Goodbye, Archie

Pink slip for the boss

He was brought aboard to breathe vigor into a venerable but increasingly sleepy-eyed old Midwest industrial firm. Instead, the five-year tenure of Archie R. McCardell, 55, first as president and then as chairman and chief executive officer of International Harvester Corp. (1981 sales: $7 billion), has taken the ailing truck and farm-equipment manufacturer to the edge of financial ruin. Last week, after two years of heavy losses and forecasts of worse to come, the aggressive and hard-charging McCardell abruptly vacated his $480,000-a-year post. Though bankers and colleagues expressed surprise at the announcement, the real wonder was that McCardell had not been ousted much earlier.

McCardell's departure was politely termed a "resignation" by company officials, but the actual decision to dump him was made at a two-hour weekend meeting of the firm's 16-member board of directors. International Harvester has been under intense pressure from banks and other lenders, to which it owes $4.2 billion, and the company's creditors are widely thought to have played a key role in forcing McCardell out. Says William A. Goldstein, executive vice president and analyst for the Chicago investment brokerage firm of Burton J. Vincent, Chesley & Co.: "Despite their denials, the banks were very instrumental in this ouster. The Harvester board just would not have made such a move without first consulting the banks."

Succeeding McCardell as chairman will be Louis W. Menk, 64, a retired chairman and chief executive of Burlington Northern Inc., who has been a director of Harvester since 1974. Unlike the gruff McCardell, Menk is a low-key and cautious manager who will reassure bankers. He will be assisted by the head of a newly created corporate finance committee, William G. Karnes, 71, former chairman and chief executive officer of Beatrice Foods and an executive with long and close ties to many of Harvester's bank creditors.

For months, Harvester has been a leading candidate for bankruptcy. Since 1980 the company has lost $1.1 billion on total sales of $15 billion, and analysts now project perhaps as much as $219 million more in losses during the company's 1982 fiscal year that ends next January. Some of Harvester's troubles have come from the recession-caused slump in farm income, which has cut into tractor and farm-equipment sales. Yet many of the firm's woes are traceable to McCardell's bad management.

Bringing with him a reputation as a no-nonsense executive in previous senior-management positions at Ford and Xerox, McCardell at first did well, pruning corporate deadwood, tightening the budget, scrapping unprofitable products and boosting research and development. But his efforts to cut costs still further got him into a losing fight over work-rule changes with the company's unionized workers, most of whom are members of the United Auto Workers. This led to a costly six-month-long strike in 1979 that sent management-labor relations into a tailspin.

McCardell's problems further multiplied when, in the tense environment of the company's post-strike return to work, the board of directors voted to write off a 1977 loan of $1.8 million made to him so that he could buy Harvester stock. Though completely legal, the ill-timed action appeared to the company's workers to amount to little more than an executive-suite ripoff, which further soured the mood within the firm.

The first sign that this might be changing came the day before McCardell's resignation. The company's workers ratified a new 2 1/2-year contract in which they surrendered about $200 million in earlier wage and benefit concessions in return for job security and other guarantees.

It will take more than soothing personalities to improve the grim outlook for Harvester's finances. Says Richard F. Rossi, an analyst at Merrill Lynch: "The company will not turn around just because McCardell is gone. His departure will not make the situation between the company and its creditors any different at all for the time being." The big question that remains at International Harvester is whether the bankers will give the new management enough time to try to save the firm.

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