Mr. Mac & His Team
"This is Mac calling all the team." The voice crackles with authority as loudspeakers carry it to every corner of the sprawling aerospace plant on the rim of St. Louis' Lambert Field. It sparkles with an enthusiasm that rises above the inescapable racket of jet aviation--the rumble of commercial planes lifting off the long runways, the ear-shattering passage of military fighters climbing aloft on steep, improbable curves.
When Mac calls, the team listens, and the noisiest diversion dwindles into the background. For the voice belongs to James Smith McDonnell, 67, whose paternal pep talks are the hallmark of a remarkably successful modern businessman. "Our work," he is fond of saying, "is part of a great team effort. I congratulate all of you who have worked so long and hard." Invariably, he closes: "This is old Mac signing off."
In the past 27 years, "Mr. Mac," as he is known to his 46,000 teammates, has built and babied his McDonnell Co. from nothing into a $1 billion-a-year corporation. With his performance in the manufacture of Mercury and Gemini space capsules, he gave U.S. astronauts an essential boost into space. His jet planes were among the few ready to carry U.S. airmen into combat in Korea; for Viet Nam he has produced the F-4 Phantom, the hottest fighter yet flown in combat by any air force in the world. By his dedication to technical precision, he has turned his company into a sudden and surprising front runner in one of the most complex and competitive of modern industries. Yet, as its chairman and chief executive, he remains a shy and paradoxical figure, leary of publicity even as he competes for profits. Half introvert and half visionary, McDonnell sometimes seems a crusty, single-minded engineer who exists only for his work. But he is also a mystic missionary bringing word from another world, and all his fighter planes--Phantom, Demon, Banshee, Voodoo--bear names that testify to his long fascination with the abode of spirits.
Like a Barony. Mr. Mac is a man of continuing contradictions. From the start of his highly organized career he has concentrated his genius for aerospace production on a comparatively few products. But next month, by merging his company with Douglas Aircraft, he will become boss of one of the nation's most impressively diversified aerospace manufacturers. In an era of bland corporate management, he insists on ruling his 20th century aeronautical beehive like a 19th century industrial barony. His warm paternalism is flavored with benevolent despotism; he customarily sends a pair of baby shoes when an employee becomes a parent but frowns on an employee leaving the plant for lunch.
A wiry, tight-lipped overseer with sparse grey hair and rimless trifocals, McDonnell scoffs at the "one-man myth" about his company. But if his employees are "teammates," he is the coach, and he calls every important play. He is in the middle of every scrimmage. McDonnell refers to himself as "a practicing Scotsman," and in small ways he certainly is. He has been known to spend five hours going over the cost of Xerox copies of company documents. To inhibit gabby long-distance telephone calls, he gave his aides three-minute egg timers. Yet Missouri's largest employer spends lavishly where it counts: on new technology. Since the company's birth, McDonnell has poured 83% of its profits into research and expansion. For his reward, he has earned the steadiest profit rise of any major company in a roller-coaster business where losses come easily and disaster often. McDonnell's net income has climbed every year since 1951; last fiscal year it reached $43.2 million, 35% above the year before. So far this year profits have jumped by another 30%. A mere $2,000 invested in McDonnell when the company faced the future without a single contract would be worth $730,000 today.
Profit Squeeze. McDonnell is an unmistakable phenomenon in a fast-changing industry that is suffering a good deal of anxiety about its future. The U.S. guns-and-butter economy lifted aerospace sales by 15% last year to a record $23.8 billion. But Viet Nam-caused labor shortages and material bottlenecks boosted costs enough to squeeze profit margins down to 3% of sales compared with 5.6% for all U.S. manufacturers.
Fearful that there may soon be too little traditional aerospace work to keep their huge organizations busy, the major companies are scrambling to put their expertise to work in other fields. To hear aerospace men tell it, this computer-based talent for analyzing and solving intricate problems gives the nation its best hope for coping with everything from urban sprawl to water purification to figuring out how a diocese should deploy its priests. Aerojet-General, principally a rocket-engine maker, has contracted to build two automated post offices, and has begun planning new methods of solid waste disposal for Fresno (Calif.) County. Lockheed, though still the top Pentagon contractor, with $1.5 billion worth of 1966 plane and missile orders, is battling General Dynamics and Litton Industries for a Navy ship contract--to the dismay of the nation's proudly inefficient conventional shipbuilders. Cleveland's TRW (nee Thompson Ramo Wooldridge) is designing a hospital operations system for Edmonton, Canada, studying ways to improve highspeed ground transportation for the Federal Government, devising a system by which California cities can cope more effectively with their growing pains.
