Textron's Trick

"They're saying I'm a wild man. If I turn the trick, they'll say I'm a genius."

So said Royal Little, the mild, 50-year-old president of Textron Inc., whose unconventional production ideas have built a textile empire in less than three years. Last week Wildman Little did turn a trick. He paid $12 million to Benjamin Brown Gossett for his mills in Charlotte, N.C. and Anderson, S.C., thus adding twelve southern mills to Textron's 13 in New England, and more than doubling Textron's cotton and rayon capacity. But Little still has to perform his main trick--making Textron the most integrated and most profitable U.S. textile company.

For over a hundred years it has been customary for each textile mill to specialize in a single process only. One mill would spin, another weave, etc. But when Little established Textron's parent company (Special Yarns Corp.) on $10,000 capital in 1923, he had different ideas. He believed that in textile making all stages of manufacture, from yarn to consumer, should be under one management.

Test a Theory. For years, Little's theories had to wait upon the practical necessity of keeping Special Yarns out of the red. Then the war came. Little found himself busy on war work (parachutes, jungle hammocks, etc.) until the Army suddenly began to cancel contracts in 1943. Carefully Royal Little weighed his chances, decided not to curtail production but to reconvert, expand and integrate.

Under the name of Textron Inc., his company began retailing its first civilian goods in August 1943, through department stores and other selected outlets. This proved highly profitable. Furthermore, Textron, a new producer, got a better break on price ceilings than oldline textile companies. The $5 million worth of consumer products made in 1944 were increased last year to $16 million. Nevertheless, Textron's 1945 balance sheet showed a deficit ($147,000), in spite of individual profits by subsidiaries which it acquired. Reason: earnings went partly to former owners; Textron needed time to finish processing their products and put them on the market.

Today, Textron is integrated from raw yarn to finished product; it covers the field of house furnishings and clothing, employs its own designers, chooses its own retail outlets. And Little talks about a $100 million gross next year.

Set Up Trusts. Another Little innovation is his policy of setting up nonprofit foundations which purchase his textile mills, or getting outside foundations to buy them. The foundations then lease the mills back to Textron. Example: the Rhode Island Charities Trust owns the Manville Mills and leases them to Textron at $210,000 a year. The U.S. Treasury, always suspicious of any unorthodox financial practices which seem to benefit a corporation taxwise, looked over Textron-connected foundations, dropped the matter. Little's own explanation is that he would rather help charitable foundations while he's alive than will them money.

Bald of head from "butting against stone walls," as he puts it, Royal Little doesn't look like the philanthropist nor the overworked executive he is. Skiing and foldboating have given him the same physical toughness that characterizes his textile thinking. In the South, where owners are joyously selling their mills to northern companies in the hope of buying them back cheap five years from now, he will need all the toughness he's got.

Weather the Storm. Little is not the only one now using vertical integration. Cannon, Pepperell and Barbizon are trying it. But they turn out a specialty while Textron produces a diversified line. Little hopes, by integration, to survive the drop in prices when textile supply again begins to equal demand, probably in 1948. Then integrated companies will have to compete all along the line with mills expert in specialized production. If Textron is successful, then the textile industry may have found the way to arrest the 15-year decline in profits (only 3% on net worth) that was checked only by the war.

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