books very clean. I was cheating myself while seeing the future.
My debt to the banks was about one hundred thousand dollars, secured by my stock. The credit line was backed by Inductotherm's guarantee to purchase the stock from the bank in case of default. My holdings meant that I would still have more shares than Stan Myers in the merger, and he would not stand for that.
Finally Rowan told me that it was his and my stock, and that the others would have to live with what we said. An option was offered to the other shareholders that would allow them to purchase some of my shares at the present book value, plus prime rate interest, during the year after the merger. This still left about thirty thousand dollars to be settled. Stock in Inductotherm was issued to me to make the numbers correct. I believe that I was the only shareholder that did not directly report to Rowan. This stock was to be the subject of some fun and games in the future.
A start-up of equipment in India required me to travel again in September 1978. It was a hot two weeks, and the start-up was difficult. I was the first person to be housed in the hospice they had set up for the servicemen that would visit this facility in the years to come. The building was attractive and the rooms were clean, but there was no air conditioning. A small net room enclosed the bed to keep the mosquitoes away so the windows could be opened at night. I asked the house boy to buy me a good bottle of vodka and stock the room with a bucket of ice. The bottle of vodka had a skull and cross bones sign and words that said this stuff was dangerous. In hot climates one should not drink hard liquor. For dinner the chef was so proud of his creation. It was a full sized goat brain. I demanded to stay in the Ritz hotel in town for the rest of the visit. This was equipment that the state of India purchased for its military requirements. The Indians asked me to start up equipment built by Inductotherm UK for our competitor, Scotvac. This is the same factory that FMI shipped a control to in 1989 that led to their conviction in 1996.
From India I traveled to Moscow to talk with a new customer. This was my first meeting with Reshat Fachavich Matsutov, the Tartar who was to be the project leader. This was the first time I was able to sell a customer before the bureaucrats were in the picture. Alex had fulfilled his promise to let me have direct contact with the customer before the bureaucrats took over. During detailed questioning of his needs, I asked if he wanted a manual or a power driven car for his charging machine. His reply was: "We do not have slave labor in our factory." My reply was: "No zietz pakade." That statement is taken from a very popular Soviet cartoon in which the rabbit always gets the upper hand over the wolf. It means "rabbit, just you wait."
Matsutov spoke good, but broken, English. At dinner that evening we compared our life histories. He was two years older than me and grew up happy in poverty in the Tartar region. He was old enough to join the army at fifteen and was severely wounded in the final battle to free Leningrad. This city had been under siege for 882 days during their struggle with the German's. After technical school he got his first job as a furnace operator. He became a very vocal Communist in order to rise up in the ranks. He joined a firm in Chelyabinsk in their maintenance department and then worked his way up to design engineer for that factory. He designed and built the same type arc furnaces Consarc was selling in those days. At this moment he was assistant chief engineer for the factory.
Matsutov had visited Kramatorsk several times during periods when I was not there. He obtained translated sales literature including Inductotherm and Consarc. He said he saw the simplicity and the faults and wanted me to build him a bigger one. We both agreed that nickel was heavier than iron and we could build the same size furnaces and say they were larger. He could then use the furnaces from this factory in case they shut down. He could have bought the furnaces from Inductotherm and built the mechanical part himself. He was sold by the beautiful red paint job on the Consarc furnaces.
We worked during the day at the US/USSR Trade Council and, without the bureaucrats, got the job done. I commented that getting around the buying houses in this phase was much better. The American commissioner of the Council told me that Brezhnev's son was arranging a system that would allow large western businesses direct contacts with their customer. I had been there early, and while not large, was on the list of large businesses. Vera had close contacts with Brezhnev's daughter, so I thought she might be helping me.
My arrival in the States in late October 1978 was just three days before the official board meetings that approved the merger of my operation into Consarc. Inductotherm's tax expert was a person that never liked me. He told the directors that I alone might be taxable in these mergers. I told Rowan that someone would have to pay the tax besides me. He told me that his company did not cover individual tax problems. The whole deal was dead until he allowed my statement that I had only one source of money and, when and if required, I would look to that source to pay me for my good work.
The thing was done. Rowan called me to say that all his legal and moral obligations to our original partnership were now fulfilled. He meant to say, among other things, that the minority no longer had the right to control twenty percent of the stock and to buy and sell the stock without restricting its ownership to the company. We no longer had the right to control the board of directors. I told him that I understood but would remain "Jimmy".