Merger Appetite. With all that diversification the industry's sales of non-aerospace items last year grew 25% to $2.45 billion. Moreover, such business increased at a faster rate than industry revenues from civilian aircraft despite a rash of airline orders for jet transports. Thus it is no surprise that aerospace companies are more anxious than ever to tap lucrative new fields and reduce their worrisome dependence on Government contracts.
Lately, they have developed a conspicuous appetite for other corporations. Northrop moved into radio manufacturing last year by acquiring the Hallicrafters Co. Lear Siegler broadened itself from aviation instruments and electronics to auto parts and furniture springs by merging with American Metal Products. Detroit-based Bendix Corp., which produces everything from auto radios to complex weapons systems, has a marriage pending with Fram Corp., which makes oil and air-conditioning filters. Dallas' Ling-Temco-Vought has just corralled Chicago's Wilson & Co., a major meat packer and sporting-goods producer. And last week there was North American's merger agreement with Pittsburgh's Rockwell-Standard Corp.
McDonnell's forthcoming merger with money-losing Douglas Aircraft Co.--effective April 28, provided that stockholders of both firms agree at mid-April meetings--will keep both companies largely in aerospace. But it will give the resulting McDonnell Douglas Corp. as firm a foothold as any in the industry. The two companies fit together like pieces of a jigsaw puzzle. Where McDonnell has gaps, Douglas counts its main strength: in civil aircraft, in military rockets, and in man-in-space work for the years just ahead. Civilian DC-8 and DC-9 transports account for 79% of Douglas' $3.2 billion order backlog. Where Douglas is weak, McDonnell is strong: in seasoned second-level management and in orders for the highly profitable F-4 Phantom, which accounts for 84% of the company's revenue.
By joining forces, both companies will bolster their ability to compete at a time when orders--notably from the government--are growing bigger but fewer, and margins for error are shrinking fast. The merger will also lift McDonnell from sixth in sales among U.S. aerospace companies to No. 2, behind Boeing. For Mr. Mac, reaching that pinnacle has required both luck and a lifetime of relentless effort.
The Decision. Youngest son of a well-to-do cotton farmer and retail merchant, McDonnell grew up in Little Rock. He was always "rather shy, serious and withdrawn," says his older brother William, former chairman of the First National Bank in St. Louis and still, at 72, finance committee chairman of the St. Louis-San Francisco Railway. But the young teen-ager was not too withdrawn to get out of bed at 4 a.m., saddle up his horse and deliver the morning Arkansas Gazette. "My Scotch daddy," Mr. Mac explains, insisted that his sons earn all their own spending money.
At Princeton ('21), McDonnell hefted trays in the dining hall for pocket money, studied physics so doggedly that he had little time for campus social life. Still, the first time he got a chance to buy a ride in a rickety old biplane, McDonnell impulsively blew $25 on an aerial tour of the campus--and went without a new winter overcoat. Recalls Freshman Roommate Edward L. Barbee of Joplin, Mo.: "He didn't mingle and mix with people. He always was a one-idea man. One time he spent a whole week in his room deciding that he believed that there really was a God."
As a loner, Mac developed a talent for unsparing self-analysis. For a while he dreamed of a political career. "I thought I would like to spend my life trying to bring about the things that Woodrow Wilson stood for," he says, "but my Scotch daddy set me straight. He said, 'You're too shy. Your brother Bill could do it, but you couldn't.' I thought about that for a while and decided he was right."
