Chapter 13. High Profits in Honest-to-Goodness Manufacturing Companies

The company's [Scott Fetzer's] success comes from the managerial expertise of CEO Ralph Schey—The reasons for Ralph's success are not complicated.[123]

Warren Buffett

Scott Fetzer has been a Berkshire Hathaway subsidiary since 1986 and manufactures or sells such wide-ranging items as utility tree vehicles, brushless DC (direct current) and universal motors, Ginsu knives, World Book encyclopedias, Kirby vacuum cleaners, and professional cleaning products, among other small industrial and consumer items.

Ralph E. Schey's leadership in salesmanship and management was instrumental in Scott Fetzer's success before it was acquired by Berkshire. When Schey joined Scott Fetzer in 1974, Scott Fetzer's stock price was $8 per share. Ten years later, it sold for $62 a share. At one time, Ivan Boesky, a corporate buyout expert, offered to buy the company; and at another time, the company's management tried to take it private. Both those attempts failed, and Berkshire Hathaway purchased the company in 1986 for $61 per share, or about $315 million. It was acquired after its significant growth in prior years under Ralph Schey's management. Until his retirement in 2000, Schey managed the company and produced high returns for Berkshire.

Scott Fetzer's Success

Table 13.1 shows that for the first nine years after Berkshire acquired the company, Scott Fetzer earned a total of $555 million and paid dividends of $635 million to Berkshire. ...

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