Rowan had decided he did not need partners, he needed managers. With Wooding and Peschel gone and Metcalf's wings clipped he had no need to worry. Rowan knew I would run the company and consider him only an investor, but the groundwork for his complete control was laid.
Lona paid too much for his Cragmet stock and when I was sure that Rowan would go public he did not take full advantage of averaging down his cost per share when the merger with Cheston took place. He had bad feelings due to this fact and did his best to obtain the best offer from IPE in Michigan. He finally agreed to stay in Rancocas if I bought his stock at a value that would give him a very small return on his investment. He joined Consarc as an employee without stock. Marino, Lona, and Soderstrom, the shop and drafting group came down the street to Consarc and did not miss a beat.
Everything fitted well and we did not have to lay off a single person. Some Consarc deadwood left the company later. Cheston was very lean at the time and everyone survived the merger. Bob Klingerman decided that there were too many layers between him and the top at Consarc and departed New Jersey for IPE in Michigan.
Myers took advantage of the fact that Cheston was building a large stock order standard heating equipment to use the existing staff on a cost plus basis. An order for a special heating furnace in progress at Cheston also filled the Consarc shop. The financing of the new project in Russia was turned over to Myers. He was able to interest the Provident Bank of Philadelphia in financing the Russians.
With Lona and Marino running production, purchasing and estimating the need for the office of president was very much reduced. With an active board of directors that would decide officers pay and all other important matters there was no longer a need to have Myers the middle man between Rowan and the managers. Allowing Rowan to micro manage the company would be counter productive.
I returned to Moscow in mid October 1978 to continue the discussions with the Chelyabinsk group. I was able to define the scope in great detail because Matsutov knew what he needed. Vera located a new apartment for us to use that was near the center. A grandmother saw me going in and out. She knew that I did not belong in the flat, so she reported my presence to the local police.
The doorbell rang about seven in the evening. At first Vera did not answer. When the person did not give up after fifteen minutes or so, she answered the door. She put me in the back room and invited the two men to the kitchen. They asked her where the man was, and would not give up until she called me into the room. They were very surprised to find that she had an American in the house. She gave them some American cigarettes and opened a bottle of Stolichnaya vodka. They stayed until after midnight and wished us well.
Consarc had a bonus program, worked out with Rowan before the merger, which gave each vice president two percent of the pretax tax profits, and the president two and one half percent. My salary had been increased to equal that of the other vice presidents on the first day of the merger. The problem was how to share the bonus with me. At the time of merger I had arranged that the four of us would be directors, with Inductotherm having two directors. If the minority would stand solid we were in control of the company and our pay.
Rowan could replace the board any time he wished, but that would not be wise if we stuck together. In addition, Consarc had an approved profit-sharing plan that put fifteen percent additionally into a trust if there were adequate profits.
I suggested that since the merger would bring extra profits, we should maintain the six and one half percent already approved, split equally among us. Myers would not hear that, so he went to Rowan with a plan to add two percent for me. Rowan did not like it, but allowed it on the basis that the board would not approve such a large percentage to the officers in the future. The group had been greedy, and I asked Myers to refrain from discussing officer's pay with Rowan. This was the directors' right and duty.
Roberts traveled with me to Moscow to obtain the new Soviet order. We had an invitation to visit Paton Institute in Kiev. Roberts enjoyed his tour and maybe learned some things from Medovar. There was no way Paton could get out of their Moscow agreements, so nothing was to come from these contacts. Alex picked us up and took us back to the airport. I asked him if he had given my materials to Matsutov. He said I owed him one and not to forget the metal samples.
Our task in Moscow was selling the thirty-ton vacuum furnace based on specifications already agreed with Matsutov. Our quotation was a four-foot long telex we sent just before our departure. Our New York agent went with us because Cheston agreed to continue them as agents for five years if they reduced the commission on the troubled Kramatorsk job. Their fee was set at ten percent, but by this time they were no longer required or helpful. Roberts was there because we had a new rule that two officers were required to accept large contracts, and even with two people we were still under strict rules to use our estimating departments for costs. This rule was the main reason that the company made some money in the future.
