Fight for American Woolen

In the basement banquet room of Boston's Statler Hotel, some 300 worried men and women gathered last week at a stockholders' meeting. They were a cross section of the more than 17,000 stockholders of American Woolen Co., world's biggest woolen and worsted manufacturers, and they hoped to help work out a way to get their money-losing company out of trouble (TIME, April 4, 1949).

For two years there had been no common-stock dividends, and the company's operating loss for that period was more than $20 million. Even considering the general sickness of the woolen industry, American Woolen was in bad shape. With its 27 antiquated mills (built as far back as 1849, none built or rebuilt since 1929), the company found it hard to compete with smaller and more energetic companies. When American Woolen finally decided in 1951 to open plants in the South, where other companies had built efficient new plants, it bought an old mill and an old tobacco warehouse.

American was so late in getting into the fast-growing field of synthetics that the C.I.O. Textile Workers Union, fighting a 15% wage cut in 1953, criticized management, said that President Francis W. White had few fresh ideas, centralized control in himself.

American's Plan. The company's sales, which were high during the postwar shortages, slumped from $253 million in 1951 to $62 million in the first nine months of 1953. Net profits of $15.92 a share in 1948 (when stockholders got $8 in dividends) turned into a deficit of $7.39 a share in 1952.

American Woolen called last week's special meeting to vote on its own prescription to heal the company: retire about $20 million worth of preferred stocks, thus eliminating about $1,000,000 a year in dividend charges; sell off eleven mills in New York and New England (nine were already shut down), thus cutting down overhead, and start a program of modernizing its remaining mills. Three of the company's eight directors opposed the stock retirement, among them influential New Haven Railroad President Frederic C. Dumaine Jr.

Many stockholders also opposed the plan. How did the company expect to modernize its plants and equipment, they asked, if virtually all the cash was to be used to retire preferred stock? They charged that the company was1) shutting down some of its more efficient mills and keeping the less efficient and 2) keeping six mills that averaged about 60 looms apiece, necessitating six resident managers, six maintenance crews, six tax bills, etc., to turn out as much as one of the mills to be closed. Stockholders' committees sprang up, and at least one aimed to take over the management itself.

Textron's Offer. Just before last week's meeting, Textron's Royal Little, whose company has also been losing money (net losses in the last two years: almost $5,000,000), offered to exchange its own stock-for that of American Woolen, and to take over the company as its own woolmaking subsidiary.

As tall, bald and humorless President White opened the meeting, he announced that a stockholder had obtained a court injunction that prevented him from holding the meeting. Reason for the suit: Textron had not had enough time to get its plan before the American Woolen stockholders. Up jumped Lewis D. Gilbert, who makes a career of attending stockholders' meetings, to protest adjourning "this meeting without the approval of stockholders." Replied White: "But I'm the defendant. I am not permitted to go on with the meeting." In the confusion of other protests, Lawyer Robert H. Montgomery, company clerk, recognized a motion to adjourn until after the court hearing this week, and called for a vote. There was a quiet murmur of "ayes" and a roar of "nos." Announced Montgomery: "The ayes have it." Then he and White turned and walked out a back door.

The stockholders, many of whom had traveled hundreds of miles to attend the meeting, were in no mood to call it quits, decided to hold their own rump session. As their chairman they elected Stockholder Gilbert, and named a committee of eight to meet with the management and talk over its plans. Meanwhile, American Woolen management, claiming proxies for 55-57% DEGf the stock, sniffed at Textron's plan, prepared to put through its own proposals as soon as the court order was dismissed.

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