Lee D. Harness Narrator

James E. Fogerty Minnesota Historical Society Interviewer

Interviewed on December 27, 1984

JF = James E. Fogerty LH = Lee D. Harness

JF: I’d like to start with a brief comment on where you were born, whereProject you went to school, and how you came to Graco. Why don’t you start with those, and proceed at your own pace.

LH: I was born in the small town of Milltown, Wisconsin, and actually lived at my grandparents’ home at that time, on a farm. I moved to Minneapolis in about 1934 andSociety went to school here at Marshall High School I worked all the way through high school, working nights, Saturdays and what-not, in the retail hardware business. History I decided that I wanted to get out of that field and get in with a manufacturing company. I’d heard about Graco through some friends, and went over and applied for a job with the stipulation that what I wanted to do was get into sales, and therefore I wanted to get into the factory and learn the product and learn the businessOral for a period of time, and then go into the sales function. This was in 1939. I had finished school then, and interviewed with both Rollie Gray, who was the factory manager, and Leil Gray, who was theHistorical President of the Company. They were brothers.

As it turned out, I was reallyInc. exploring this possibility, and hoped that something might develop. One of the reasons that I became conscious of the Company is that I had seen a trailer with a Vitalizer on it—which is a device for motor cleaning. I saw it in a service station and was curious about it, and went up and asked a few questions. Then I found out that a friend of mine was acquainted with the Company, so I just pursued that. It looked intriguing. It turned out that I went for this interview, and they said, “When can you start?” I said, “Well, I have to give notice at the job GracoI’m on now, but I can probably make that fairly short.” So within one week I started with the Company. Minnesota

I started working on the assembly line, where the pumps were made, so that it would give me the experience of what the product was, how it was built, who the people were, and give me the knowledge I’d need later on to sell the product. I worked for about six months on that assembly line, with no particular timetable as far as when I wanted to get into the sales field. I had some discussions with Leil Gray, the president, and apparently I had learned enough about the pumps so I would be able to answer some questions. I was pulled out of the assembly line to go down to Chicago to the show at Navy Pier, which is an annual automotive trade show. My job at that

1 point was to set up the equipment and to maintain the equipment and demonstrate it, as customers or people in the industry came through. This was my first move into sales as a product demonstrator. I was twenty-one years old at the time.

JF: What product were they making at that time on the assembly line? What was the major product?

LH: The basic assembly line product was pumps. Air-operated lubricant pumps for dispensing lube for service stations and garages. Then the hoses and the valves that would complete that package so it would pump the fluid from a bucket or a container and dispense it in the fittings on the automobile. That was the main business at that time, lubrication equipment. In fact, that’s what started the Company with Russell Gray back in 1926, I think it was.

JF: So that was the major product that they were making at that time, almost everything.

LH: That’s right. It was almost totally related to lube equipment duringProject that period of time. Now at that period of time, when I came aboard, my first contacts were with Rollie Gray, who was the factory manager—and essentially, I worked for him—and Leil Gray. Within a few days, I met Russell. He was down on the line. In fact, that’s how I first got pulled away toward the Chicago show, by answering some questions about the pump. Apparently there wereSociety some field problems, and it was through that conversation that finally I got picked for this Chicago show.

At that time, Leil Gray was the president, RussellHistory was a vice president, Harry Murphy, Sr., was a vice president, and Grier Wheaton was the treasurer. Those were the four partners, together, essentially, after the crash in 1929. They had invested some money at that time. Harry Murphy and Grier Wheaton were investors, and Russell, of course, started it. Leil came in as his partner. After the crash, Wheaton and MurphyOral were looking for other things, and joined the Company as employees, and as officers. They formed the board of directors, too, at that time. Historical That’s how I came into the Company. I think in 1940 the Company was launching one of its first major promotional efforts toInc. demonstrate some of the new equipment that Russell had been developing. It was equipment that had some pizzazz to it, in terms of sheet-metal shrouds that made it look good and made it easier to clean, and to try to get a jump on competition. This was in the early fall of 1940, and there were three or four of us—I think it was three—that started out on a tour of the Midwestern states to attend some oil company meetings. One of the major oil companies was Skelly Oil Company. We had cars and a four-wheel trailer loaded with equipment,Graco packed as much as we could get on them, and then drove to each meeting during the night, set up the equipment.Minnesota The meeting then would be during the day. Following that, we would tear the equipment down, reload it, set on our way to the next meeting and drive sometimes two or three hundred miles in the night to set it up. So this is where I gained some of my sales experience, from a product demonstration standpoint. Kind of a continuation of the Chicago meeting at Navy Pier.

