COVER

LEARNING FROM THE PATRIARCH A NEW GENERATION MOVES UP

JOHN DeMONT February 6 1989
COVER

LEARNING FROM THE PATRIARCH A NEW GENERATION MOVES UP

JOHN DeMONT February 6 1989

LEARNING FROM THE PATRIARCH A NEW GENERATION MOVES UP

small parking lot in front of an abandoned liquor store. Puzzled, James asked where their newest holding was. “We’re parked on it,” said Arthur. “We’ve got 600 feet on the main street.”

For 20 minutes, three of the richest men in North America went unnoticed as they tramped up and down the sidewalk, while Arthur explained his plans to level the buildings and put up a new Irving service station—and accompanying convenience store— which would market primarily Irving products. Then, back in the warmth of the mud-splattered van, Arthur explained why 600 feet of land on Van Buren’s main street is so symbolically important in the family’s plans.

The Canada-United States Free Trade Agreement, said Arthur, “is the best thing that ever happened to Canada.

The richest market in the world is in the northeastern seaboard of the United States. That is a natural way for us to go.”

Widely: And Arthur made it clear that the Irving corporation plans to expand widely in the area: “We will go wherever things take us.” For the past three years, the Irvings have been quietly buying their way into the Maine gass oline, home-heating, timber M and convenience-store marz kets. And the brothers have | also started extending their a reach into nearby New Hampshire. As a result, many Maine residents have expressed concern about the Irvings’ corporate annexing, although many others said that they would welcome new employment opportunities.

Later, as the trio crossed back into New Brunswick, they stopped for lunch—soup and breaded chicken—in a restaurant attached to an Irving gas station. While they could walk unnoticed on the streets of Van Buren, almost all their employees know the Irving brothers by sight. As they entered the restaurant, heads turned and employees snapped to attention. The brothers immediately began introducing themselves and shaking hands. Eventually, they picked a table in the back—but the young, well-groomed station manager’s eyes rarely left the Irvings.

In between bites on a crusty roll, James denied any suggestion that the Irvings regular-

ly feud with other industrialists—particularly the McCains, New Brunswick’s other superrich family, which operates the $8-billion frozen-food empire in Florence ville. That rivalry officially began in 1983 after the Irvings decided to compete against the McCains in the frozen-food business. “We are the best of friends,” James said angrily, adding uncharacteristically that “any bastard who says any-

thing about us and the McCains is looking for a God damned punch in the mouth.” The Irvings do not need flow charts and computers to detail their successful strategy. Instead, Arthur says that he can sum it all up by comparing the company’s restaurants to its competitors. “See this,” he said. “It is Heinz. The other guy doesn’t use Heinz.” He points to a package of cream. “See that? Eighteen per cent. The other guy uses 12 per cent.” Then, for final emphasis, he picked up a paper napkin. “See this: big napkins. The other guy uses small ones.” Leaning forward, he concluded profoundly: “That’s the key to our success: Heinz ketchup, 18-per-cent cream and big napkins.”

Later, the van rattled and fishtailed down a stretch of icy, Irving-owned road through another part of the family’s Canadian holdings.

On each side of the road, for as far as the eye could see, were forests of Irving-owned spruce and pine trees. Eventually, the brothers reached a clearing in the woods, parked, got out and peered across a small field at a granite boulder half buried in the snow. The engraved cairn marked the planting of the onemillionth seedling under an extensive reforestation program that K. C. Irving started in 1958.

As he looked at the memorial, James Irving reminisced about his roots. He recalled that their father carefully trained the sons to take over the business. “We have had the world’s best teacher,” he said, adding: “Our father has always been able to look at things and do what

was required to run them correctly for the long run. He got a lot of things moving, and we are having fun running them.” As they drove away, Arthur looked out at the surrounding forest and said with a chuckle, “Isn’t this better than owning an office tower in Toronto?”

