Aug

100 Years of Ulbrich: The Difficult Years

To mark our historic 100th anniversary, we continue our series of sharing stories from the past. This seventh blog article takes us through the difficult years that followed after the passing of Fred Ulbrich Sr.

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After Fred Ulbrich Sr. passed away, a difficult series of events played out that effected the business. The Internal Revenue Service (IRS) decided to challenge the value of Fred Sr.’s estate. Fred Jr. was the estate’s Executor and spent considerable time, effort and funding to prepare with attorneys for federal tax court in New Haven.

Then in 1977, the Ulbrich family was saddened by the passing of Ada Ulbrich. She was a loving mother and community leader with a warm, adventurous soul.

Ada’s adult children were incredulous when they learned that the IRS planned to challenge her estate as well. While experiencing the personal trauma of losing both parents and the stressors of internal turmoil, Fred Jr. and attorneys worked tirelessly to resolve the two estates. It took five years for Fred Sr.’s estate to be settled and another three years for Ada’s. The estates owned the land upon which the Strip Mill was located. The complication required that property ownership was transferred to the company.

Around this time, Bill Gardner, having left Ulbrich, began a Service Center called the Metal Center located three miles from Ulbrich’s headquarters. He became a competitor, but he still owned stock in Ulbrich related companies; specifically, Tubex, Professional Leasing and MSD. Gardner managed to hire sixteen Ulbrich employees, including almost all Ulbrich of California’s staff. This series of events involved more resources, attorneys and accountants — all of which obstructed the growth of Ulbrich.

Fred Jr., Dick and Dan chose not to file a lawsuit against Gardner or his new company. They favored a competitive approach instead. Customers would determine from whom they bought metal. Within four years, Metal Center ceased to exist. However, the turmoil was not a happy event. Gardner’s stock and other assets in the Ulbrich-backed companies were relinquished and losses were taken. In spite of these horrendous happenings, Ulbrich continued to service customers and overall sales increased.

In the winter of 1977, a 27-inch blizzard hit Connecticut and Governor Ella Grasso declared a State of Emergency. Commerce came to a halt and traffic was prohibited. Ulbrich co-workers had been sent home before the emergency declaration except for four men in the Furnace Department. The furnaces could not be shut down without being damaged beyond repair. Dick Ulbrich and the Personnel Director, Tony Medeiros, secured an exemption from the State to allow the four operators to work continuously.

The furnace operators were paid triple-time but needed food and supplies. They had help from a longtime employee, Ed Eylward, who lived next to the Strip Mill. Mrs. Eylward cooked, and Ed brought the men food each day. Dick arranged for cots and blankets from the National Guard so they could rest. When the emergency ended, Dick personally congratulated the men and gave them an additional week of vacation. When asked about the operation, Dick simply said, "My job was easy compared to theirs.”

Soon thereafter, the family and the business suffered a particularly grievous event. Daniel Ulbrich, who had undergone two open heart surgery operations, suddenly died of a heart attack at 39. It was terrible to lose Dan. It became worse when the executors of his estate became hostile. They claimed that most of Dan’s corporate agreements were invalid and demanded the liquidation of Ulbrich. The efforts made by management to remedy this uncomfortable situation were enormous.

A bright light upon the scene was Chris Ulbrich, Fred Jr.’s son. He was a graduate of the University of Connecticut and worked part-time at Ulbrich since age 15. He had learned to operate machines and worked in the Packing Department. Then Chris became familiar with the office and purchasing functions before spending time at Tubex and Ulbrich of Illinois. Jay Cei, a cousin of the Ulbrich family with financial management experience, was also brought into the business around this time as well as Chris’ brother, Robert Ulbrich, who joined the company at the Strip Mill as a Management Trainee.

Betting The Farm

During the difficult years, competence and dedication of Ulbrich co-workers saved the company. To keep up operations and to turn a profit during those tumultuous times was thought of as a small miracle. The company seemed to have turned a corner as most internal squabbles had been settled. Although Ulbrich’s sales were increasing (1979 sales were $48 million), and customers considered it a dynamic supplier, internal problems undoubtedly contributed to Dan’s death and were having a serious adverse effect upon the well-being of Fred Jr. and Dick.

In February of 1980, Fred Jr. attended a business meeting in Florida with his wife Joanne. In addition to business subjects, this four-day meeting also included wellness subjects. One of them was called, Are You a Candidate for a Heart Attack? Joanne, and the doctor of the course convinced Fred Jr. to attend. Fred Jr. later said he was tricked into attending the course when Joanne told him that Leroy Nieman, an artist, was going to be in Room 202 exhibiting his watercolors and signing autographs. When Fred Jr. opened the door to Room 202, there was the test machine, nurses, the doctor, and Joanne. Fred Jr. failed the stress test.

