Wickes Companies, Inc.
Wickes Companies, Inc.
Wickes Companies, Inc.
3340 Ocean Park Boulevard
Santa Monica, California 90405
Fax: (310) 452-9509
Wholly Owned Subsidiary of WCI Holdings Corporation
Incorporated: 1947 as The Wickes Corporation
Sales: $2.36 billion
Wickes Companies, Inc., conducts business in three distinct areas—automotive and industrial products, the home improvement sector, and textiles. In the automotive and industrial sector, the company makes such products as doorpanels and floor mats for cars and parts for jet engines. With its operation of 108 Builders Emporium retail stores, Wickes is a major presence in the retail home improvement market. The company is also a leading manufacturer and marketer of wall coverings for both residential and commercial use, as well as a worldwide manufacturer of textiles that include upholstery fabrics, commercial floor coverings, and women’s hosiery and related products.
The company was founded by Henry Dunn Wickes and his younger brother, Edward Noyes Wickes, in Flint, Michigan. The Wickes family came to Flint in 1854 from New York state and were soon modestly established in the area’s burgeoning lumber business. At the time, Michigan possessed some of the thickest and choicest pine forests in the United States, and land could be purchased at the bargain price of only $1.25 per acre.
The Wickes brothers, along with H. W. Wood, established the Genesee Iron Works, a foundry and machine shop that specialized in repair work and the casting of odd metal parts for equipment used in the logging and lumber business. The pig iron the company used had to be hauled in from Saginaw, Michigan, by ship and wagon. Conversely, the equipment the foundry manufactured was being hauled back to Saginaw for shipment. As the company’s business increased, it became obvious that the closer the foundry was to Saginaw, which at the time was a boom town, the more efficient and profitable the operation would be.
Life in Saginaw did not appeal to the Wickes brothers’ partner; the landscape was composed mostly of the swampland and mosquito-infested marshes adjacent to Lake Huron. In 1864 Wood sold out to the Wickes brothers. That same year, the company’s name was changed to the Wickes Bros. Iron Works.
During these boom years, Henry Wickes developed and marketed the Wickes gang saw, a steam-powered mill saw capable of ripping two or three logs into boards simultaneously. In 1869 the company made some basic improvements to the design of the gang saw that revolutionized the lumber milling business. The new design gave an oscillating motion to the saw’s frame, allowing all the teeth of the machine’s parallel saw blades to cut evenly. The speed of the saw was increased and blades of a thinner-gauge steel were used to cut down on the amount of waste. The new design’s success created a national market for Wickes Bros. International sales of the newly designed saw enabled the company to survive as the lumber business in Michigan slowly began to dry up. By 1887 there were more than 300 of these saws in operation.
As this happened, the company had to adapt to survive. One of Wickes’s moves towards diversification was to begin buying up equipment from the many troubled sawmills, reconditioning the equipment, and then reselling it to mills in other parts of the country. Wickes also expanded its repair and resale business to include all kinds of machinery. As the new business grew, the Wickes brothers noticed that one of the most frequently bought and resold items were industrial boilers. After developing the machinery necessary to manufacture new boilers, the Wickes Boiler Company was founded. Two of Henry Wickes’s sons took over management of the family’s enterprises. Harry Wickes headed Wickes Bros. Foundry, and William Wickes took over the boiler business. In 1901 Edward Wickes died. One month and a day later, his brother Henry died in Guadalajara, Mexico, where both brothers had traditionally gone to spend their winters. It was on a trip to Guadalajara that the third Wickes business, The United States Graphite Company (U.S. Graphite), had been born.
While vacationing in Mexico, Henry and Edward had heard of a huge graphite deposit not far from where they were staying. Upon further exploration, they discovered a huge workable vein of about 85% pure graphite in the desert mountains below La Colorada, Mexico. They passed the information on to Henry Wickes’s sons, who incorporated U.S. Graphite in 1891. After acquiring an abandoned shed next to a railroad siding, back in Saginaw, and having some luck—both the Mexican government and the Southern Pacific Railroad were in the process of building rail lines that would permit easy and inexpensive shipment of the raw graphite back to Michigan—U.S. Graphite began to mine, import, and sell the black powder as paint coloring, lead substitute for pencils, and an industrial lubricant. At one point, U.S. Graphite supplied the graphite-based lead substitute for at least 90% of the world’s pencils. U.S. Graphite achieved even greater success in the years preceding World War I as the demand for electricity grew. Graphite was the major component in the manufacture of carbon brushes, or contacts, that are necessary in the operation of electric motors.