In a Chicago public library--where he spent his spare time while on a summer job inspecting telephone switchboards--McDonnell chanced upon an obscure book about psychic emanations: Human Personality and Its Survival of Bodily Death, by English Essayist Frederic W. H. Myers. It turned his interest abidingly toward the occult. "I was fascinated with the idea that this realm of the mind and soul and survival after bodily death ought to be susceptible to investigation through a scientific approach," says McDonnell. Rebuffed by one of his Princeton professors when he asked for help in such an inquiry, the eager student attended every seance he could find; he seriously suggested that his father give him an advance on his inheritance so that he could do research with Myers' Society for Psychical Research in Britain. Daddy demurred. "We compromised on aeronautical engineering," says McDonnell. "At that time, it was pretty much out of this world too."
Hallelujahs Aloft. Having made his decision, McDonnell approached the future the way he approaches a business decision: detached, deliberate, precise. He had already worked out a 50-year plan for his career. Now he juggled the details to fit aviation, deciding among other things "to intern until age 40 before making a serious attempt to set up my own company." Says McDonnell today: "The plan went just about the way it's happened." He earned a master's degree in aeronautical engineering from M.I.T. ('25), enlisted in the Army Reserve to learn to fly. He remembers "singing hallelujahs as I did my first aerobatics in 1923, all alone, without the damn instructor in the rear cockpit." He also recalls "something like psychic ecstasy during my first parachute jump. The ecstasy ended when I landed in weeds and gravel and the open chute pulled me through them."
At first airplane makers were less than impressed with the intense young engineer-pilot; they even refused his offer to work for nothing. In time he caught on as a $108-a-month draftsman at Huff Daland Airplane Co. of Ogdensburg, N.Y. Later he became a stress analyst at Buffalo's Consolidated Aircraft but was soon politely asked to look for employment elsewhere. He was fired outright by Ford Motor Co.'s aviation division.
The Doodlebug. That was the nadir of his career. With nowhere to look but up, McDonnell took aim on a $100,000 prize: the 1929 Guggenheim Safe Air-Craft Award, for which he and two associates built a plane they called "the Doodlebug." It was an open-cockpit monoplane that McDonnell hoped to peddle as "the aerial flivver of the future." It came close to consigning him to the past.
In order to meet the contest deadline, McDonnell taped two flashlights to the wings and flew part of the way from Milwaukee to Long Island's Mitchell Field by night. Next morning he took the Doodlebug up to show officials its structural integrity. During a shallow dive at 1,500 ft., the horizontal tail folded and the Doodlebug began some unplanned acrobatics. Common sense dictated that it was time to bail out, and McDonnell had one leg out of the cockpit when a semblance of control returned. After that, he says, "I was too much of a practicing Scotsman to use the parachute." Somehow he wrestled the plane to a crash landing--as a result of which, surgeons removed the third lumbar disk in his spine.
Undaunted, McDonnell kept doodling with airplane designs. He went to work for the Glenn L. Martin Co., where he rose to be chief project engineer for land planes. But he still wanted his own company, and in 1939, with $165,000 put together from his own savings plus investments cajoled from family and friends (including Fellow Princetonian Laurance Rockefeller, who put in $10,000), he started McDonnell Aircraft in a $100-a-month second-story room at Lambert Field. Despite the company's vast expansion, McDonnell's headquarters have moved only a few hundred yards from that original site.
McDonnell had just turned 40 when he moved to St. Louis. He was still sticking to his timetable--barely. He had his own outfit, but it boasted only two employees: himself and a male secretary. Thriftily, Mr. Mac rented part of his space to a group of Navy flyers, squeezed his own desks and drafting tables into a corner behind the flyers' canvas cots, mosquito netting and dirty underwear.
"At the end of the first year," he says, "our backlog was zero, sales zero, earnings zero. All we had for our work was a $3,000 design award for an Air Corps fighter plane." The first production order was for $7,672 worth of parts for Stinson observation planes. During World War II, McDonnell kept busy producing such garden variety items as ammunition boxes, gun-turret parts, engine cowlings, and tail assemblies for Douglas' famed DC-3.
