BUSINESS WATCH

Victor Rice gives capitalism a bad name

With friends like the Varity chairman, politicians may prefer the Mohawk Warriors. At least they shoot from the front

Peter C. Newman August 27 1990
BUSINESS WATCH

Victor Rice gives capitalism a bad name

With friends like the Varity chairman, politicians may prefer the Mohawk Warriors. At least they shoot from the front

Peter C. Newman August 27 1990

Victor Rice gives capitalism a bad name

With friends like the Varity chairman, politicians may prefer the Mohawk Warriors. At least they shoot from the front

BUSINESS WATCH

PETER C. NEWMAN

When a justifiably disgruntled shareholder at the recent annual meeting of Varity Corp., the pathetic residue of Canada’s once great Massey-Ferguson Ltd., asked chairman Victor Rice whether he felt any moral obligation to keep his company in this country, the answer was blunt and predictable. “Not at all,” replied Rice, whose decade as head of the embattled agricultural-implements maker has set new standards in corporate irresponsibility.

The company, whose roots go back to 1847, when Daniel Massey started supplying the farmers of Durham County in central Ontario with sap-boiling kettles, is about to depart for a brand-new domicile in the United States. Its headquarters are in the process of being transferred, probably to a $13.5-million mansion on Buffalo’s Delaware Avenue. The move clearly violates Varity’s agreements with the federal and Ontario governments, which provided $200 million of taxpayers’ money for the company on the clear understanding it would remain in this country, creating new jobs and opportunities. To the charge that he is going back on his word, Rice has an equally facile answer—“We’ll just renegotiate the contract.”

Varity’s snorty presumption goes beyond the arrogance of its 49-year-old chairman. Although we are constantly reminded that Canada is a democratic society, we also live under a fairly aggressive brand of capitalism, and the ethic of that system demands the private sector follow the laws of the marketplace. This implies that Massey-Ferguson either should have made it on its own or been allowed to go into receivership. Instead, the two governments—read Canadian taxpayers—saved the company. Now that Varity is safely in the black, Rice is thumbing his nose at his benefactors and jumping ship. With corporate friends like the Varity chairman, Canadian politicians may prefer to deal with Mohawk Warriors. At least they shoot from the front. One reason governments were so ready to

help Massey is its proud history. During the opening of the Canadian West, a Massey marching band would lead parades of newly delivered tractors and harvesters into the raw little towns, their purchasers treated to a free concert and dinner. The company became the world’s largest farm-implement maker and this country’s showcase multinational.

Eventually controlled by Argus Corp., the Toronto-based investment pool, the company became a social climber’s paradise, with Massey chairman John A. McDougald enjoying a permanent suite at London’s luxurious Claridge’s Hotel, an appropriate pied-à-terre for his visits to British race tracks. (The company also maintained two London-based Rolls-Royces. One of the limousines, decorated in royal colors, was so grand it was borrowed by the Queen for ceremonial occasions.) On this side of the Atlantic, Al Thombrough, who was president for more than 20 years and at the time ranked as CanaCï’s highest-paid executive, commuted to his Toronto office (three days a week) in a company jet from his beach home in Boca Raton, Fla.

Such dumb extravagances eventually caught up with Massey’s balance sheet. Between 1929 and 1979, the company made more than four-

per-cent profit on its sales only five times, and even in its best year (1976) $93 million of the $ 118-million net was accounted for by currency gains. When Conrad Black captured Argus in 1978, he moved in as savior of Massey for 25 months and cleaned house. “There are fe^v genuinely great companies in Canada. Massey is one of them. As such, it is worthy of prodigious effort,” he grandiosely declared. “Only a 20-per-cent prime rate or complete collapse oí the North American agricultural market could sink Massey now.” That, of course, was precisely what happened, and soon afterwards Massey was in default on most of its bank covenants. It should have gone bankrupt, but as Black pointed out at the time, “Some things defy all laws of economics and nature—like bumblebees.”

Black departed, donated his Argus Massey shares to the Massey pension fund and installed Victor Rice as his successor. An impatient man who makes jerky, rabbitlike gestures with his hands and nose when he speaks, Rice closed seven plants (laying off 12,000 workers) and fired 15 vice-presidents. By the fall of 1980, the company’s credit was so overstretched that its bank obligations amounted to the world’s largest unsecured loan. After relentlessly lobbying Ottawa and Queen’s Park, Rice persuaded the two governments to provide him with $200 million, which by his own admission saved the company. But the cash infusion as renegotiated in 1986 had some stringent conditions, among them that Massey’s headquarters would have to remain in Canada and that it would have to maintain or create at least 1,500 jobs here through to May, 1993, or pay back $30,000 föï each work place not maintained. (On that basis, it is already liable for fines of $13.2 million because of the extent to which it had fallen short of this target by the end of 1989.)

By 1988, Rice had laid off about 50,000 workers. The company’s last Canadian combine factory, at Brantford, Ont., was shift leaving 3,000 retired workers and their spouses without adequate pension and medical benefits. Varity’s only operating Canadian subsidiary at the moment is Kelsey-Hayes Canada Ltd., a small automotive-parts manufacturer it acquired last year. The only reason Rice has given for Varity’s intended move to the United States is that he hopes it will help increase the value of its stock.

That may not be unconnected to the fact that along with other Varity executives, Rice recently used a $7.5-million internal loan to acquire more than 2.3 million company shares. That’s on top of his $l-million salary, guaranteed $250,000 annual pension and special “golden parachute” arrangements. A Buffalo move will also be handy, geographically, because Varity’s new mansion headquarters are* within comfortable commuting distance (by chauffeured Jaguar, of course) from Rice’s magnificent heritage home at Niagara-on-the Lake, Ont. Such grandeur will be taken for granted by the Varity chairman. Not everybody gets to lay off 50,000 workers and to renege on a $200-million favor from taxpayers.,

If that’s capitalism on the hoof, let’s go back to the jungle.