Chapter 5 of The Story of Hastings-Raydist
HICO Is Born, 1944-1946
Laying a Foundation, 1947-1950
Deceptive Prosperity, 1951-1953
Shifting Gears, 1954-1955
Everything Goes Right, 1956-1967
A Teledyne Company, 1968-
he early months of 1954 brought substantial developments to both instruments and Raydist.
On the instrument side of the business, Charlie Hawk was busy setting up the manufacturer's representative sales program. Hawk had begun last November, taking off in his station wagon on two- to three-week forays, spending a couple of days in each of half a dozen cities. Once in a city, he'd get in touch with potential reps, tell them about HICO instruments, and discuss with them what they thought a fair arrangement would be.
By February, the details of the working arrangement between HICO and its reps had been worked out, and Hawk was signing up reps for various territories in the Northeast. The South and the Midwest soon followed. By July only several Western states were yet to be covered. After these would come Canada.
The line of instruments was expanding. Especially promising was the new vacuum indicating and control system, but there were also new panel-mounted vacuum gauges and improved Air-Meters.
At the same time, excitement on the Raydist side of the business ran high because Raydist had been chosen for use on the March 1954 hydrogen bomb tests in the Pacific. As part of the tests, the Air Force wanted to study the effects of the bomb blast on planes flying in the area. It was planned that two planes would be flying at known distances and altitudes from ground-zero at the time of detonation.
After a series of comparative tests with other equipment, Raydist was chosen to track these aircraft. Several months in advance of the tests, a transmitter was installed on each plane. Then a crew of four Raydist men was sent to the Pacific. On various atolls they set up Raydist antennas and relay stations that had been especially engineered to withstand the intense initial shock of the blast and the high wind velocities that would follow. During the blasts they manned Raydist master stations on a nearby ship.
Twenty-five years later, Raydist engineer Bob Cayouette still has vivid memories of that assignment: "On that job I would have enjoyed working for the company absolutely free for the whole four months. It was an awesome experience to see things like this happening first-hand."
I mmediately after the bomb tests, HICO had its first booth in the IRE (Institute of Radio Engineers) show held in New York City. The show hosted 40,000 attendees, and HICO had put a lot of effort into developing an exhibit that would attract attention.
Visitors nearing the booth first heard a 400 cycle tone and then saw someone waving a strange wand over a tabletop model of a heliport. Inside the cone of the wand was a speaker to simulate a Raydist transmitter. Stationed around the heliport were microphones taking the place of the usual Raydist radio receivers. The microphones were connected to Raydist phasemeters that tracked the position of the wand "helicopter" as visitors "flew" it around the heliport.
The results were more than gratifying. The aisle beside the HICO booth was packed throughout the show. Everyone wanted the chance to play with the wand and watch the phasemeters track his "flight."
M eanwhile, behind the scenes, Hastings was besieged with problems.
The patent suit with Seismograph Service Corporation was a large drain on the finances of the company and the time of its officers. Countless hours were spent consulting with patent attorneys, gathering data and documents, answering interrogatories, and making trips to New Orleans for pre-trial depositions. This promised to continue through the summer and fall, when the trial would begin.
On another front, over the years the company had had many arguments with government cost inspectors, who came in to audit records in connection with the cost-plus-fixed-fee contracts.
When this first began, in 1948, the cost inspector had said it was normal for industrial plants to call a guard's salary general overhead, and then to prorate it between government and commercial business on the basis of direct labor dollars. In the first few months most of the business in the shops was commercial, and the result of prorating the security costs on a labor-dollar basis almost put the company into bankruptcy. Hastings discussed the problem with the Head of Cost Inspection of the Navy Department in Washington, and they agreed that all security costs should be charged directly to classified contracts.
In the years since, a stream of cost inspectors and auditors from the Army, Navy, and Air Force had come to the company to go over the various contracts, and each one of them had challenged this policy. Every time, Hastings had gone over the reasons for the policy. He had also told them that any time the government refused to accept the full expense of the guards, he would immediately dispense with them. Since there were many contracts, many levels of inspectors and auditors, and a high turnover in auditing personnel, by 1954 Hastings had gone through this routine more than fifty times. Now there was to be yet another audit, this time a "comprehensive" audit of all cost-plus contracts by the General Accounting Office.
The GAO personnel arrived in late April, and an audit began that lasted for four months.