Getting the technical specifications ready was easy. Our agent employed the Korean wife of an American businessman. She spoke and wrote both English and Russian and was a very fast typist. The meetings were held in the US-USSR Trade Council in Moscow, just down the riverbank road from the Ukraine hotel and near the Kiev train station. The meetings were long and business-like. The buyer did not speak English. That helped me a little because I could speak and understand technical Russian by that time. A very pleasant and plump translator kept the meetings moving.
We were beaten down to our lowest price of about seven million during two weeks. They then dropped the bombshell. How much discount for the second if bought at the same time? My quick reply was ten percent. Our agent became greedy and wanted to keep his same commission percentage for the larger sale. Ruble would only give five percent discount. The banks became more interested in the larger credit amount.
The buyers knew we needed time. They set their offer at a fifteen percent discount on the second unit. They also added some laboratory equipment for which they knew the price, a Xerox copier and two small desktop computers. They also required that we make a detailed spare parts list for six percent of the sales price.
We had our hands full to make the detailed spares list for items to be used on equipment we had not yet designed. We made a list with descriptions, like repair kits for this and that. Roberts would estimate one item and I would estimate the next. We were breaking our company rules, but the risk was minor.
Our agent prepared the typed document. The quotation on the lab equipment was received direct from the suppliers, which contained a fifteen percent discount for us. Our agent could wait no longer, so he reduced his commission a half million dollars and departed for New York. Roberts was becoming restless and wanted to go home. My having a lover in Moscow was not to the benefit of the buyers because they could not wear me down as fast. The buyers were informed that Roberts had to go home so we must conclude our efforts by that Friday, since I did not have the authority to negotiate alone.
The major suppliers were to call me between three and five, Moscow time, with their final offers; otherwise there would be no business. The Russian buyer was asked to make a better and final offer before Roberts went home. Their much improved offer was on the table by noon. We could not make our revised offer until we received telephone calls from our sub-supplier. We both knew we would accept that offer. In the toilet, Roberts said if our board of directors refused we could do it together as a new business.
The first call was from Myers. He reported that the Provident Bank had improved the credit offer, which would save us four hundred thousand dollars. He also told us that a careful analysis and better offers from his sub-suppliers would save another two hundred thousand.
Ruble called and reduced his price by a quarter million if we would order within one month. The remaining call was to come from our agent on his commission. The call did not come, but we already had three hundred thousand more in concessions than we needed to accept the order.
What separate amateurs from professionals are these moments. I looked sad and worried, and the translator spotted it. The buyer was asked for his final and better offer before the last call. He raised his offer by three hundred thousand. I called our agent but he was not yet in his office.
When we returned to the room my face was still sad. Finally, Roberts said "Jimmy, shake the man's hand and bind the contract." We sent our agent a Telex saying - "A bird in the hand is better than two in the bush. Your commission was reduced by two hundred thousand dollars when we accepted the order. Congratulations on your final efforts." We went to the bathroom to relieve ourselves and while washing our hands Roberts commented. "If the board refuses this order we can set up a company and do it ourselves."
Roberts left Moscow very pleased that the merger had taken place. There was a little work remaining to conclude the effort, but the Russians were in no hurry. This client was happy and wanted to go home for a short break, and Vera was in a very good mood. She was now sure of a wedding, or at least of having me in Russia for several years, if Kramatorsk could be used as a gauge.
Signing of the large contract for Chelyabinsk was a short affair, with only one change required at the last minute. They agreed to use the bank's rules for credit, one hundred eighty day notes, but forgot to take out the per annum fine print from the contract wording. Metallurgimport arranged a table at a very good restaurant outside Moscow for themselves and their clients at my expense. Before the night was over my thousand rubles were gone and my debt to Matsutov was another eight hundred rubles.
The date was February 23, 1979, which is the celebration of Man, or Soviet Army Day. It is not a day off kind of holiday, but one used widely for drinking, like our Saint Patrick's day. Matsutov was the star of the evening. It was plain to see that this young Tartar was going to rise in the Soviet system. We were becoming very good buddies by this time.
Everyone was stone drunk, including the translator. While walked arm in arm with Matsutov to the car, my foot slipped into a hole and we fell on the hard snow. My ankle was severely twisted. They wanted to take me to the hotel, but my plans were already made. Vera opened the door to see me on the floor, dead drunk, with a contract with a red ribbon tied around it.