JF: Who were the principal customers—at this time—of the Company?

2 LH: We had, first of all, our distribution system. We had distributors that we sold to, and then they in turn sold to oil companies-although in some cases we would sell direct to the oil companies if the distributor couldn’t handle that type of business. The major customers were all of the major oil companies who owned or leased the service stations and the garages, so that our product generally went through distributors, but sometimes direct to the oil companies. The oil companies had major building programs at that time, in which they were attempting to compete by modernizing their stations. They would install this equipment and try to outdo their competition.

We had automotive distributors as customers, and then they in turn sold to the smaller oil companies, but in some cases we sold and packaged programs for the major oil companies. Standard Oil, Skelly, Pure Oil, Shell Oil Company, and some that are no longer in existence. Conoco is one of them. That was almost the total thrust of the business at that time. As a matter of fact, when I started, the Company had a hundred employees, total. I’ve forgotten the dollars’ worth of sales, but I suppose it was maybe three million annual sales at that time. Project JF: That included production employees as well as the sales force.

LH: Yes, that was all employees. Society JF: You did not sell, then, at that time, directly to service station operators, for instance?

LH: No, we normally did not sell direct at all. If anHistory independent service station operator or one that leased from a major oil company wanted to buy, he would buy through a distributor. We did not sell direct, but we did, on occasion, sell direct to the major oil companies, and they in turn would distribute to their lessees. We would ship it direct to the point of use, but we would actually sell it to the major oil companies.Oral In industry this is always a challenge, because of the fact that you try to retain and develop your distributors, but in some cases it becomes almost essential to sell direct to the major customer. YouHistorical usually try to work out some kind of a rebate system so the distributor stays in the fold and lets it go on, because they do want to sell that product that they’re representing—Inc.in this case, Graco.

JF: Who were your major competitors? Did you meet your competitors coming in the door as you were going out?

LH: That’s an interesting question, because one of the other projects that I got pulled out on— this was priorGraco to the show in Chicago-was to order in competitors’ equipment. We had a space up on the second floor Minnesotathat happened to be vacant at the time, and we set all of that equipment up and actually put it in operation and ran tests on delivery and pressure and any other performance criteria that we could, and kept a record of that. I worked in conjunction with the engineering research department to do that. It was a special project, and in fact it was in preparation for the sales meetings that we would have in conjunction with the show in Chicago.

To answer your question, the competitors were the Alemite division of Stewart-Warner; Lincoln Engineering in St. Louis; Balcrank Company in Cincinnati. It’s really interesting; I haven’t thought about some of those names in quite a while. Those were the three major competitors. All

3 were good, aggressive competitors. It was about this period of time that Russell began to get the idea of—I use the term “jazzing up” the equipment, so that instead of just being a piece of hardware, it had some display value to it. This show in Chicago was one of the first times that we displayed that type of equipment, and found that our competitors were very interested in seeing what we had been doing. I think Graco—through Russell and Leil, particularly tried to be a leader and innovator in the industry, not only in the quality of the product and what it would do functionally, but especially the appearance portion of it.

JF: What was your title about this time? Did people have titles in Graco at that time?

LH: Oh, there were some titles. For instance, the officers were vice presidents, and the four principals that I mentioned. Rollie Gray was called, I guess, the production manager. There was an engineering manager and a sales manager—but not very many titles beyond that. It was a small company. As to my title, I don’t think there was one. I think it was maybe assistant in the engineering department at that point, or in the sales department. Project The tour of oil company sales meetings I referred to earlier lasted several months as I recall it, with a few breaks in between to come back. Otherwise it was continuous for a week, then back in for a weekend and then out. That, particularly with those oil companies, gave Graco a good boost from the standpoint of promotion because of the presentations that wereSociety made. There was a lot of effort put into hauling equipment around and setting it up in that many places.

