Mayor Thomas E. Radich of Lackawanna, N.Y., recently had two words of advice to the city's largest employer: "Get out!"
Radich was that blunt in addressing Bethlehem Steel, the company that virtually fathered the Lake Erie city when it put up a giant steel mill there 67 years ago. Steel making no longer goes on in Lackawanna, which is like a ghost town today--and a sooty one at that. Bethlehem employs 1,300 people in Lackawanna, down from the 26,000 that it once had. The mill's coke ovens remain. As Radich, who worked in the mill for 30 years, put it: "They pulled out and left behind the dirtiest parts of the steel process."
In New York, Mayor Edward I. Koch wasn't as blunt but was extremely irritated nevertheless when Merrill Lynch, the largest employer on Wall Street (12,500 people), said it would transfer 2,500 employees across the Hudson River to Jersey City. For this betrayal, Koch said the city was removing Merrill Lynch as senior underwriter on its municipal bonds.
Hometown values do have meaning for some companies. It would be inconceivable, for example, to think of Hershey Foods being located anywhere else but Hershey, Pa., in the exact place where Milton Hershey was born and grew up.
Ford Motor is headquartered in Dearborn, Mich., 10 miles outside Detroit, because that's where Henry Ford was born and grew up. And Levi Strauss is still based in San Francisco, not far from the dock where Levi Strauss arrived in 1850, even though its manufacturing plants are elsewhere.
But those companies, whose roots go back to the last century, are the exceptions. Modern companies, especially conglomerates, tend to have as much affection for hometowns as do the Los Angeles Raiders. United Technologies didn't lose much sleep over shutting down the Otis Elevator plant in Yonkers, N.Y., the city where Elisha Graves Otis began to perfect his elevator in 1853. Greyhound moved from Chicago to Phoenix, where the chairman happened to own a home. Drew Lewis, former transportation secretary, moved Union Pacific's headquarters from New York to Bethlehem, Pa., near his home. Indeed, the mark of modernity is that the corporate headquarters can be plunked down anywhere.
For a classic case of the corporation on the run, consider RJR Nabisco, which is now busy selling off assets to pay down the mountain of debt incurred in the $25-billion leveraged buyout engineered by Kohlberg Kravis Roberts & Co.
RJR's main profit engine is R.J. Reynolds Tobacco, second in the cigarette business to Philip Morris. And Reynolds has been linked for more than 100 years to the Piedmont region of North Carolina, our principal tobacco-growing state. Two of its major brands were named after its headquarters city, Winston-Salem, and the company has long been the dominant force in that city and the major benefactor of the cultural institutions there.
Reynolds Tobacco began diversifying into foods and beverages after the first U.S. Surgeon General's report on smoking and health in 1964. However, the headquarters remained in Winston-Salem. The company even built a new state-of-the-art food research laboratory there.
In 1979, Reynolds acquired Del Monte, the nation's largest packer of fruits and vegetables. Del Monte had been a major corporate citizen of Northern California, with roots going back to 1899. Today, Del Monte is virtually invisible in its hometown of San Francisco (and to reduce its debt, RJR is selling Del Monte to an investor group headed by Merrill Lynch & Co. for $1.475 billion).
In 1985 Reynolds--by then called RJR Industries--made an even bigger acquisition, absorbing Nabisco Brands. The company's name changed to RJR Nabisco but headquarters remained in Winston-Salem.
But the unthinkable--to Winston-Salem and North Carolina--happened in 1987 when RJR Nabisco transplanted its headquarters to Atlanta, explaining that it needed to "assume the role of a holding company, a separate parent company." And, of course, parents no longer live with their children. At least they were not deserting the South. However, now that RJR Nabisco has become a ward of KKR, it is on the move again. The headquarters is being relocated from Atlanta to New York City.
Why New York? Well, there's a certain amount of logic to this madness. The new chairman of RJR Nabisco is Louis Gerstner Jr., who was recruited from American Express. He has a home in Greenwich, Conn. This way he won't have to pull up stakes and look for a condo in Atlanta.
More important is RJR Nabisco's debt-ridden position. The pieces of paper representing this debt were bought and sold by New York investment bankers. When you owe so much money, it's a good idea to keep in close touch with the people who lent it to you. As Gerstner himself put it, "The objectives of our parent company can best be achieved by maintaining close, ongoing contact with the investment banking community and other New York-based segments of the business community." RJR's new hometown is, appropriately, Wall Street.