33 Bloomfield Hills Pkwy., Ste. 200
Bloomfield Hills, Michigan 48304
Fax: (313) 433-4598
Incorporated: 1956 as William J. Pulte, Inc.
Sales: $1.37 billion
Stock Exchanges: New York
SICs: 1521 General Contractors—Single-Family Houses; 6162 Mortgage Bankers & Loan Correspondents
Pulte Corporation, organized as a holding company with dozens of subsidiaries, is one of the largest home builders and financial services providers in the United States. The company originated when William J. Pulte built his first house in Detroit, Michigan, in 1950. He incorporated his home building activities in 1956 under the name William J. Pulte, Inc. Over the years, 115,000 families have purchased Pulte homes, including single-family residences, townhouses, condominiums, and duplexes. Pulte offers a wide variety of home models and customers can vary the model’s style by choosing from a number of facades and interior options.
In 1961 the company had one subdivision in Detroit; by 1969 it had 12 active subdivisions in six states. The company recorded $5 million in sales in 1964. That figure nearly tripled by 1967, and sales exceeded $20 million by 1968. Pulte entered the Washington, D.C., market in 1964, the Chicago market in 1966, and the Atlanta market in 1968. On March 4, 1969, William J. Pulte, Inc. was reincorporated through a merger with American Builders, Inc. of Colorado Springs, Colorado. The newly formed Pulte Home Corporation became a publicly owned company and 200,000 shares of common stock were issued. The reorganization allowed Pulte entry into the low-cost Federal Home Administration (FHA) and Veterans Administration (VA) housing market. At the same time, Pulte opened its first subdivision of medium-priced homes (to sell in the FHA and VA mortgage market) and began its first subdivision in the state of Virginia. The company also built high-priced conventionally mortgaged homes, student apartments, and turnkey multi-family housing. To control its construction costs, it implemented a computerized critical path program.
During 1970 Pulte evolved from its status as primarily a supplier of high-priced single family homes to a supplier of single family homes across price ranges. For the first time, the company’s sales of low- and medium-priced houses exceeded those of high-priced houses in both sales dollars and units. The company completed and delivered 1,000 housing units for the first time, reaching $31.2 million in sales. The company also increased its capital base by selling preferred convertible stock for the first time.
In the early 1970s Pulte architects developed the first Quadro-minium project, a single building that resembled large, custom-built, high-priced homes, but contained four separate two-bedroom units with separate entrances and garages. Pulte opened its first Quadrominiums in Chicago in 1971, providing buyers with homes for less than $20,000. To increase quality control and shorten the time period between the first rough carpentry work and the closing in of a house against the weather, Pulte started to make extensive use of component parts. It used prebuilt trusses; prefinished cabinets, windows, and doors; and factory-built floor and wall sections.
The company extended its presence into new housing markets and continued to grow during the 1970s and 1980s. Even as national housing starts and deliveries declined, Pulte’s sales increased to nearly 5,000 units in 1980. It ranked first of all on-site builders in the United States in revenues and in homes delivered in 1985.
One of Pulte’s first financial services companies was the Intercontinental Mortgage Company, founded in 1972. Later renamed ICM Mortgage Corporation (ICM), the wholly owned subsidiary provided customers with home mortgage financing and thus made Pulte housing units more attractive to homebuyers. (Over half of all Pulte homebuyers financed through ICM in 1992.) ICM services included originating mortgage loans, placing loans with permanent investors, and servicing loans as an agent for investors. ICM posted its third consecutive year of increasing volume in 1992 as it began to focus on origination of “spot” loans for other than Pulte buyers, development of core business relationships with local real estate brokerage professionals, and refinancing activities.
Other Pulte financial services companies included Pulte Financial Companies, Inc. (PFCI), which was the parent company of several bond issuing subsidiaries, and First Line Insurance Services, Inc. (First Line), which provided customers (principally Pulte homebuyers) with convenient and competitively priced insurance-related services to protect their new homes and financial security. In operation since 1981, PFCI subsidiaries engaged in the acquisition of mortgage loans and mortgage backed securities principally through the issuance of long-term bonds. First Line was established in 1987.