Rowan covered this sale in his book:
"The Russians' failure to get the Kama River truck plant into operation didn't inhibit Metcalf's "down home" selling style in the slightest. It was his efforts that landed a $17 million contract for 7-ton, 15-ton, and 30-ton vacuum furnaces to be installed in the Ural mountains, where they would allegedly melt alloys for hydroelectric power plant turbine shafts."
He is a little mixed up here: It was Chelyabinsk in the Ural region just above sea level. I never saw Kama River but they were producing trucks. The turbine shafts were produced in Kramatorsk.
Vera bought some crutches that were used on my trip to New York. This was my last flight from the old airport in Moscow. They were finishing the new one for the 1980 Olympics. The walk down to the boarding gate, alone, took me at least twenty minutes. Pan Am, seeing my situation, gave me a first class seat to New York. At Frankfurt and New York they transported me in a wheelchair. On my flight back to New Jersey, there was some serious thought about marriage with Vera. The rosy glow was gone from our relationship, but I felt very comfortable with her.
My wife, together with Lona and his wife met me in New York. They did not expect me to arrive in a wheelchair. The telephone rang in my office the next morning. Vera was on the line asking about my sore foot. The Soviet Union was now attached to the international direct dial for some sections of Moscow. The iron curtain was being lifted a little for the upcoming Olympics.
President Carter signed the export control regulations into law in 1979. These regulations listed all items that required a specific license. Exporters were encouraged to license themselves and engage in exports for the health of the economy. Stan Myers wrote and called the Department of Commerce to reconfirm that our order with Chelyabinsk was allowed.
There were only three items in the 1979 regulations that concerned us. One was equipment for production of pyrolytic graphite (4203B). This item was first used for some purpose in the sixties and we never received an inquiry from domestic or foreign customers for this type equipment. The second was for consumable electrode vacuum furnaces of more than twenty tons (1203B). All Consarc export customers were interested in this furnace in a much smaller size. The third was isostatic presses more of than 5000 psi with a controlled thermal environment (1312A). I had one enquiry while at Cheston for an isopress that was to be used to isopress tool steel powder into an ingot. Here the canned powder was heated in another furnace and was not controlled by the regulations. I lost that order to ASEA, a Swedish company. Sweden was not a member of CoCom and was the main supplier of this type of equipment to the Soviet Union.
Autoclave technology to produce carbon-carbon was in the 1979 regulations. Equipment for producing and winding high strength fibers was in the regulations. Autoclaves for carbonizing pitch impregnated parts were not covered by the regulations. This technology was "Greek" to me at that time.
A letter from Inductotherm's accounting department shocked me. I would be required to pay off the loan to Provident in three equal installments. I would need $35,000 extra after tax earnings to accomplish that. Rowan was putting a squeeze on my stock ownership just when things were looking bright. More importantly, I needed that cash to provide Jody with a nest egg after the divorce.
Our assembly building was bursting at the seams from orders in progress and we needed to expand. Roberts extracted my vote for an expensive computer aided drafting machine for his vote on building expansion. The machine was ahead of its time and was useful only as a device to impress customers and make pretty sales drawings.
My home problems had improved with my oldest daughter settled down at college. The design task that was ahead of me was exciting. Flowers were beginning to bloom. The company knew they had a tiger by the tail and the merger was right.
Myers began the task of finding the best deal to finance the Russian project. Girard Bank made a very good offer and, as part of the deal, loaned me money against my Consarc stock without Rowan's guarantee.
Provident National Bank agreed to a better deal in the end. The bank was attempting to get into the international banking business at the time. We arranged to pay Phillips Overseas the commission in advance at a much reduced amount. The Jewish gentleman that owned the trading company sold it to a large group. The new President of the trading company wanted current profits, and we wanted a reduced payment and a current expense for income tax purposes. Rowan did not like that decision as a matter of principle.
The general market for Consarc's equipment was favorable, and our combined strength allowed us to make a reasonable profit for the first year after the merger. The project required me to be in Moscow twice for short visits in the spring of 1979 to review the progress of the engineering plans. Vera was in good spirits but was putting me under a lot of pressure to obtain a divorce.
