BY RANDALL LANE AND STEPHEN S. JOHNSON
This feature appeared in the 1995 Forbes 400 edition.
AS A DISTRIBUTOR FOR THE CRAWFORD FITTING CO. for three decades, Robert Evans sold over $50 million worth of pipe valves and fittings throughout the Pacific Northwest. Three years ago he was summoned to the company’s Solon, Ohio headquarters for a meeting with Fred Lennon, the company’s elderly chairman.
With his wife in tow, Evans flew out and was escorted into the boardroom. “Bob, you’ve enriched Crawford Fitting Co. a great deal over the last 34 years,” Lennon said, tears welling up in his eyes. Lennon placed his hand on Evans’ shoulder. Then he fired him.
For what? To encourage customers to buy Crawford products, Evans had been providing copper tubes to them at close to cost. It was a little extra service. But this act had violated one of Crawford’s most rigid rules: Company policy forbids distributors from selling anything made by another manufacturer—no exceptions.
Strangely, Evans, who now sells products to the semiconductor industry, has no hard feelings. “I had other distributors trying to get me to sue them [Crawford], but I wouldn’t do it,” says Evans. “I love the man. He’s like a father to me.”
Fred Lennon inspires tenacious loyalty and bitter loathing after spending 48 years aggressively and ruthlessly building one of the most impressive money machines in American industry. Crawford Fitting has been a sole source supplier of tube fittings and valves to the Navy, and maintains big contracts with Du Pont and USX, as well as hundreds of other industrial concerns here and in some 40 foreign countries.
You never heard of the man? Nothing would please Fred Lennon more. To escape attention he lives in a secluded development in Hunting Valley, Ohio that posts signs warning outsiders to stay away. He lives a mile from public roads, in a modest house with an anonymous mailbox.
Perhaps to make himself more invisible, Lennon has broken his empire into dozens of separate firms. His factories are scattered across the U.S., and many don’t have signs. When Lennon buys a factory from another company, he sometimes leaves the old signs up as a decoy.
Paranoia? Perhaps, but paranoia seems to be corporate policy. Why attract competition? Why alert trade unions? The company’s motto, a spokesman once explained: “Secrecy is success. Success is secrecy.”
Lennon takes a leaf from underground political organizations. Managers are allowed to know only the performance of their own division. By numerous accounts, only a half-dozen people inside the company even know Crawford’s overall sales.
Nevertheless, we’ve taken a stab at is: Forbes estimates the company has between $700 million and $1 billion in revenues (wholesale), and net profit margins of over 10%. The company has no debt. Forbes figures Lennon, who controls 70% of the firm (the other 30% was sold to its 2,500 or so employees in an ESOP five years ago), is conservatively worth $1 billion.
FRED LENNON TURNS 90 JUST AFTER THANKSGIVING, but he still goes into the office almost every day. He wouldn’t talk to Forbes, of course. No one on Crawford’s management team would comment, either. But after interviewing nearly 100 friends and observers, and pawing through mountains of documents, we’ve gotten a pretty clear picture of Lennon and his web of companies. What emerges is one of the great untold business stories of the 20th century.
Valves and fittings are big business but highly fragmented. It’s a $70 billion industry worldwide, but Crawford competes in the most profitable segment. Lennon’s Swagelok fittings connect tubing in astronaut space suits, nuclear power plants, oil pipelines—any industry where pressure and volume must be controlled in an absolutely precise fashion.
Lennon controls his sales force precisely as well, and it’s that control, along with a top product, that fuels Lennon’s wealth. “He doesn’t give you orders,” says Mel Martin, an early Lennon assistant, later his Cincinnati distributor for 30 years. “He just says, ‘Why don’t you think about this …’ But you know that’s an order. It’s not just, ‘Well, come back to me in a couple of weeks, and tell me what you think.’ You just do it.”
The heart of Crawford Fitting is its tight control over its distribution system, developed in part, Lennon has told associates, from observing the coaching staff of the Cleveland Browns football team. “You can’t tell the players how to dress or how to do anything else,” Lennon has said. “But you can sure tell them if they’re going to play in the next game.”