Nor were these all the problems. During the Korean War, HICO and RNC had been receiving over 75 per cent of their revenues from military contracts. The end of the war had brought drastic reductions in military appropriations. The Bureau of Ships, for example, HICO's biggest customer, had had its appropriations slashed by eighty per cent compared to the wartime years, and now had virtually no funds available for Raydist.
The decline in military contracts and the financial drain of the patent suit called for immediate cutbacks. The work force was reduced, and by May the 39th Street plant had been vacated and put up for sale. The purchasing department and the stockroom were moved to the Warwick building, and the main office and accounting were transferred to Southampton.
I n the summer of 1954, RNC was scheduled to make a two-month survey for the Army Corps of Engineers of a series of distances between Cuba, Haiti, and Jamaica. The line between Jamaica and the northwestern tip of Cuba, about 450 miles, would be the longest distance ever measured electronically.
Shortly before the survey was to begin, Charles Hastings, Arthur Samet, and Floyd Gibbs, project engineer for the survey, went to the area to choose sites for Raydist installations. Mountaintops would be good, but they needed to be accessible, and have large, fairly level, cleared areas for the equipment.
One potential site in Jamaica was the top of Blue Mountain, at an altitude of 7402 feet.
Floyd Gibbs remembers the trip:
Blue Mountain is the highest point of land in Jamaica, and is known for the fine coffee that grows there. It may have had fine coffee, but it had no roads up the mountain. Getting to the top required riding five hours on muleback and then climbing the last few hundred feet.
There weren't enough mules available, so Arthur and Charles flipped a coin to see which of the two would get to go up. Charles won. Arthur would check out a site on another mountain on a different day. His trip would be easier, but less spectacular.
The Blue Mountain party was made up of Walter Scales from the Corps of Engineers, Charles, our guide, and me. We started out at the crack of dawn. Walter, a man twenty years my senior, drew the only horse—an energetic animal who was prancing all over the place. Charles and I each drew a draggy old mule.
About halfway up the mountain the sun went away and it began to rain. The trail first got slick, then turned into a river of mud. We were all soaked from head to toe, and as miserable as we had ever been in our lives. Eventually we got to the top of the mountain, checked out the site, and took our lunches out of wet paper bags. The sandwiches were soaked through, but we didn't dare not eat them because we'd have starved before we got down the mountain.
No sooner had we started down the mountain when Walter's horse threw him and Walter broke his collarbone. So there we were, a five hour mule ride between us and civilization with an elderly man with a broken collarbone. Walter didn't want the horse any more then, so I traded him my mule for his horse and we slowly made our way back down the slippery trail.
When we got down, Arthur was waiting for us in a Jeep. He had spent a pleasant day at the hotel, enjoying the swimming pool and the bar before coming to pick us up. After he learned how our day had been, he gallantly assured Charlie that in the future he would be delighted to lose a coin toss with him anytime!
T he results of the government audit were grim. On Navy contracts the auditors again disallowed the costs of the guards and a host of other items that had supposedly been settled many times before. They not only disallowed such costs incurred during 1954, but made the disallowances retroactive to 1950! Altogether the disallowed costs on Navy contracts came to $115,000.
But that wasn't all. The GAO wrote letters to the Air Force, urging it to challenge costs charged on the Sierra Wave project and the Bahama Islands survey. The disallowed charges here amounted to $28,500.
Since HICO was also having trouble collecting $45,000 from the Army under a terminated contract, the grand total came to $188,500 that the government was either disallowing, withholding, or trying to recapture. All this in a year when the company was spending $60,000 defending itself in a patent suit. The timing couldn't have been worse.
As November came, Hastings was thinking more and more seriously about discontinuing cost-plus-fixed-fee contracts altogether. The recordkeeping and dealing with the auditors had been a thorn in the company's side for years, but it had been thought necessary to put up with them and that the company was making a profit on the contracts. Now it appeared otherwise.
"It's a game of 'Heads, you break even; tails, you lose,' with the government continually flipping the coin," he concluded.
To check out his thinking, he contacted other companies doing a similar type of business. He could find no successful company of his size that did a large percentage of both commercial business and government cost-plus business. Time after time the top executives of these companies told him that a small company could do either all government business or all commercial business, but that it was impossible to mix large amounts of the two profitably.