JF: Did these meetings include Skelly’s regional Historymanagers, or something like that?

LH: Yes, it was Skelly’s sales marketing organization that worked with the service stations. They pooled all of them together, so in effect it was a Skelly meeting—or other oil company meetings— that we tied into, and thenOral Graco had a portion of that. Usually, the Graco sales representative for the territory involved would be in and do a presentation as part of the meeting, and then the equipment would be on display whereHistorical the meeting was held in each case.

JF: So many times, these peopleInc. were the ones that were going to be making or recommending that this or that line of product be bought.

LH: That’s right. And they didn’t have any contract, as I recall it, with Graco. It was a good working relationship but they could recommend other equipment, competitors’ equipment, if they wanted to. Generally, the oil companies felt that Graco gave them good service support and sales support,Graco and were obviously making it easy for Graco to make their presentation, but they weren’t actually controllingMinnesota it as far as determining the end buyer was concerned.

JF: Out of curiosity, how much communication was there—if you were out for most of weeks or literally months—how much communication was there with people like Leil Gray, who must have been fairly close to operations in those days?

LH: Usually, there’d be conversation. We’d come in at the end of a week—sometimes two weeks—and there’d be conversation: “How was it going?” and “What was happening?” But I think most of the conversation took place between the sales rep that I was, in effect, working

4 with, and Leil. But he was very, very interested in oil companies and oil company promotion, and very involved in it, although he did not travel this circuit. We had three circuits going on at one time: three of us out doing this. The sales reps would ride with me and with the other people that were doing this, from town to town.

JF: Did you ever take out—I know I’ve seen pictures of the colorful and certainly jazzy vans that Graco had—those trailers with the corporate logo on the side of everything. There were some wonderful pictures.

LH: No, that was an era before this. That was in, I think, probably the late twenties or very early thirties, before I came with the Company; although I’ve seen them and certainly heard many, many stories about them and I’ve seen the pictures of them. So that was not true. In this case, these trailers were rented four-wheel trailers with nothing on them in the way of display. They were strictly functional;, other than the fact that the cartons or the crates had “Graco” on them. But it had a tarp over it, so you really couldn’t see that. So these were not the jazzy display kind that you’re talking about. Project

JF: They weren’t part of the display.

LH: No. Society

JF: How long did that particular involvement of yours last, traveling the circuits? History LH: That was in 1940, and after that was finished I went on some other oil company trips. I came back in and did special assembly work on new products during 1940 and into 1941, and then would go with the product—because these were fairly complicated for Graco at that time. We had one we called the Center-luber,Oral which was a device that had hose reels that you pulled out and then pushed the button to retract. That was hooked up to a pump in the back of the service station. We made a lot of them, so I wouldHistorical frequently assemble them and then go with it out to the installation and see to it that it operated. So I followed in that sales and quasi-engineering functionInc. to get the product out and see to it that it operated.

Then about 1940—late, I think it was—or early 1941, I started working with our sales representative as a junior salesman, if you will. It was a very excellent learning experience. I found out in short order that I knew a lot about the product, but that I knew very little about selling, because I’d had no training at all, and Graco did not have a training program as such at that time. GracoLater on, that was developed. I found that I wasn’t as gung-ho to be involved in sales as I thought I was. IMinnesota was doing some installation work, and we had new products which had lettering on it with the dealer’s name, and I would go out and do the installation on that and install those letters, which were cemented on and had to be aligned and spaced. So it was a combination of installation, sales assistance; and it kind of led up to December 7 of 1941.