To make sure he retains the right to hire or fire at will, Lennon insists on a contract clause with his 140-odd distributors that stipulates he can fire them with or without cause on 60 days’ notice. They must also—as Bob Evans learned to his cost—sell only Crawford products. Put these two clauses together and they give Lennon near absolute power over his theoretically independent distributors.
Lennon even tells the distributors how to dress (white shirts, dark ties and suits, absolutely no facial hair), whom they can sell to and even which politicians they will donate to. Of course, a distributor can say no. But then Lennon can tell him he can no longer play.
Evans, a loyal soldier, was given a fat noncompete payment as he was pushed out the door. Others are treated more curtly. “They want you completely beholden to them,” says John Benz, fired as Pittsburgh rep after 27 years at Crawford for running a fittings installation business on the side. “If you make any attempts whatsoever to have any other business interests, they choke you off.”
Loyalty, on the other hand, is richly rewarded. In essence, Crawford distributors are protected monopolies, forbidden from soliciting business in one another’s territories. The company won’t even accept national accounts, which would undermine its distributors: If the Navy wants tube fittings for its Norfolk, Va. Shipyard, it orders from Norfolk-based Dibert Valve & Fitting, just as a boiler operator in Richmond does.
All distributors get a “suggested price list.” Pity the distributor who breaks rank. Former distributors tell Forbes that deviating from the suggested price was not really an option.
Is this price-fixing, and is it legal? The Sherman Act requires that each Crawford distributor act independently, but Lennon’s system has held up in court so far. A former distributor trying to sell Swageloks in Europe brought an antitrust action 14 years ago; he lost. The plaintiff, Richard Keeney, grumbles that Lennon, through his acquaintance with Chief Justice Warren Burger, got to the judge. An unlikely story, but an indication of how Lennon’s subordinates are in awe of the man.
Crawford distributors are supposed to sell only to end-users, lest a secondary market be created. When product does sneak out, usually from contractors who buy too much and then dump surplus dealers, Lennon’s legal team goes into action. One reseller, Baton Rouge dealer Wiley Alexander, found himself shelling out $10,000 to defend himself against allegations of counterfeiting Swageloks and of misrepresenting himself as an authorized dealer. Alexander won. “It’s a shame a company of that quality and size would stoop to the strong-arm tactics they attempted with me,” he says.
Lennon will even go after his biggest customers if they cross him. When the Navy began buying fittings in the 1980s from Parker Hannifin to use with Crawford’s Swagelok, Lennon sued the Navy, arguing that the two companies’ parts aren’t interchangeable. This time the Navy won.
Why do customers put up with these high-handed tactics? In good part because Lennon gives such excellent service. “Fred would stand on his head for a customer,” says Larry Dietz, a former sales manager at one of Crawford’s larger subsidiaries.
WITH AN EARNEST DEMEANOR, piercing steel-blue eyes and a powerful gift for remembering names, Fred Lennon is a natural salesman. He never went to college but garnered an understanding of heavy industry from his father, Patrick, a machine tool designer who moved the family from Providence, R.I. to Cleveland.
Associates say Lennon learned how to sell by peddling encyclopedias door-to-door. He learned about customer service from IBM: At 21, he wangled a job at IBM’s Cleveland office. He left IBM in 1938 for Cleveland-based Office Machine Co., then moved to a company called Weldon Tool five years later. Though he was a born salesman, Lennon’s career was going nowhere and he was developing something of a reputation as a boozer. Not a promising prospect for a man approaching 40.
Suddenly luck walked in the door. Around 1946 Lennon met Cullen Crawford, an engineer at Parker Appliance, the predecessor to Parker Hannifin. Crawford had been spending his nights parked at his kitchen table, developing a fitting he dubbed a Swagelok. (To “swage” means to shape by applying pressure.)
Swagelok was definitely a better mousetrap, and Lennon quickly understood that. Before Swagelok, pipes and tubes were usually connected by flaring one end with a tool. Crawford’s new method, using two free-floating rings, or “ferrules,” that act as bearings, created a leakproof seal.
For industries where spillage means catastrophe, the Swagelok technology became essential. Fifty years later the Swagelok sold worldwide is basically the same as the one concocted in Crawford’s kitchen.
Crawford needed help. He knew nothing about sales, which was Lennon’s strength. But backing the invention required money. Where was Lennon to get it?