In the years following World War I, Wickes introduced the straight-tube vertical boiler. These new boilers lasted longer than any boiler that had been manufactured previously and did not require a shutdown to be cleaned. The phenomenal success of the Wickes Vertical Safety Boiler propelled the company to the forefront of the institutional heating and steam-plant business. As orders for hundreds of the new boilers flowed in, the company had trouble keeping up with production.
During the Great Depression the boiler business, like most others, suffered heavy losses. There was a need for larger and more powerful boilers, but there was also little profit in producing the new, larger, bent-tube-type boilers Wickes eventually introduced. World War II and the resulting increases in production needed to equip the U.S. military helped Wickes pull out of the doldrums. The U.S. Maritime Commission purchased 360 Wickes 1,000-horsepower boiler units for use in Liberty ships. Wickes also built other types of boilers that were used in many Navy vessels. The company increased its work force to 500, built its first production line, went to three shifts, and in 1944 was awarded the Maritime Commission Award of Merit.
In 1947 the three Wickes operations, Wickes Bros. Foundry, Wickes Boiler, and U.S. Graphite, were merged to form The Wickes Corporation. Under the terms of the merger, the newly formed corporation had an authorized capitalization of $10 million, consisting of two million shares with a $5 par value. Some 770,000 of these shares were used in the exchange of stock with the companies that had been absorbed. The remaining 1,230,000 shares stayed in the company’s treasury for use in future purchases of other manufacturing companies.
With the end of the war, Wickes capitalized on its newly acquired production techniques. The company upgraded its bent-tube boilers’ capabilities to 350,000 pounds of steam per hour and experienced great success in selling the newly designed unit to factories, refineries, schools, hospitals, and municipal utility companies. However, the company’s increased sales volume brought with it new problems. Boilers do occasionally explode; in the late 1950s and early 1960s damage suits resulting from the explosion of some of the new, more powerful units resulted in millions of dollars in damage suits against Wickes. The company chose to discontinue pushing the growth of its boiler business and began to concentrate its resources toward expanding its highly profitable lumber division. In 1959 the boiler operation was sold to Combustion Engineering Company.
The post-World War II years saw a tremendous housing shortage. The lumber business as it existed in the United States was not equipped to handle the increased demand. Lumber was sold by small, independent dealers to builders who completed construction of one dwelling at a time and purchased the materials to build these houses in small quantities, resulting in high prices, which were passed along to the home buyer. Home builders were at the mercy of the local lumberyard owner, and in many instances, lumber stock needed to complete construction was not available when the builder needed it.
Wickes took advantage of the situation. In 1952 the company took a portion of a former grain terminal in Bay City, Michigan, and under the supervision of Joseph S. McMullin opened a retail outlet for building supplies. The idea was to maintain a stock of all the types of lumber and construction products needed by builders. By always having a healthy supply of product, Wickes created a one-stop store to which the builder simply sent his truck and purchased the needed supplies with no delays and at a price lower than what he had been paying to the small independent lumber yard. The new Wickes venture was called the Bay City Cash Way Company. The idea was such an overwhelming success that Cash Way soon found itself selling to independent lumberyards, which had found that they could buy lumber at Cash Way for less than it was costing to mill the lumber themselves. The key to Cash Way’s success was volume. McMullin realized that as long as the company was willing to turn large amounts of product at relatively low profit margins, the volume of sales would take care of the company’s bottom line.
The company opened additional Cash Way stores, and in 1962, the year Cash Way was renamed the Wickes Lumber Company, sales topped $66 million nationally. The division had become responsible for more than half the business of the entire Wickes organization. A year later, the lumber division was doing about two-thirds of the company’s business, and its growth seemed to be out of control. The company pulled Smith Bolton in from U.S. Graphite to head the lumber division and tighten up Wickes’s corporate framework.