Alex called and asked me to meet him at the Rossia Hotel. He asked me if scrap aircraft turbine blades were on the open scrap market. I told him they probably were. He asked me to bring him some in return for his help. I told him I would try. This would have been legal, but he was pushing the limit with me, and there was no way I would even look for these items.
I thought, "Alex, you bastard." I was still going to use him, so I did not refuse his request right away. He was getting cute with me and there was no way the things he was requesting would be delivered.
I attended my first Inductotherm shareholders meeting in June of 1979. All the other shareholders were key Inductotherm employees. The accountants passed out the reports and the results of the individual profit sharing trusts. Ruble gave the report of the Inductotherm furnace group companies and their overseas operations. He used slides, and the report was impressive. Rowan gave the report for the headquarters group and all other companies under the Industries group. He had many more slides to show, and they were not impressive. The total profits of Rowan's holdings were $10.6 million with the furnace group and his land company accounting for $6.4 million. Consarc showed a profit of $900 thousand. Rowan had used all the profits of Inductotherm to buy these companies and his return on investment for most of them was poor. After the meeting we went to Rowan's house for cocktails. I was the new man and the star of the show that night.
It had always been my method to hold a minority meeting of the board without Rowan. If the minority was in solid agreement we were in control of the company. The four minority directors assembled in Consarc's conference room in early June 1979. My simple and realistic question was why the president should earn more than the others while his input to the income of the company was equal to or maybe less than the others. Rowan would put up a real fight if we attempted to hold the eight and one half percent bonus level for the next fiscal year in the face of what he calculated was eight million dollars profit.
Rowan issued a directive to all his company chief executives for a uniform bonus level. His method of calculation had the effect of reducing the president's bonus level to one-half percent if the profit level reached ten million. Vice president's bonus levels were to be lower than the president.
After this memo, we agreed to stick together as a board to fight Rowan on this matter. A real battle took place. We presented a profit projection of less than two million for the coming year with the same percentage level as the previous year. This level of income was factual because we would not be able to complete the Russian job before the end of the tax year.
Rowan met Stan Myers before the scheduled board meeting to attempt to win him over to his side. Stan told him that his officers were firm in the demand. Rowan asked me for an informal meeting before the actual board sat. In a very serious way he told me that he would close down Consarc than lose this battle. I knew he was selling because his lip was not twitching. During the formal board meeting he not listen as we explained that we would not make the levels of profit that he had in mind, and that the bonus level was fair. He stormed out of the room, saying, "There is no way I will be dictated to by a conniver, a peddler, and an Englishman." The board had been called, so we could have voted the resolution, but Ruble convinced us that it would be better to let Rowan settle down.
Myers plotted the bonus curve that Rowan suggested and the one that we wanted. Ruble drew a curve by hand to split the middle as a suggestion. I wanted to stand firm but the other board members were afraid of the fight. Rowan did not want us to dictate because he was the dictator. He was killing the geese that laid golden eggs, but it was not the time for me to react.
The split produced the following formula:
Y = (5.157X + 5.85 divided by X square )+ 3.9X +1.7 +.385
Y = bonus percent of pre-tax tax profits
X = pre-tax tax profits in millions
At a quiet meeting, which saw Rowan walk away and then return without comment, the new bonus plan was approved.
Our design group was very busy with several projects. I spent long days making sure the design for the Russian project was correct and economical. The chamber for melting and mold handling was so large that it had to be built in pieces. The contract specified that we would keep the items small enough to pass through the smallest railroad tunnel in the Soviet Union. The contract also required that we ship the largest pieces possible. Roberts came up with the idea of making the chamber walls like a honeycomb structure. The chamber parts would be too large to ship; therefore we could only ship plates cut to the correct size with all the final welding to be done by the customer. It was a brilliant idea for making us profit and making an excellent chamber for the customer. I was a little worried that Matsutov would not buy it.
The Moslem revolution began in Iran. Carter was up to his eyeballs with the hostage crisis, and the Soviets were making some gains in the arms race. The purse strings were opened for military aircraft, and the world market for commercial aircraft was on the rise. The Haubenstein-Metcalf team won a combined order from Carpenter Steel, my favorite customer. The price was high enough to make a good profit and the merger was bearing fruit. Consarc had not been able to get in the door with this customer because Wooding had done something stupid there in the past.