A t the next meeting of the Board of Directors, held at the end of November, he formally proposed a drastic change in the course of the company. His resolution read:
WHEREAS the Hastings Instrument Company has suffered serious losses on the total CPFF [cost-plus-fixed-fee] contracts during the past fiscal year, andA lengthy discussion followed. They discussed the amount of cost-plus work they would be likely to get if they continued such work. They discussed the prospects for expanding their commercial business. They discussed how the elimination of cost-plus work could be put into effect. And they voted to adopt the proposal discontinuing cost-plus-fixed-fee contracts. In the future, Hastings Instrument Company would pursue a new course.
The second order of business was salaries. The patent suit and the disallowed costs had put the company into a difficult financial position. There were going to be hard times ahead. Budgets had to be trimmed, and the first step was to be a cut in officers' salaries. It was unanimously agreed that the salary of Charles Hastings be cut by half, and that the salaries of the other officers be cut by one third.
W ith the company no longer accepting new government research and development contracts and with the phasing out of existing contracts as soon as possible, there were major layoffs.
Ray Doyle remembers:
Cuts were across the board—engineers, technicians, shop personnel, bookkeepers, everything. Jim Benson put out some feelers about selling our R&D organization as a whole, but the companies he contacted were more interested in recruiting personnel for their own organizations.
We did as much as we could to help our people find new work. Fortunately, it was a strong time in the economy, and jobs were plentiful. In fact, the demand for engineers was so strong that ironically we had to give raises to some of the ones we were keeping at the same time as the officers were having their pay cut. In November 1954 the work force had numbered approximately 150. By February 1955, less than 40 were left.
With less than forty employees, there was no need for two plants. Keeping Southampton was the obvious choice. Being adjacent to the water made it better for Raydist, and the larger, more accessible Warwick plant could command a higher price on the market. All operations were quickly consolidated at Southampton, and the Warwick building, like the 39th Street plant, sported a "For Sale" sign on its lawn.
It was not clear that the company could survive. Even the officers had doubts.
Charles and Mary Hastings were close friends with Ray Doyle and his wife, and as a general rule business was never discussed when they saw each other outside the office. But now things were different. The Doyle home was just down the street from the Hastings home, and many times during this period Charles and Mary walked down to the Doyle home after dinner to discuss the day-to-day situation at the company. "We're going to do everything we possibly can to pull this company through," Charles told Ray, "but I'm not sure we'll make it."
There were also doubts among the employees. A few who had been asked to stay left anyway, hoping to find jobs with companies in whose future they had more confidence. But those who remained were determined that the company would weather the storm. Often working nights and Saturdays, they pitched in to do whatever they could to get the company back on its feet.
The layoffs had been so severe that many in the community thought the company had already gone under. Lee Marks recalls trying to cash her payroll check at the grocery store early in 1955: "Hastings Instrument Company?" said the clerk, looking skeptically at the check. "I thought that company went out of business."
E arly in 1955, Charles Hastings sat down to write the "Report from the President" for the 1954 Annual Report. It would be a hard report to write. He could cover the events, but there was no way he could convey the pain and frustration of that turbulent year.
The events at the trial of the patent suit had convinced him that the officials of Seismograph Service Corporation had deliberately conspired to do him in by stealing his ideas. Now the government was trying to do him in by disallowing costs they had agreed for years to pay. The injustice of it rankled him. Recalling a common expression of the time, he began his rough draft with a succinct characterization of the situation as he saw it: "We wuz robbed!"
When he completed his draft, he handed it to Mary and asked her to go over it.
"Your opening sentence won't do," she told him. "You just can't say it that way in an annual report, even if it is true. What you say will have to be written in a formal style."
She began rewriting, and eventually the report opened with a somber tone.
Your company completed its tenth year of operations in 1954. While the success of Raydist and the increase of standard instrument sales were bright spots, the year was one in which we faced serious obstacles and some setbacks.It went on to explain that the patent suit had been extremely time-consuming and expensive, but had finally gone to trial and they were expecting a favorable decision. Next it told the stockholders about the disallowances and the drop-off in government R&D contracts.
Fortunately there were some bright spots to mention about the company's '54 performance, such as sharply increased instrument sales, improved Raydist equipment, and the company's performance in the H-bomb tests.
But then the report was forced to return to unpleasant facts.
Unfortunately, it was not possible to present a complete and audited financial statement at this time since our accountants cannot close the books and audit them until the items in dispute are either accepted or formally disallowed. Every effort is being made to complete this work as rapidly as is possible under the circumstances, and your copy of the financial statements of the company for 1954 will be mimeographed and mailed to you for inclusion in this report just as soon as possible.