"Will Do." Then, in 1943, came McDonnell's big chance: a Navy contract to develop the world's first carrier-based jet aircraft. It was a lucky break, to be sure, but as Mr. Mac likes to point out, "it didn't come by chance." As early as 1939, just after he had set up shop, McDonnell began badgering the Air Corps to commission his company to do research in the advanced field of jet propulsion. He finally got a contract. "It was just a tiny one, only $20,000," he says, "and of course we didn't make a nickel on it. But the boys did a good job, and we learned a lot." When the Air Corps let the contract expire, McDonnell tried to interest the Navy. At first he was unsuccessful; then, a couple of years later, someone in the Navy Department remembered the little St. Louis firm that had been shrewd enough to see a future in turbojet propulsion.
"It was on New Year's Eve," says McDonnell. "I was sitting in my office, and it was well into the evening when I got this call from a rear admiral in the Bureau of Aeronautics. I remember being favorably impressed that the Navy was working that late in Washington. The admiral said, 'If you'll be here tomorrow about 8 a.m., we can tell you about a classified item I think you'll be interested in.' I said 'Will do,' and headed there overnight. When they told me what it was all about, I said 'Will do' and then I came back and we went to work."
The result was the 500-m.p.h. twin-jet Phantom I, and it performed so successfully that a few years later the Navy ordered 895 of its bigger, faster sister, the Banshee, which fought splendidly in Korea. Today's phenomenal McDonnell F-4 Phantom II, the rugged all-purpose workhorse of the Viet Nam air war, beloved alike by the Air Force, Navy and Marines, is a direct descendant of the original Phantom. "Its excellence is no fluke--just the end of evolution," says Mr. Mac. With its arched nose and down-pointing stabilizer separated by a bulky midriff, the F-4 looks as awkward as a goose with drooping tail feathers and middle-aged spread. But it can zoom from a dead stop on a runway to 40,000 ft., faster than astronauts in a spacecraft can reach that altitude from ignition on a launch pad. It can climb higher than 100,000 ft., fly at more than twice the speed of sound, yet slow down to 150 knots to land on carriers or short jungle airstrips.
Phantom IIs bagged seven MIG-21s over Viet Nam one day last January; of the 37 MIGs shot down so far, the Phantom is responsible for 26. As a bomber, it carries twice the payload of Boeing's World War II B17. Wrote Captain William A. Mackey, a Navy test pilot assigned to re-evaluate the plane: "The Phantom II is the first airplane that I have ever had the pleasure of flying which is always capable of performing as well as if not better than the contractor advertises in his sales brochures. . . It is a truly perfect tool."
To date, some 2,300 Phantom IIs have rolled off the St. Louis assembly lines, and the Government has another $1 billion worth on order. The company expects to keep producing them until the mid-1970s partly because volume has cut the price from an original $2,200,000 to $1,700,000. Besides, McDonnell is already designing newer versions, which may give the Phantom a further lease on life.
Hearts & Goofs. When it came to space work, McDonnell showed as much foresight as he did with jets. Correctly anticipating what was to come, Mr. Mac put 45 engineers to work on capsules months before the U.S.S.R.'s Sputnik started Washington on its race for the moon. With that much preparation, McDonnell easily won the competition to build the Mercury capsule. Then well-publicized goofs marred the early phases of the program; it was almost more than Perfectionist Mac could bear when NASA cameras detected a loose nut and a crumpled cigarette package during a zero-gravity test of an early capsule. The problems were overcome so completely that Astronaut John Glenn, America's first man in orbit, popped from his Friendship 7 Mercury capsule and sent his regards to the manufacturer as "a very satisfied customer." Later, at the plant, Glenn told the teammates: "Your hearts were in this."
NASA was so impressed that it hired McDonnell to build the Gemini capsule without even asking for competitive designs. So flawless was Gemini's performance that it completed nine of the ten manned missions precisely as planned and McDonnell collected a $25 million bonus. "McDonnell's engineers always seemed to be on top of the problem," says NASA Flight Director Chris Kraft. As often as not, Mr. Mac himself would turn up at Cape Kennedy for a 3 a.m. breakfast with departing astronaut crews. To help him recall who was who, he invariably carried a small black notebook crammed with the names of wives, children--and even their dogs. "Mr. Mac is an anachronism," says NASA's Paul Haney. "There's a measured cadence in working with him that's refreshing--the same aura that was Henry Ford's."