I had already decided to make the chamber for the Russian job rectangular in shape because it would be impossible to ship a round one that large. With a hard push I convinced Carpenter to accept a rectangular chamber. This was the start of the shape of this type of equipment for the future.
During my next trip to Moscow in mid-September, 1979, Vera took me to the central marriage department to fill out marriage forms. She asked me for a date to schedule the event, which had to be at least ninety days in advance. The marriage date was set for Christmas day. The Russians celebrate Christmas fourteen days later, so Vera did not understand that this date would be emotionally difficult for me.
The arrangements I made for the divorce of my wife, Jody, was unfair, and the most difficult event in my life. It was going to happen sooner or later, and a quick divorce would be less painful for her.
A furnished apartment was rented in Las Vegas for two months. My lawyer told me that property settlement would have to be in advance and that my wife could not contest. The law required me to be a resident in Nevada for a minimum of forty-two days. We had a net worth of one hundred fifty thousand dollars at the end of November 1979. This included the house at fifty thousand. My Consarc stock had a value of one hundred fifteen thousand dollars, but the Girard Bank was owed almost that amount.
The automobile salesman who sold me a new car agreed to go to court as the witness who had known me in Nevada for the required period. Tests were passed for a Nevada driver's license. It was not necessary to be in Nevada all the time. I had a West Coast customer and sales calls were necessary. I voted in the elections in Nevada that year.
Lawyers were hired for us both. My offer for a non-contested divorce was fair and generous, including alimony. The company stock was to be worth a lot more in the future, but past records caused her and her lawyer to select other assets. No one could guarantee that Consarc stock would be worth anything. Jody was stunned by my request for a divorce, but knew my mind was made up. Fate seemed determined to make this crisis in her life even worse. Her father died in the middle of this situation. I went to the funeral in North Carolina with her, hoping to comfort her. She clung tightly to me during the burial. This was strange feeling. I never fell out of love and never will because she was the mother of my five children. She signed the property settlement document on November 30, 1979.
Matsutov arrived in Rancocas with his mechanical engineer and an engineer from a design institute in Chelyabinsk. Consarc rented two apartments in Mount Holly to house the guests for their stay. This visit was to inspect the drawings and to make any improvements or changes required. They were most interested in items that they had to construct before the arrival of the equipment. Matsutov again demonstrated his ability to get his job done. His translator spent all her pocket money buying clothing. She was out of food and was only eating lunch. When we found out she was starving we sent our company secretary to stock her refrigerator in secret.
Consarc had two flagpoles and flew the flag of the customer's country during their visits. The Red Soviet flag flew over Consarc for two weeks. No one stopped to protest because American/Soviet relations were good at that time. At times when we flew the Japanese flag a retired soldier would ask us to take that flag down.
It was a very busy time for me, so others took care of most of the inspector's needs on that visit. They went home after one month with the required documents. The court scheduled the divorce in Las Vegas on December 5, 1979. My car salesman at first had reservations about appearing in court. He had only seen me once after the car was purchased. Finally he agreed to go to court if he was compensated for his lost time. The whole process took fifteen minutes. Everything was proper and legal, including my legal residency for the required period.
The next morning my keys to the apartment were turned in. The long drive back to New Jersey was made longer by a major snowstorm in the Rockies that stopped me just short of Denver. The car was parked in a snow bank in a motel parking lot for the next two months.
The travel agent could not get me a visa through the New Year, as all Moscow hotels were full. A visa was finally obtained for December 21 to 28. Many things had to be done in Moscow before they would allow the marriage. A letter of permission was obtained from the American Embassy after they looked at my divorce papers. The cover letter from the American embassy advised me to think long and hard, due to upcoming visa problems for Vera. My birth certificate, which was in my briefcase only as a stroke of luck, had to be translated. The divorce document was part of the long property settlement and had to be in Russian, but the official translation department wanted ten days to translate the long document.
My business appointment with Metallurgimport was at ten, with the marriage to take place at noon. We arrived at the wedding hall with ten minutes to spare. The first and real step of the marriage is to have the documents in order with the necessary and legal stamps on them and in the passports.
The clerk refused to accept the long English document as evidence of the divorce. A gold necklace from Vera's neck solved the problem. The rest of the ceremony is pretty, but legally meaningless. The state has its little bit, but the main portion is based upon an old tradition.