Intricate: The brothers, like their father, say proudly that they have not turned over management of the company to committees or outside managers. They know all of the workings down to the smallest detail. On an unannounced visit to the Irving pulp and paper mill in Saint John in early January, the attention to detail was evident. The mill, which employs 484 people, was operating at full capacity when the brothers arrived. They promptly began to pepper their managers with intricate questions about pulp production and capacity, inquiring about an Egypt-bound shipment. On the way

back to the mill parking lot, James explained: “We are hands-on operators—always have been, always will be. If we had to stay in the office all day, we would die.” Added Arthur: “We do what we do because we enjoy it. But we are also out to win.”

Arthur, president of Irving Oil Ltd., is known as the toughest and most feared of the trio. James, president of Saint John Shipbuilding Ltd., which owns the shipyard, is less intense but is known as the sharpest negotiator. Jack, who heads some of the smaller operations, is the quietest and least public of the brothers. All three possess their father’s legendary passion for cutting costs, his distaste for wasting money—and time—and his knowledge of every tiny business detail. But, most of all, the brothers have a reputation as aggressive competitors who never give up—and seldom lose. Said Arthur:

“We don’t apologize for our behavior. We have to compete against big multinational companies. And you have to be aggressive if you want to stay in the ring.”

Build: That aggressiveness paid off at the Irving shipyard, which is just a 10minute drive from the pulp mill. About 3,000 employees at the yard are now working on a multibilliondollar contract to build frigates for the Canadian Armed Forces. When K. C. Irving bought the shipyard for $4.5 million in 1959, it was teetering on the edge of bankruptcy and employed only 150.

Above the din of the shipyard, and walking past the workers—many of whom waved friendly greetings to the bosses—James dismissed critics who say that his family has grown too powerful. Said James: “We are not a huge multinational company which makes its money here and then sends everything back to the parent company in New York. When we make money, the dividends stay here. The people of New Brunswick benefit from that and we think they appreciate it.”

Buying: The Irvings are, in fact, old-style industrialists whom many New Brunswickers credit with helping their home province’s economy by buying and reviving moribund businesses. They have prospered without getting involved in the big-money leveraged buy-outs and

takeovers that are now sweeping through the business community in Canada and the United States. Instead, throughout their rise to prominence, the family’s strategy has been based on “vertical integration”—buying or building companies that become each other’s best suppliers. K. C. Irving did it earlier—and better— than anyone else.

And there is another generation of Irvings getting ready to expand the empire. James’s

son, James Jr., 38, helps his father nm J. D. Irving Woodlands Ltd., which controls the family’s vast timber operations, and most Irvingwatchers say that he is the heir apparent. His brother, Robert, 33, general manager of Cav-

endish Farms, runs the Prince Edward Islandbased frozen-food operation and two trucking companies from Moncton, N.B.

Still, many critics in both New Brunswick and Maine say that continuing the Irving dominance through K. C. Irving’s grandchildren is unhealthy. They charge that the family stifles competition by eliminating their competitors. And they also decry the fact that the Irvings own all four of the province’s English-language

daily newspapers and two of its three English-language television stations. In 1969, in fact, the Special Senate Committee on Mass Media called the situation “about as flagrant an example of abusing the public interest as you’re likely to find in Canada.” In 1974, the New Brunswick Supreme Court ruled that the Irvings had formed a monopoly of English-language daily newspapers— the first prosecution of newspapers under the Combines Investigation Act. But the next year, in a move that became a symbol of the impotence of the combines act, the appeals division of the New Brunswick Supreme Court

overturned the decision. And the Supreme Court of Canada later upheld the reversal.

Defence: In their defence,

the Irvings say that they have absolutely no influence in the editorial policies of the newspapers and television stations that they own—a view echoed by Paul Wilcox, publisher of the Irving-owned Saint John Telegraph Journal.

But reporters at some Irving papers, requesting anonymity, said that Wilcox is merely following the corporate line, and that the papers would never be able to print an investigative story on the family with impunity.

On the other hand, many New Brunswickers argue that the Irvings are honest and hardworking and that the province would be far worse off without the billionaire family. And many are no doubt proud of the fact that the Irvings are expanding deep into the neighboring U.S. market. For their part, the Irvings say that they just plan on making their empire bigger and better. Said Arthur: “In business, you can’t stand in one spot or you will die.” The man on The Bridge would approve.

JOHN DeMONT