On September 17, 1987, PHM Corporation was incorporated and became the publicly held parent holding company of the Pulte Home Corporation group of companies, which became the wholly owned subsidiary of Pulte Diversified Companies, Inc. In 1988 home sales were flat and one of Pulte’s financing subsidiaries filed for Chapter 11 protection due to foreclosure losses. PHM saw a good opportunity to expand its financial services operations by taking advantage of the federal government’s Southwest Plan to purchase five insolvent Texas savings and loan institutions. Under the plan, the government offered excellent purchase terms, assumed the risk for any loans that went bad, and gave tax benefits for any losses generated. The acquisitions included two newly incorporated Federal Savings and Loan Insurance Corporation (FSLIC) insured institutions, First Heights, fsa, and Heights of Texas, fsb. For $45 million, and with the assistance of the FSLIC, the company acquired substantially all of the five thrifts’ assets of $1.3 billion and their business operations and assumed certain of their liabilities. Since Pulte was basically responsible only for loans made after the takeover, it was the Government National Mortgage Association’s responsibility when one of the thrifts defaulted on a mortgage servicing contract only a month after the takeover. The $2.4 billion portfolio was Ginnie Mae’s largest single default to date.
Heights of Texas merged into First Heights in July 1990 and consolidated operations under the name Heights of Texas, a federal savings bank (First Heights). Throughout 1991, the bank sold off home loans and securities not guaranteed against loss by the government, repaid high priced liabilities, and made other transactions in anticipation of eventually being removed from government backing. The effect was an increase in core capital ratio. By 1992 First Heights had grown to 28 branches that offered a full range of deposit and loan services to retail and small business customers, and it had approximately $2 billion in assets.
The homebuilding industry is traditionally one of the hardest hit by fluctuations in the economy. Factors that affect the housing market include national and world events that impact consumer confidence and changes in interest rates; property taxes, energy prices, and other costs associated with home ownership; federal income tax laws; and government mortgage financing programs. PHM realized that a conservative financial philosophy, combined with delivery of good products, was not enough to assure that the company’s more than 35 years of consecutive profitability would continue; in 1989 the company launched the Pulte Quality Leadership (PQL) proactive initiative. PQL was a process to involve every employee, supplier, and subcontractor in devising ways to continuously improve all aspects of the company’s operations and assure its continued success. Since the company was already a decentralized organization, PQL further empowered divisions and subsidiaries to adapt products, services, and business strategies to meet the needs of local markets.
Under the PQL process, Pulte had more than 150 teams in the field working on improvements and innovations that would benefit the corporation’s diverse companies. Active councils represented each of Pulte’s major disciplines: sales and marketing, land management, construction, and finance. Senior managers from every business unit joined to form the seven task teams of the National Quality Council (NQC) in 1990.
PQL training stressed the concept of “Seven Voices” that must be heard and understood to become integral to decision-making. They were the voices of customers, employees, suppliers, competitors, internal systems, communities, and shareholders. The NQC developed the Customer Satisfaction Measurement System, a communication link with new homebuyers that provided feedback on the expectations of customers nationwide. The system measured quality and satisfaction relative to expectations.
The Construction Council developed performance requirements for nearly 200 distinct processes involved in building a house. The council also implemented a comprehensive “building science” program that was the first in the industry. These initiatives fundamentally changed the way the company viewed the entire construction process. For example, in Charlotte, Pulte decided to complete garage slabs, driveways, walks, stairs, and rough grading far earlier in the construction process so Realtors and brokers could show the houses to prospective customers even in bad weather. The new practice contributed to the company’s local success and growth during challenging market conditions. Additionally, the subcontractors liked the ease of entry and cleanliness of the job sites and customers were able to view their homes more conveniently. Pulte’s Chesapeake Operations converted to a screw system to attach gypsum and subfloors. The new system reduced drywall cracks, nail pops, and floor squeaks—three of the most frequently occurring problems in a new home. It also solved service problems that usually showed up after the customer moved in.