Legend has it that his wife’s uncle, John McHannon, head of the Central National Bank, made Lennon an offer: He would stake him, but only if he stopped drinking. No one has seen Lennon drink since. When business protocol calls for alcohol, he slurps near beer or colored water.
Crawford and Lennon became equal partners, forming Crawford Fitting Co. in July 1947. The partnership lasted less than a year, however, as the two men butted heads. “They both wanted to have final say,” says Crawford’s daughter, Carole Hahl. Lennon made Crawford an offer: He would buy Crawford’s stake for $2,000, even then not a fortune. But Crawford wasn’t as shrewd as Lennon, and he took the offer. That deal ranks with the purchase of Manhattan Island for a bag of beads as one of the great bargains of all time.
Did Lennon feel any remorse for taking his onetime partner to the cleaners? Not that anyone ever noticed. In fact, the litigious Lennon sued Crawford when the inventor tried to set up a new fittings company called C.B. Crawford. Rather than fight, a disheartened Crawford, who died four years ago, renamed his new firm Tylok International.
Lennon lost no time cashing in. He had won some big contracts, including a job to help Du Pont supply equipment for the country’s fledgling nuclear energy program. To get the valves made, he contracted jobs out to local shops but found inconsistent quality and unreliable delivery. So he bought a small plant in 1950 and began making his own Swageloks. He’s done almost all his own manufacturing ever since. Occasionally, he’ll contract out small jobs and, if he likes the work, he’ll buy the company.
Lennon’s 40 or so factories are legendary. Just as he’s fanatically secretive, he’s obsessively neat. Fellow Forbes 400 member Richard Farmer, chairman of Cintas Corp., vividly remembers his first visit, as he watched workers wiping wheelbarrows spotless each time they dumped a load of oily metal chips. “I was just flabbergasted,” he says. Cleanliness is also a major criterion in Lennon’s hiring decisions. Crawford executives will drive by a prospective employee’s house to see whether the lawn is trimmed and the car washed.
From the beginning, quality control was taken seriously. Every inspector, cleaner, assembler—even the machinist himself—has full authority to scrap a batch for any reason.
Almost from the start, Lennon had a quality product. But Swageloks cost around 25% more than competitors’ fittings, and explaining to customers the superiority of a “two-ferrule” system back then wasn’t quite as simple as showing a color TV next to a black-and-white.
So Lennon, the master salesman, sought to create a brand name. On early sales calls, Lennon would carry a purple jeweler’s cloth, laying it out on a customer’s desk to display the shiny Swageloks. Lennon treated each fitting like the Hope diamond, daintily lifting it with two fingers.
Then came the demonstration. Recalls Joseph Bertram, Lennon’s first distributor in the Northeast: “He would have a way of turning a wrench, so that when he tightened it, he wouldn’t take little quarter turns. He would take one full turn while looking at you, smiling, saying ‘That is how easy it is.’ He was a perfectionist at demonstrating how it would work.”
As the company grew, Fred Lennon couldn’t sell all the fittings himself. He hired distributors like Bertram, who added Swageloks to valves and fittings lines they already pushed. But using independent reps irritated Lennon, so he began tightening control. He distributed a canned script for the reps to follow, demanded approval of every advertisement placed in trade journals, rejecting ads even if they were slightly off-center.
As his business thrived and his distribution system became powerful, Lennon began adding product lines. Throughout the 1950s and 1960s, Lennon added related companies, notably the Whitey Valve Co. Dozens of new products—valves for nuclear plants, fittings for vacuum products, etc.—were developed from within, courtesy of a steady stream of engineers hired from Case Western Reserve. Dubbed the “Whiz Kids,” the core group of a half-dozen or so began developing new Swagelok variations at a special foundry. The Whiz Kids’ ideas were executed by literally hundreds of skilled Hungarians hired by Lennon after the 1956 revolution. The product list surged into the thousands and numbers about 6,000 today.
In the days before Federal Express, Lennon understood that prompt delivery was essential to his industrial clients and responded by requiring that his distributors carry huge inventories. Traditionally, at least 90% of standard orders are filled the same day. To ensure this quick response, he set up four regional U.S. warehouses.
Over the last 20 years most of the company’s growth has come internationally. The fittings business, still dominated by U.S. companies, is growing 10% a year in Asia. Lennon told Farmer that up to 25% of Crawford’s sales come from Japan alone. He has numerous sales offices in China and Singapore, too. Unlike in the U.S., the company owns many of its foreign distributorships.