One week later, Fred Jr. went through a series of tests. The doctors came to the conclusion that Fred Jr.’s main artery to his heart was 95% clogged and without an operation, he had less than three months to live. Fred Jr.’s bypass heart operation was successful, although he had a heart attack on the table while unconscious. He had no impending symptoms nor pain to forewarn an imminent heart attack. In 1980, bypass operations were relatively new, and in the experimental stage.

There were three major medical centers spearheading this new operation and its technology: Cleveland Clinic in Ohio, Dr. DeBakey’s Group in Texas and Dr. Dietrich’s American Heart Association in Phoenix, Arizona. With his team, Dr. Dietrich performed the operation on Fred Jr. To say that Fred Jr. was lucky is an understatement. An important ingredient of this new technology was educating the general public about heart disease and how it could possibly be prevented, Fred Sr. had died from a heart attack, his wife Ada, passed due to a stroke and Dan had a heart attack.

Dr. Dietrich was featured on 60 Minutes, the Sunday night news show on CBS, to inform the public about the operation and what people could do to help prevent themselves from becoming a statistic. At the time, preventative care and yearly check-ups were not common. Fred Jr. was one of the handful of patients who appeared on the 60 Minutes as examples cases. The story encouraged viewers to take part in preventative medicine by taking a stress test, even if they were not exhibiting symptoms of distress or chest pains. Fred Jr.’s operation and its consequences changed the fate of Ulbrich. Up to now, Ulbrich had a vertical form of organizational structure. Fred Jr. was President of all Ulbrich companies and responsible for the growth of sales. Dick Ulbrich was responsible for the performance of equipment at all companies.

Chris Ulbrich assumed responsibility for purchasing at all companies in place of May Warzocha. But Fred Jr. was incapacitated while recuperating in Arizona for three months. The company suffered for nearly a year without the guidance of its president. Dr. Dietrich told Fred Jr. that there were three things he could never do again:

NEVER SMOKE

NEVER BECOME EXHAUSTED

NEVER WORRY NEEDLESSLY

Fred Jr.'s Eight-Point Plan Shapes the Future of Ulbrich

With these three important pieces of advice, and with three months to plan, Fred Jr. reorganized Ulbrich. He drew up a ten year plan for the 1980s. Upon returning to Connecticut, he went over the eight-point plan with Dick, Chris and Jay Cei. After their input and modifications, all participants agreed. The plan was

The Reorganization Plan

Divisionalize the company from its present centralized form leftover from the 1950s. This meant that Fred Jr. is no longer President of Ulbrich, Dick no longer oversaw all company production equipment; and Chris no longer purchased metal for all of the companies. A new General Manager position at each Ulbrich division is responsible for their location — including buying equipment and incoming metal. Each General Manager reports to the President
Resolve one by one all problems not related to Ulbrich Steel and get back to basics. In other words, focus solely on providing specialty stainless steel and high-temperature alloys
Truly become a national company. Plant steel Service Centers in Georgia and California (Ulbrich already had sales offices in both Norcross, Georgia and Fresno, California). It also meant expansion in the Connecticut reroll and wire mills and the Illinois stainless steel Service Center (Ulbrich of Illinois)
Enter the international market by opening a steel Service Center or via a stocking arrangement with a steel Service Center
Aim for $100 million in sales by 1990
Develop an organizational structure for employees which works smoothly, efficiently and is customer-oriented. Hire top-notch primary and secondary management teams who could run the company regardless of whether or not Ulbrich family members were directly involved in every detail
Reinvest all corporate profits into these expansion projects, and into the education and training of all employees
Hire an outside consultant to evaluate this plan

Fred Jr. remembered his father’s saying, “Never bet the farm” - meaning not risk everything at once. Yet Fred Sr. did this twice before, once when purchasing his first Sendzimir Mill and secondly on the thin foil project for the B-70 bomber. Financing the company reorganization and expansion would be the third bet the farm moment. If it failed, it could be the end of Ulbrich Steel. However, Fred Jr. Dick, and Chris were certain of the company’s demise unless major changes were made. The organizational changes reorganizing Ulbrich into a divisional company were made in 1980.

Ulbrich had to reorganize and get back to basics. Projects initiated in the 1970s unrelated to the steel industry were relinquished. The two Ulbrich-owned shopping centers were sold off. Fred Jr. stepped down as head of the Valley Water Company and it was sold. All roads within Wharton Brook Industrial were turned over to the Town of North Haven, and Ulbrich Realty dissolved. The tax problems on Fred Sr., Ada, and Dan’s estates were settled with the IRS.

Everyone finally refocused on the core business again.

The proverbial train was, at last, on the tracks — until believe it or not, an actual freight train wrecked on Ulbrich property.

On August 26, 1981, a Conrail freight train derailed and crashed inches from Ulbrich Specialty Strip Mill. Train cars were strewn about the front parking lot for three days before the cleanup was completed. The train wreck was a public spectacle, but no significant damage occurred. Fred Jr. penned a memo to his co-workers and called the event a “close call.” He wrote, “life itself is series of close calls,” and expressed gratitude for their sacrifices during the event.