Cheaper than Sprouts. Work for McDonnell begins right after 7:30 a.m. calisthenics when, over breakfast in his distinctly unpretentious colonial house in the St. Louis suburb of Ladue, he reads papers and reaches decisions. At the plant, amid the wail of Phantoms taking off to fly directly to Viet Nam (with the help of in-flight refueling and an Okinawa stop), he operates out of a spacious but spartan corner office, with a scuffed carpet and hand-me-down, imitation-leather chairs.
The frugal mark of the proprietor runs deep at McDonnell's 408-acre, 30-building headquarters and plant. There are no frills amid the tangle of boxlike brick offices, glass-clad research laboratories and steel-walled hangars. Scientists experiment with laser beams and gamma rays in basement rooms so jammed with costly equipment that it is difficult to walk about. Executives often labor in windowless cubbyholes. But there are no audible complaints. McDonnell spends weeks and months scouting out able men, screens them with such painstaking care that he is rarely forced to fire anybody. Though he delves into everything from the wording of a minor press release to the price of three-ring notebooks, he has the good sense to refrain from looking constantly over his engineers' shoulders.
At every level, though, his demands on his teammates are exacting. Though he has eased up a bit, for years McDonnell had a habit of telephoning department heads at 2 or 3 a.m. for hour-long talks. His knack for asking the one question that an aide cannot answer is legendary. Characteristically, he summons assistants to meetings at such precise times as 10:22 or 3:53, then keeps them waiting while he wrestles on and on with the previous problem.
Before a company dinner for an important visitor, Mr. Mac will often take three or four hours with a pair of vice presidents deciding whether to serve steak at $5.25 a person or rib roast at $4.75. Then there is the matter of vegetables. Will asparagus be cheaper than brussels sprouts, or will carrots be cheaper still? When it comes to making such decisions, McDonnell's favorite tool is his slide rule. For a Christmas party, he once figured out that twelve ounces of eggnog per person was precisely the right amount to assure conviviality without too much hilarity--and ordered the whisky accordingly. The vice president who asks for a third drink on the company airplane (a Jet-Star made by rival Lockheed) is quietly reported to Mr. Mac himself.
Despite such strains, loyalty runs strong. McDonnell's top 17 executives have worked there for an average of 23 1/2 years. "It's a hell of a crucible," says one ex-McDonnell officer. "But it works. Mr. Mac operates on the theory that if you take care of the little things, the big things will take care of themselves. A man tends to think, 'My God, if we spend all that time on the budget for a lousy little dinner, what's he going to do to me when I come up here with the presentation for some $2,000,000 proposal?' So he goes back and goes over that proposal until he has justified every penny."
By common consent, no one toils harder for the McDonnell team than Mr. Mac himself. Aside from an occasional round of golf (he is lucky to break 100), his relaxation consists of a nap after lunch and two drinks before a late dinner with his second wife, the former Mrs. Priscilla Brush Forney. After the Jell-O and Sanka, Mr. Mac retreats to his den to dip into his briefcase until midnight. McDonnell's sons, J. S. Ill, 31, and John Finney, 29, both hold mid-bracket executive jobs in McDonnell's space center. They are the children of his first wife, who died in 1949.
For Psychic Rewards. Mr. Mac draws a salary of $98,970 a year, and his personal 13% stockholding in his company (worth $90 million) earned him another $730,000 in dividends last year. But he is not impressed by the figures, only by what they reflect of the success of his lifelong plan. Says he: "I don't work for money any more, just for the psychic rewards."
With the fortune he has made from weapons of war, McDonnell has long contributed to research on ways and means of keeping the peace. In 1950, he gave the McDonnell Foundation $500,000 for just that purpose. A fervent backer of the United Nations, he not only observes the U.N.'s Oct. 24 birthday as a plant holiday but also buys full-page newspaper ads to plug his belief that all Americans should "give their time, talents and wealth in striving toward U.N. goals." At the same time, he remains convinced that the U.S. "will be criminally negligent if we wage peace except from a foundation of great strength." Accordingly, the April 4 anniversary of the North Atlantic Treaty Organization is also a company holiday. McDonnell has also donated some $5,200,000 to Washington University in St. Louis. From 1964 until the pressure of Viet Nam production last year impelled him to resign, he headed the university's board of trustees.