A s it turned out, the financial statements for 1954 were not available until August 1955. By then many of the disputes over the disallowances had been settled, but a few were being appealed by HICO. The loss for 1954 was $40,250. Half of this amount would be recouped through tax refunds, but the result was still serious.
On the brighter side, by August Hastings could soften the blow to the stockholders by reporting that the company's profit for the first half of 1955 was over $40,000. Commercial sales were up, and the number of employees was again on the rise. Could the company survive without government R&D contracts? It certainly looked that way!
T he prospects for the company became even brighter on September 29, 1955, when Judge J. Skelly Wright of the U.S. District Court in New Orleans, Louisiana, issued his verdict on the patent case. His opinion (135 F. Supp. 342) detailed the story of what had happened between Hastings and Seismograph:
The story of this case begins in 1947 after the oil industry became aware of the vast reserves of oil in the tidelands of the Gulf of Mexico. …
T he court dismissed Seismograph's complaint, declared the Hawkins patent invalid, and required Seismograph to award HICO a sublicense in the geophysical field, covering the vendees of its equipment, on the Honoré patent, retroactive from the time the rights were acquired by Seismograph. Hastings was to pay Honoré royalties on the same basis as Seismograph.
Charles Hastings was elated. He had won a major victory. Although it would have been nice if the court had awarded him damages and attorney fees, he nevertheless had won the issues that counted. Raydist would not be silenced by the likes of Seismograph.
The decision generated considerable publicity. Business Week magazine ran a two-page story on the case. Fortune included the case among a group of others in a major story on business espionage. News of the decision also appeared in a variety of industry magazines and newsletters. A short mention of the story even cropped up in Pageant magazine, in an article entitled "I Was A Spy for Industry."
B y the end of the year the company was in a sound financial condition. Sales were less than they had been a few years earlier—$730,000 compared with over $1,000,000 before—but sales dollars were being converted into profits at a higher rate than before. The year's after-tax profits, $63,000, were the highest in the company's history. To celebrate the turnaround, all employees received a cash bonus and stockholders received the largest cash dividend ever.
Both Raydist and instruments had had a good year.
A lot of Raydist equipment had been sold to Raydist Navigation Corporation, whose major job of the year had been nuclear bomb tests in Nevada during the spring and summer. Raydist was used more extensively in the Nevada tests than it had been in the Pacific tests, and again it turned in an excellent performance.
More equipment was sold to Offshore Raydist, which was doing close to $1,000,000 annual business supplying position data to petroleum crews in the Gulf of Mexico. And South America was becoming a good Raydist customer. The largest customer was Brazil, which bought Raydist to chart the mouth of the Amazon River. Systems were also sold to Venezuela and Argentina for hydrographic surveying.
Sales of Hastings instruments were strong, and the sales rep program was working well. The most important technical developments were an improved vacuum gauge and the new Hastings Jet-Vane, designed to measure higher wind velocities. The low-velocity Air-Meters were finding use in air pollution studies in Los Angeles.
The last government cost-plus contract had been completed in October, the 39th Street plant had been sold at a profit, and the Warwick plant had been leased out. A new wing had been added to the Southampton plant. It would be leased to RNC, which was still operating out of the small building adjacent to the former plant on 39th Street.
O ne of the company's goals for 1955 had been for instrument sales to exceed $100,000. As December 31 came around, it looked close.
Charles Hastings called Lee Marks, who was tallying the figures. "Lee," he said, "What are your sales so far for the year?"
"I have ninety-nine thousand, seven hundred, and a few odd dollars," she told him.
"Oh," he said, disappointed. "I was so hoping this year we would go over $100,000."
"But wait," Lee said, "I haven't figured out the bills for the December repair orders yet. I always leave the repairs until last."
"Good," he said, encouraged. "Figure them out and let me know what your total figure comes to. Since today is the last day of the year, I'll be saying a few words to everyone before they leave for the day. I'd like to know the figures for instrument sales before then."
Lee went back to work. About three hours later she came up with her final figure for the year—$100,003.75.
Charles was delighted, but he couldn't help kidding her about it. "I'll tell you one thing," he joked, "If I were a customer I'd never get anything repaired when YOU needed money!"
That evening while the Hastingses were dressing for a New Year's Eve party, Charles chuckled as he remembered something Mary had said exactly one year ago. On that night, December 31, 1954, Mary had proposed a heartfelt toast to the New Year: We'll have no more of '54!
Indeed they had not. The troubles of 1954 were now well behind them.
Copyright © by Carol Hastings Sanders