Around this time, the company’s earnings were stagnated at around $50 million. While working to satisfy customer requirements, the company struggled to grow as it had decades prior. Then Ulbrich hired a management consultant who identified organizational structure and personnel deficiencies. The business needed more employees to grow sales numbers. While anticipating an expansion of factories and equipment, there had to be a corresponding increase in the number of professional managers throughout the organization.

The Personnel Department (known today as Human Resources) took on new importance at Ulbrich. The department reported directly to Dick for Strip Mill personnel, to Chris for Ulbrich Wire personnel and to Fred Jr. for all other personnel. By the end of 1981, Ulbrich’s hiring, and expansion plans were ready to go, but once again, an economic recession reared its ugly head. The family business weathered the recession reasonably well thanks to previous experience, loyal customers and efforts by both hourly and salaried employees producing a quality product.

However, sales dropped abruptly from $50 million to $43 million in 1982, The company had an ability to survive and prosper due to its unique manufacturing capabilities. Several competitors went belly up. The recession was quick and deep. The Federal Reserve made borrowing money easier than ever. States joined the federal government by offering Industrial Revenue Bonds that returned interest payments and rebates if a company relocated or expanded. Fortunately, Connecticut, Illinois, Georgia and California offered Industrial Revenue Bonds. Ulbrich had plans ready for nearly two years. In 1983, Ulbrich went to its banks, State Street of Boston and Rhode Island Hospital Trust to borrow for an expansion.

EARLY 80S CAPITAL EXPENDITURES

1. Build a 40,000 sq. ft. structure (Building #2) for slitting, edging, cutting-to-length and leveling in Wallingford, install new equipment and hire additional personnel

2. Build a 10,000 sq. ft. addition to Ulbrich Wire in North Haven, install new equipment and hire additional personnel

3. Build a 40,000 sq. ft. addition to Ulbrich of Illinois and double the office space, install new equipment and hire additional personnel

4. Build a 22,500 sq. ft. stainless steel Service Center in Fresno, California to be called Ulbrich of California, install new equipment and hire personnel

5. Build a 22,500 square foot stainless steel Service Center in Norcross, Georgia, to be called Ulbrich of Georgia, install new equipment and hire personnel.

These five capital expenditures began in 1982 and continued into 1983.

John Thoma, who helped start Ulbrich of Illinois headed that division’s enlargement. Chris Ulbrich led Ulbrich Wire’s investment. Dick Ulbrich oversaw the completion of Building #2 in Wallingford. Tony Mederios became Personnel Director at the Strip Mill and was in charge of hiring and placement of personnel together with the appropriate Division General Manager, not only in Connecticut, but also in Illinois, Georgia and California. The Personnel Manager, Tom O'Leary, was entrusted with hiring personnel for Ulbrich's Connecticut-based operations.

The second phase of the expansion plan included opening steel Service Centers at Ulbrich of Georgia and then at Ulbrich of California under the able direction of John Thoma. Total costs for the entire corporate revamp were $15,000,000 with the expectation that Ulbrich would reinvest three to five years of profits. Financing this expansion was potentially hazardous, especially if another recession occurred, or if Ulbrich’s forecasts and profit projections were incorrect. A hundred things could go wrong like construction overruns, poor personnel selections or dynamic and unpredictable market conditions.

In fact Ulbrich applied for and received $7.9 million in financing from the State of Connecticut in 1982. The loan helped the company create 62 new jobs in Wallingford and North Haven. Meanwhile, Ulbrich had to change banks in order to underwrite the national expansion. The company’s bank of choice, Colonial Bank and Trust Co. could not lend $15,000,000. It was above it’s legal lending authority!

Consequently, two banks, the State Street Bank of Boston and the Rhode Island Bank and Trust Company, jointly lent the money to Ulbrich Steel. State Street’s Commercial Lending Group was subsequently bought by Citizens Bank. Excellent relationships were developed, and Citizens Bank partnered with Ulbrich as its lender for nearly 35 years.

Unlike the days of old, the family business made painstaking efforts to inform their lending partners of all business activities and capital expenditures, so there were no surprises. This policy continues to this day.

With confidence in the abilities and the enthusiastic support of their co-workers, The Ulbrichs put their expansion plan into motion. Ulbrich borrowed the $15MM it needed; the absolute maximum amount their credit allowed in 1983. The mission to attain $100,000,000 in sales by 1990 was underway. Everything was on the line. The banks wanted personal guarantees to make sure that Ulbrich would make good on its loan. If the company failed, shareholders would lose everything - even their homes.

Want to learn more about Ulbrich’s century of excellence?

Visit our Centennial website for a company timeline, treasured memories, and more!

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