I was still in that sales-engineering function when Pearl Harbor hit. This had a major impact on most companies, because it didn’t take long before materials were curtailed and you couldn’t continue to produce civilian products. In that transition, in 1942, we started into the war materials business, products for war production. Harry Murphy, Sr. had been—I guess the best

5 description of his function was purchasing. He was an officer of the Company, but he was really heading up the purchasing function up to that time. At that point, it was a matter of survival. If you didn’t go into war production, you really weren’t assured that you would have any business. It had to be essential. It could be a commercial product, but it had to be essential. While the lube equipment was considered semi-essential, it was not such that you could depend on it for continuing in business. At that point, Harry Murphy swung over and became in effect the production manager of the war materials products. Rollie Gray continued to produce the parts for the commercial part of it. It was about that time that we had to discontinue the famous Vitalizer because we couldn’t get the copper and some of the other materials that went into it. We just had to discontinue it, and it never really got reborn after that.

JF: What sort of war products were made at Graco?

LH: We started out at the earliest conversion making bullet dies for the Twin Cities arsenal, I believe. It was operated by Federal Cartridge. We set up a special department for manufacturing the dies that made the bullet cases. It was total, absolute conversion Projectfor us, in terms of precision, in terms of the type of equipment. As I say, Harry Murphy headed that up to establish not only the production equipment, but also to go out and find the places that we could bid to obtain business. Of course, the whole country was seeking sub-contractors or contractors, trying to get geared up for the war effort. It was not that hard to find opportunities, butSociety to find them that you could compete in and get your costs in line, was a little bit more difficult.

That was in 1942. While Harry Sr. was doing that,History Russell was developing a pilot model of a field lubrication unit, so in effect you could take a service station right out into the battlefield or in a maintenance depot or wherever, and he had built several of these. He took it down to—I think it was Fort Holabird, which is a Marine Corps base right outside of Washington—and gave demonstrations of it. We started production,Oral I believe, in 1942—late 1942. It was a two-wheeled trailer-mounted lubrication unit. It had an air compressor, pumps, and quite frequently a charger made by the Onan Company-that’s how we gotHistorical started doing business with them—so that it could charge the battery and provide lights to do the service work. Inc. That unit continued production all through the war period, both for the Marine Corps and for the Corps of Engineers. It became a very competitive business as it came near the end of the war, and somewhat following the end of the war as well. Let’s see. We also made hydraulic valves for Sperry—parts for airplanes—and we made landing gear struts for Beech Aircraft. That’s some of the range of products, but those were the main ones that we made. We were still making lubricationGraco equipment, but most of it had to have a high priority for commercial use, or it went to the military. Some ofMinnesota the standard lubrication equipment, of course, was purchased by the military, so we continued to make some of those products, but it all went to the military.

JF: So the gas station market, if you will, kind of dried up then.

LH: It was very difficult for them to get a priority or an allocation for materials to buy. It became, of course, more difficult as the war became more severe in the 1943, 1944 period. During that period of time I was pulled from the sales, because commercial sales almost dried up. In fact, some of our salesmen began to represent us as far as government sales were

6 concerned, because they couldn’t really fully utilize themselves selling to the commercial market. So I became the production control manager of that war production function.

On the basis of that, all through that period, I was deferred from an occupational standpoint. I was called up but I never did enter the service, as a result of that. So Russell’s genius was very instrumental in getting us into the lube business, which became a very, very important part of the whole thing and led to other products such as portable gasoline dispensers. Harry Murphy Sr.’s, knack for purchasing and production became very instrumental in getting us into the ordnance side of it, and he and Russell did a lot of traveling together, calling on people like Beech and Sperry and others.

Throughout that whole war period, we totally converted production, and I was involved in the production control aspect of it. Then, I think in 1945, the war contracts were being cancelled, and Russell and Harry had been developing a post-war commercial product, more jazzy and with more features—both mechanical and appearance features. In that period of time, Harry Sr. became the engineering manager. As we phased out the production ofProject war materials, he became the engineering manager, and Russell was the research engineer; I guess you’d put it that way. The two of them then developed this line of products, trying to anticipate the phase-out or phase-over back to commercial. Society We had business booked—much more than we could possibly produce—because our distributors were beginning to order. They saw this line of equipment. We had sales meetings as we began to develop it, and we had business booked that lookedHistory like we’d never be able to produce it, which was great—you’d have to have expansion. The commercial business had a certain size to the market, but it became obvious that the habits developed during the war—long lead-time, and ordering ahead—had been built into the commercial side of it. Oral When once it all became a reality, we had many cancellations and retreated from what looked like a total overload to produce the goods that wereHistorical needed. In fact, it looked pretty barren in terms of the orders that were left after the cancellations. The natural washout just looked like disaster, almost, but there wasInc. enough work so that the Company could retain the work force. By getting out and doing marketing and selling, getting back to the pre-war way of marketing with the oil companies, we were able to weather that storm and go on through. That started in about 1945.