Bolton took a very hard look at the lumber division’s organization, inventory distribution method, and the process used to decide where new lumber centers were to be located. He discovered that the vast majority of Wickes Lumber profits were being generated by its more established stores in Michigan and the other midwestern states, and that many of the newer ones in the South and Southwest were losing money. The reasons for these losses were twofold. First, all the stores carried identical products, irrespective of climate and local building codes. The second problem was the haphazard method that was being used to choose new locations. Bolton found out that location choices were made without any actual market research. Bolton believed the existing management team did not realize that the company was moving into a larger, more complex business arena. The changes instituted by Bolton resulted in more than 40 resignations from the lumber division’s management team. The first executive to leave was the division’s president, Dick Wolohan, who struck out on his own and began a competing company. The remaining resignations were, in most cases, defections to Wolohan’s new company. An aggressive internal management promotion program and recruiting from outside the company eventually filled the void created by the mass resignations. By 1966 Wickes had broken the $200 million per year sales level.
The 1970s brought with it even greater growth for Wickes. In 1971 Wickes Companies, Inc., was formed to be the parent company of The Wickes Corporation. The company expanded its business into Europe and, fueled by the profits generated by the continuing growth of the lumber division, entered into many new enterprises, including the retail furniture, consumer credit, modular housing, and commercial construction businesses. In 1974 the company surpassed $1 billion a year in sales. In 1978 Wickes purchased Builders Emporium, a home-improvement retailer.
In August 1980 Wickes acquired Gamble-Skogmo Inc., a Minneapolis, Minnesota-based retail company consisting of supermarkets, drugstores, mail-order houses, and other outlets. The acquisition, valued at more than $200 million, elevated Wickes sales figures to more than $4 billion per year. To fund the purchase, however, the company took on significant debt. The worldwide recession of that time, coupled with bad planning in its building supplies and furniture lines, put the company in a tenuous situation following the Gamble-Skogmo merger.
In April 1982 Wickes and most of its domestic subsidiaries filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. In June 1982 the Securities and Exchange Commission began investigating charges that some of Wickes’s former officials had issued false data and omitted material information about the company’s deteriorating financial condition in the year preceding the filing. The investigation was prompted by complaints filed by many former Gamble-Skogmo shareholders. The following year, however, the judge presiding over the company’s Chapter 11 case ordered the court-appointed examiner to terminate his investigation, as the cost of the investigation, already more than $1.5 million, and the sheer volume of work needed to complete the inquiry did not appear to be justified.
A month before Wickes filed for Chapter 11, Sanford C. Sigoloff had been brought in as the company’s new chairman and chief executive officer. Immediately following his appointment, a purge of upper-level Wickes executives occurred as the first step in the new chairman’s reorganization plan. After building up enough capital to see the the company through the first stages of the Chapter 11 filing, Sigoloff began to sell off practically all of Wickes’s general retailing operations in an attempt to make the company less vulnerable to regional retail sales cycles and simultaneously began a program whereby the company would embark on several major acquisitions.
In 1985 Wickes emerged from the second-largest bankruptcy proceedings in U.S. history. After divesting itself of many interests, including the company’s vehicle leasing operations, Wickes Machine Tool Group, and Wickes Engineered Material Division, it acquired the Consumer and Industrial Products Group of Gulf + Western Company for approximately $1 billion. In 1986 Wickes acquired a group of retail stores from W. R. Grace & Co., which it added to its Builders Emporium operations, and spent $1.16 billion to acquire The Collins & Aikman Corporation, a manufacturer and distributor of upholstery, fabrics, and wall coverings for the home, as well as carpeting, upholstery, and seat coverings for automobiles. Also in 1986 Wickes made unsuccessful takeover bids for Owens-Corning Fiberglas Corporation and National Gypsum Company.
In 1988 Wickes sold off its lumber operations. The same year Wickes agreed to be taken private by WCI Holdings Corporation, an investment group jointly owned by Blackstone Capital Partners L.P. and Wasserstein, Perella Partners L.P. The sale was completed in 1989.
In fiscal year 1990, Wickes reported operating income of $53.3 million on sales of $2.36 billion. In 1989 and 1990, the company continued divesting certain businesses, including Orchard Supply Hardware, which had been acquired in 1986, and a European hosiery division.
Collins & Aikman Textiles; Kayser-Roth Corp.; Collins & Aikman Wallcoverings; Builders Emporium; Wickes Manufacturing Co; Wickes Engineering Group.
—William R. Grossman