"Doodlebugged Again." Though McDonnell's engineers are already looking beyond the moon to Mars and Venus, Mr. Mac is also betting part of his bankroll on earthbound expansion--notably the development of vertical- and short-takeoff-and-landing craft for intercity air travel. "It's bound to come," he insists. By his calculations, as early as 1975 V/STOL planes could grab half the commercial travel over such short hops as San Francisco to Los Angeles.
McDonnell has also devised a 27-lb. antitank missile that a single foot soldier can tote and launch, is confident enough of a big Army order that he has bought a 247-acre site in Florida for a factory. In another diversification, the company has created thriving automation centers in Houston, Denver, St. Louis and Columbia, Mo. Operating $40 million worth of computers, the centers keep records for 22 St. Louis banks, handle warehousing and order control for a shoe manufacturer, compute tax bills for Colorado counties, help devise game strategy for the Denver Broncos' professional football team.
In his quest for diversification, Mr. Mac has been trying for years to break into the ranks of civilian-airplane manufacturers. And he has been repeatedly frustrated. In the late 1950s, he sank $15 million into a four-engine turbojet transport intended to be a corporate plane or Air Force trainer. Nobody would buy it. "That was the time," says McDonnell ruefully, "that old Mac got doodlebugged again."
The Downdraft. But he was not about to give up. It was almost inevitable that Mr. Mac should go all out to buy Douglas when he got a chance. He made a first overture in 1963 after picking up an estimated 200,000 shares of the California company's stock. Douglas rejected his advances, and McDonnell later sold his holdings at a handsome profit.
Even then, Douglas was in a downdraft. Part of the trouble was that strong-willed Donald Wills Douglas Sr., now 74, had waited too long to move into commercial jet transports; the DC-8 lagged a year behind Boeing's profit-laden 707--and Douglas has yet to break even on the venture. After Donald Jr., now 49, took over the presidency, the company grossly underestimated both the demand and costs for its 90-plus passenger, twin-jet DC-9. Labor and parts shortages snarled production lines, and as a result Douglas lost at least $600,000 on each DC-9 it delivered last year, ended 1966 some $27 million in the red. That process nearly exhausted the patience of the eight banks that were providing it with operating funds. They cut off Douglas' $100 million credit lifeline just as the company realized it would need $300 million more to squeeze through 1967.
By late November, the Douglas board of directors knew that only a merger would save the firm. At Douglas' request, Stanley Osborne, a partner in the Wall Street investment banking house of Lazard Freres, began shopping for bids. Well-heeled McDonnell Co. offered the most cash--an immediate $69 million for authorized but unissued Douglas stock. It had already snapped up 300,000 shares of Douglas stock at depressed prices, a move that made it Douglas' largest stockholder.
Can McDonnell pull Douglas out of its spin? Nobody who knows Mr. Mac thinks he would have put so much money into a company so loaded with debt unless he felt confident of the outcome. And as if to bolster that confidence, he plans to install a new chief executive at Douglas: the handsome heir apparent from McDonnell, President (since 1962) David S. Lewis, 49.
Aerospace's newest mammoth, McDonnell insists, could well prove to be a synergistic compound--a union in which one and one add up to more than two. McDonnell, for example, is building an "airlock" which astronauts hope to couple to a spent-but-orbiting Douglas-built Saturn rocket stage; spacemen would live aloft for a year in the airlock's safe, two-gas atmosphere. Now that Douglas and McDonnell can plan and build that equipment together, the job should become not only easier but more profitable--and the cross-pollination of ideas between two sets of engineers may lead to new and more advanced projects. "Once our merger goes through," says Mr. Mac proudly, "we'll be big enough to take on any space project that comes along."
But in his own way, McDonnell is far more interested in the industrial conquest of space than he is in money-making weapons systems that are limited to what he considers to be man kind's more or less petty quarrels.
"America is now a space-faring nation," he says proudly. "This is a frontier good for millions of years. The only time remotely comparable was when Columbus discovered a whole new world. The creative conquest of space will serve as a wonderful substitute for war. And the revelations of cosmography should shrink our egos down to size."
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