Living on Breakdowns
The bang of a blown-out spark plug or the crunch of a bent fender makes the U.S. motorist fume, but it is music to Gulf & Western Industries, Inc. As a leader in the U.S.'s $7 billion-a-year market for auto parts, G. & W. lives on breakdowns and damage. It lives well: since 1958, it has multiplied its annual sales 22-fold to $175 million, acquired 57 companies that make products as diverse as guitars, jet-engine parts and survival equipment for spacemen. Last week, in its most ambitious diversification, G. & W. made a deal to merge with New Jersey Zinc Co. If shareholders of both companies approve as expected, G. & W. will take over the biggest U.S. miner of zinc, a metal that is increasingly in demand for missiles, artillery shells and autos.
Chance in a Clutter. G. & W.'s power source is Chairman Charles Bluhdorn, 39, who has a hard-driving philosophy: "You have to break doors down--anybody can walk through them." A penniless World War II refugee from Austria, he began as a $15-a-week clerk in a Manhattan cotton-brokerage firm, rose to other jobs and founded his own coffee-trading office at 23. Within ten years he had made more than $1,000,000 buying coffee from the Brazilians and selling it to U.S. processors and chain stores. Casting around for a more stable business in which to invest his profits, he came upon auto parts, a complex, cluttered industry with more than 1,000 manufacturers, 16,000 jobbers, and 365,000 retailers. Bluhdorn's dream was to create a nationwide auto-supply network, with his own manufacturing plants, warehouses and jobbers.
As a start, he bought control in 1957 of a parts distributor in Houston and a small parts manufacturer in Grand Rapids, Mich., merged them to create Gulf & Western. Then he began acquiring young executives as rapidly as he bought up companies. He persuaded Houston's John Duncan, a coffee dealer whom he had met in the commodities trade, to sell out his personal holdings and invest $112,000 in G. & W. Next he induced David Judelson, a New Jersey machine-tool maker whom he had met on a vacation at Lake Champlain, N.Y., to put up another $50,000. Today Duncan, at 37, is G. & W.'s president and day-to-day administrator; Judelson, 36, is executive-committee chairman and production chief. Bluhdorn is the creator of new mergers and markets.
Where Credit Is Due. This troika, powered by loans from the Chase Manhattan and other banks, has bought up or signed exclusive contracts with 500 jobbers. Those who hitch to Bluhdorn's wagon get several advantages: G. & W. gives them national advertising, marketing advice and long-term credits. Most important, it sells wholesale parts made by other manufacturers as well as its own, and promises overnight delivery.
G. & W. has ranged afar from auto parts to take over such firms as Chicago's Miller Manufacturing (steel castings and forgings), Connecticut's Mal Tool (aerospace components) and Long Island's Unicord Inc. (musical instruments). Outside of G. & W., Bluhdorn and some other associates in the past two years have bought control of New York City's Ward Foods (TipTop bread) and the Bohack supermarket chain (196 stores). When acting for G. & W., Bluhdorn often uses stock instead of cash to buy out companies, shuns ailing firms. "We have no time to be doctors," he says. The deal for New Jersey Zinc will involve $150 million in cash and stock and is expected to be completed in December. It will give G. & W. quite a boost, raising its overall annual sales rate to $300 million.
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