Vera arranged a wedding lunch at the second floor restaurant of the National Hotel. She arranged the formal dinner reception for the next night at a Soyus restaurant. She could only allow fourteen people, as that was the largest table she could find. Her main problem was how to console those she could not invite. She decided that no men could come in order to have more of her girlfriends. At the last moment one of the ladies had to cancel, so she suggested we invite the young American secretary who worked at the trade council because she could be a contact point by Telex when the telephone system became overloaded.
When we arrived the place looked like a flower garden. Flowers in December can only be found on the black market at very high prices. Vera and her friend were so excited. They were talking a mile a minute. Judy and I were talking in English. The band had been playing for twenty minutes or so and we had finished our third toast. The ladies were busy talking, so when Judy asked me to dance there was no thought about the fact that the bride always has the first dance. Later, the bill came for eleven hundred rubles. My tip was three hundred rubles, which is at least ten times too much. On the way home Vera taught me a lesson about weddings and dances, if it's ever needed again. Also, Vera was furious about my misuse of rubles. For the first time it was brought to my attention that she was a very strict manager of her assets.
My trip home was the next day. At Frankfurt the Herald Tribune headline was: "Russia Invades Afghanistan." Rowan called me to his office to discuss a commission, which was being formed by Nisbet, to visit China for the purpose of selling superalloy and equipment.
Rowan said he had heard of my marriage to a Russian Countess, and for that reason I was not acceptable to be on the China Commission. In the past he had said to me, "The company is financing a romance." The marriage was confirmed, but he was told that it was not common knowledge because she might never be able to obtain permission to leave the Soviet Union in the changing political world.
Rowan did not seem to agree with my thoughts that the USSR had done the West a favor by invading Afghanistan. Rowan did not realize that Moslem revolution could spread into forty million Moslems in the USSR.
I had come to the conclusion by this time that the social security system in the USSR was failing AND COMMUNISM IN RUSSIA WAS DONE. Our future actions to support the "freedom fighters" in Afghanistan led directly to the destruction of the Trading Center towers on September 11, 2001 and the war in Iraq in 2003.
Russia's war in Afghanistan put additional pressure on the treasury in Moscow and hastened the collapse of the system.
My next trip to Moscow was in early February 1980 to see Vera and take care of some minor business matters. This time we stayed at the Intourist Hotel. The floor ladies were missing at this hotel and replaced by television cameras. Vera was not challenged at all during this visit. Maybe her western clothing hid the fact she was Russian from the doormen and television screens.
Matsutov arrived back in the States with a two man staff. This time he would handle the translations himself. When he arrived at Kennedy Airport in New York, the unions had decided to stop Aeroflot and Soviet ships from loading at East Coast ports. This effort was criticized by President Carter, but in a mild way. After two hours waiting, the baggage was finally unloaded. When we arrived in Rancocas he saw that the Soviet flag was not flying beside the American flag. It was our statement that the invasion of Afghanistan was not welcomed.
One of our first inspections was some steam pumps that were manufactured in western New York State. We drove up through the Finger Lakes during a heavy snow. The winter Olympics were in progress. I gave Matsutov the chance to win some pocket money by covering his bet on the hockey games. I was as surprised as the rest of the world when he paid the bet. To say I was not pleased and proud of the outcome when we won would be an understatement.
There were many posters of the leader of Iran inside a shooting target. Reshat was Moslem by culture, as he was a Tartar. He told me that no matter how bad the man was, he was still a holy man and should be respected as one.
The Provident bank was legally committed to finance the Soviets for five years at less than eight percent interest. Consarc was to pay them three percent to make the total eleven percent. Interest rates shot up to above twenty percent and the Polish government defaulted on the debt. The Soviets did not back them up as expected. Provident bank began to find a way to get out of their deal. They used the fine print of their contract to insist that the Soviet Bank agree to the laws of the Commonwealth of Pennsylvania. They knew that the Soviet Bank would agree to banking laws of the United States or any other Western country but not to an individual state law.
There was no way that Provident was going to back down even if it meant losing the Inductotherm account that they had maintained over the years.
During a drive on snow covered roads on our way to visit a customer in Kokomo Haubenstein and I discussed our projected cash position in case we had to carry the Russian notes. Our problem was paying the income tax on the Russian job. It was sure that we would not make the shipment before the end of our fiscal year so the tax would not be due until 1981. We both agreed that John would have to close more profitable orders very quickly.