The Land Council changed the procedure Pulte Corporation used to acquire land. Instead of using the traditional industry “price and terms” philosophy, the corporation started to choose land based on an understanding of what targeted customers wanted and where they wanted to live. For instance, Pulte integrated 280 homesites with a large preserve of wetlands, streams, fields, and forests in suburban Baltimore. Boy Scouts, public school groups, and other civic organizations joined in planning and building hiking trails, bird houses, and other enhancements. The community received much praise, including designation by the Urban Wildlife Institute as an “Urban Wildlife Sanctuary.”
Because of the PQL initiative, ICM Mortgage Corporation switched from issuing traditional mortgage coupon books to a monthly mailing of mortgage statements. The innovation added costs up front, but reduced the number of calls to customer service, improved late charge collections, and decreased delinquencies because the system encouraged customers to communicate problems earlier.
During the economic downturn of the early 1990s, Pulte continued to enjoy record sales and profits in spite of weakened housing and troubled financial markets, enjoying the highest sales and profit per employee of any firm in the industry. While the country had the lowest number of housing starts since World War II during 1991, PHM Corporation enjoyed a 37 percent increase in earnings. The company was able to compete on the basis of reputation, price, location, design, and quality of its homes. It had more than 150 active subdivisions within 25 markets in the Mid-Atlantic, Central, Southeast, and Southwest geographic areas. Pulte Home Corporation attained its first $1 billion year in 1992, with a unit volume of more than 8,000.
Pulte was ready to respond to changing home design preferences and life-styles. Jean Halliday wrote in Crain’s Detroit Business that “homes have changed more over the past two years than they had over the previous 10, according to Robert Halso, president of Pulte Homes of Michigan Corp.” The typical home design before the 1990s was for a family of four. But “‘people don’t have to move, they want to move; so you have to give them what they want,’ Halso said. The ‘90s is certainly a time to delight your customer—satisfying them is not enough, because there’s so much competition.’ “The company established four different buyer profiles for which it designed homes: the traditional family; the single person; the empty nester; and the extended family. The last profile included parents with children starting college or with children in their 20s still living at home. To suit their customers’ life-styles and wishes, Pulte home designs decreased formal areas to provide space for larger kitchens with fireplaces, bigger family rooms, and master suites; and ranches gave way to two-story Cape Cods.
PHM Corporation was renamed Pulte Corporation on July 1, 1993, to capitalize on the public’s recognition of the Pulte name. PHM Corporation was not widely known outside of financial circles, while Pulte had name recognition and identification throughout the geographic areas in which the company’s subsidiaries marketed their products and services. It was thought that the change would decrease confusion, potentially increase awareness of the company and its subsidiaries’ products and services, and help it in its financing.
Pulte Corporation, because of the geographic diversity of its operations, complementary lines of business, and established status as a leader in its industries, appears in a good position to continue to be a successful and profitable company through the 1990s.
Pulte Home Corporation; Pulte Home Credit Corporation; First Heights Bank, fsb; ICM Mortgage Corporation; Pulte Financial Companies, Inc.
Benoit, Ellen, “PHM: Transactions Speak Louder ...,” Financial World, May 16, 1989, p. 16.
Drummond, James, “Sweet Deal,” Forbes, September 18, 1989, pp. 96, 98.
Halliday, Jean, “No Credit Problem Here: PHM Expected To Add Market Share,” Grain’s Detroit Business, March 16, 1992, p. 2.
——, “Pulte Aims at More Buyers,” Grain’s Detroit Business, March 2-8, 1992, p. 13.
Pulte Corporation Annual Reports, Bloomfield Hills, MI: Pulte Corporation, 1969, 1970, 1975, 1985, 1990-92.
—Doris Morris Maxfield