What happens when soon-to-be-90 Fred Lennon stops coming to work? The company will most likely remain in the family, since the ESOP Lennon set up some five years ago enables him to cash out 30% of the company tax-free, giving the family a nice reserve against estate taxes. But succession is less certain.
Fred’s top lieutenant is another secretive fellow, Francis Joseph Callahan, a nephew by marriage who was Jimmy Carter’s classmate at Annapolis. They both served under Admiral Hyman Rickover, pioneer of the Navy’s nuclear program. Callahan joined his uncle in the late 1950s and has served as the company’s president for more than a decade.
But Callahan is 72. Beyond him, who? Fred Lennon’s son, John, has never had a close relationship with his dad and is content to run the Cleveland distributorship. Stakes in some of the endless subsidiaries have been passed to Lennon’s daughter, Catherine Lozick, whose husband Ed is a trusted Lennon lieutenant, and to Joe Callahan. Others point to Ernest Mansour, the company’s lawyer.
But maybe nobody knows what is in Fred Lennon’s mind and in his will. It would be just like him to keep secrets, even from his own family. F
Brothers. Wine. Modesto, Calif. Ernest, 81; Julio, 80. Each married, 2 children. Italian immigrant father Joseph bought 230-acre Modesto vineyard 1930s; despondent over Depression and ill health, shot and killed wife, self. Six weeks later sons went to local public library, learned how to make wine, started winery with about $6,500. Fifty-seven years and a billion-plus dollars later (estimated 1989 E&J Gallo revenues) Julio still squeezes the grapes, Ernest still sells the juice. First major success: Thunderbird (connoisseurs reject, winos don’t). Constant effort since to upgrade product image: recently withdrew fortified wines (Thunderbird, Night Train Express) from many stores nationwide. Gaining shares in premium, “superpremium” wines, brandy. Chairman Ernest considered “intuitive marketing genius.” Dairy farmer younger brother Joseph from same tough mold; sued by Ernest and Julio for putting family name on cheese; he countersued for third of winery. E&J won both. The brothers jointly own company worth at least $660 million. Ernest believed to have large personal stock portfolio.
From the Forbes 400 1990 Issue
Coca-Cola Co. Atlanta. 60. Married; 2 sons, 1 daughter. Son of wealthy Cuban sugar farmer; Yale honor student. Answered Cuban newspaper ad for bilingual chemist at Coca-Cola, 1954. Fled Castro’s Cuba 1961 with wife, kids, $20, “I wanted to see if I was worth anything or was just my father’s son.” In 1970s rose from lab to protégé of Coke patriarch Robert Woodruff. By 1981, chairman, CEO of slowing company. Accepted Pepsi challenge, aggressively pushed growth; “He just flat enjoys the game.” Intense, detail-oriented, courteous, private; never dropped Cuban accent. Accumulated stock, restricted stock, options along the way: present value estimated $315 million.
From the Forbes 400 1992 Issue
Broadcasting, publishing. Houston. 78. Widowed, 2 children. Ran for state legislature at 25, lost. Married following year to former governor and Houston Post publisher William Hobby (d. 1964). Became coeditor, publisher 1952; added radio, TV stations; co. now H&C Communications. Assertive; distinguished; headed Women’s Army Corps in WWII; first HEW Secretary under Eisenhower. Son William Jr. current Texas lt. governor. H&C wealth in names of Hobby heirs, but largely controlled by her, worth at least $350 million.
From the Forbes 400 1983 Issue
Oil. Houston. 66. Married, 2 children. Father killed by poison dart while exploring for oil in South American jungle. Roy (Harvard Ph.D. in geology) explored for Exxon, went out on own 1956. Moderate success until 1968: Heard Indonesian area looked like Louisiana Basin geologically; made stupendous gas and oil discovery. “It’s good to peel back the old earth and see the history of the world.” Had to take in many partners, but keeps 17%: Partner Enstar paid $180 million for Superior Oil’s 7.5% stake. Roy recently lost bid to control Enstar, run by college classmate O. Charles Honig. Net worth believed to exceed $300 million.
From the Forbes 400 1984 Issue