Haubenstein was aware that Myers was thinking about resigning very soon. He told me that he had many private problems at that time and could not take the office of President. He also said he could work with me but not for me. My first thought was that Marino was almost ready but that Roberts would be the only choice for the time being.
Myers resigned before the Soviet financing problem was resolved. I have always thought that he felt his stock and bonus was at risk if we had to eat eight million in inventory if we could not obtain credit from the bank. I cast a vote at informal minority directors meeting to select Roberts as the new president. Rowan showed us that he was in control at the emergency board meeting by refusing to accept Roberts as president until his board approved.
Federal tax laws required that the trusties of the Consarc profiting sharing trust make payment to Myers within six months of his departure. As a trustee I asked for a meeting to plan for the proper stocks to sell to provide the funds. I was to learn the Rowan had hired Myers to a position at Inductotherm and his accounting department transferred Myers' account to their account on Rowan's orders. I did not believe this was legal without trustee action. I was fighting mad for a moment but decided to let Rowan have his way.
To show his anger with the Soviets for invading Afghanistan, President Carter amended the export control laws to restrict exports to the Soviet Union. Silicon chips, and equipment to produce the materials to make chips, were added to the list. He convinced the American Olympic Committee not to attend the games of 1980 in Moscow. He jawboned American firms to turn back orders for the Soviet gas pipeline that would take natural gas to Europe. Computers were also added, and we had a small computer in the chemical analysis instrument. This small computer type controller was mounted in the control panel, and after further review Commerce gave us permission to ship it. The simple desktop computers were not bolted to a panel and were denied. I had to do some quick horse trading with Matsutov to get out of that mess.
Rowan called me into his office with the request that I call my friends in the CIA to see if they could help us sell this equipment to the Pentagon. The young man from the government that came to see Rowan told him that the highest levels of government wanted this trade to proceed. Rowan asked one of his salesmen to write the Pentagon directly. This letter told of the dire consequences if the Russians obtained this melting equipment and offered it at the same price to the Pentagon.
The 1979 law had technical data regulations that ran right into the first amendment. Research grants to universities required the work to be published. Every American firm that had overseas operations violated these regulations daily. The defense contractors and other firms employed foreigners with green cards who could not receive technical data under this law. I was afraid that if I talked to Vera about any thing technical I would be in violation of the law. The men in blue at Customs closed their eyes and these regulations were never enforced.
Inductotherm was late with the construction of the equipment for the Russian job. This suited me, because we were also late with our construction and the longshoremen were not loading Russian ships on the East Coast.
Inductotherm assigned an engineer from Australia to push the job out before the close of the fiscal year. This was the first time I met John Mortimer.
Inductotherm was having a record year and had a mess on their hands because a new building was going up. Vacuum induction coils were being built at an unheard of pace and the quality was suffering because the coil department was not clean. Normally dependable capacitor contactors were humming at noise levels well above acceptance levels. The target was to be met and Consarc was to be billed before the accounting years end at all costs. Mortimer had crews finishing the project in the Cragmet parking lot weeks after the job was officially shipped.
The shareholders meeting at Inductotherm was festive since the Inductotherm furnace group had posted record sales of $57.3 million due in large part to large sales to Consarc. Profits were up to $14.9 million with the furnace and headquarters group contributing $9.7 of these profits. Consarc showed a profit $712 thousand.
We made the Soviet shipment through Canada in the summer because no ships were stopping on the East Coast bound for the Soviet Union. As it turned out we found gypsy drivers who were returning to Canada after delivering containers to the States. The Canadian dollar being cheaper, we were able to load the ships at lower cost. We received as payment five percent cash and twenty notes with seven percent interest for the balance.
Inductotherm borrowed the money Provident bank was going to lend to the Soviets based on my insistence that the bank had taken a fee from us and had got out of their obligation on a technicality. Interest rates shot up to twenty percent by that time. Bob Hotchkin wrote a letter to Rowan that taking this loan and properly utilizing it was worth about $7 million. Consarc made over a million on that deal, and as usual, Rowan made considerably more.
The amount of money earned on this deal and $11 million in dividends paid to Inductotherm plus the profits on sales to Consarc when compounded led to more than enough cash to allow Rowan to fund Rowan University.