During that period of conversion, about 1945-1946, we were looking for space to do this type of development.Graco There was a little building up on the corner of 11th Avenue. We called it the White House because it wasMinnesota painted white, and that became the research laboratory. That was kind of a home for Russell and Harry to develop and test these new products. They brought in a guy by the name of Art Dufour, who was an engineer, to do the testing. He was an engineering and lab test technician, I guess you would call it.

It was in that period of time, about 1949, that Grier Wheaton died. That was the first major change then in the basic ownership of the Company, and after about a year Ted Bergquist was elected as treasurer to replace him. Ted had been in the accounting department, and was the

7 manager of that department, and he became the treasurer. He was the first so-called outsider to join the top management group.

The products that we looked at in that 1945-1946 post-war period were a whole line of standard and deluxe portable lube units. They were painted white, although for some oil companies we painted them special colors—blue and white for Sun Oil Company and Pure Oil Company. We tried to meet the customer’s needs and be unique in satisfying what they wanted for their product. We developed a line of oil bars which were wall-mounted and had spigots on them with identification of the type of oil. The barrels were in the back room, so this brought the dispensing out where the customer could see it. There was a meter, so he could see how much was being dispensed, and he knew the type because there was a button on there that told the type of oil. It put the dirtier mechanism in the back room and put the display out in the front room, and it developed into a real good product line. It was especially good in the car dealerships. They used it more effectively, because they had more room.

At this same time, we developed the overhead reel for service stations,Project with the same idea that the lubricant was dispensed from a reel. Pull down the hose and do the lubrication work; put it up out of the way afterwards, instead of having a portable unit that you pulled around on the floor with the pump and the drum and all the mechanism. This became the standard for service stations—the overhead reel with the pump in the back room—so that theSociety customer didn’t see that part of it. He saw the clean reels and the hose that came down and disappeared back up. This became a standard built-in material for the service stations in the forties and fifties. History JF: No mess.

LH: That was the idea behind it—to make it not only functionally useful, but clean. The oil companies had their own competitiveOral challenges and objectives and they were trying to clean up their service stations and make them more attractive for customers. Again, it was Harry and Russell and Leil, sensing what the oil companiesHistorical needed and wanted. It sounds like In Search of Excellence, today. Do what the customer wants; and they were good at it. Inc. JF: How about some of the wartime products, like—what was that field luber? Was that the convoy luber that they talked about?

LH: Yes.

JF: Was thatGraco adapted for later use? Minnesota LH: It was sold and developed in the construction field. It became a commercial product, and of course some of the construction companies were involved in war production or construction, and they just continued to use it. It’s still a marketable product in the construction field. There are still some purchased by the military, even today. Mainly for the replacement of what has been worn out or been lost or damaged or whatever.

Through this whole period of time, my job continued to be production control manager, reporting to the factory manager—to Rollie Gray, the brother of Leil. The next major change in the

8 Company was a very major change. In fact, today it’s so predominant that it makes one wonder what would have happened had this phase not taken place. That was the move into the industrial market.

Up to that time it had been lubrication equipment or oil handling equipment, totally. Russell Gray and Leil Gray and Harry Murphy were looking around the industry for ways to expand, and felt that our pump as we built it at that time could be adapted not only to lube as a product, but to paint and mastics and other types of materials to be dispensed. At that time, there were very few pumping units for handling industrial fluids. They called them pressure pots, in which the material was put in a pot, air pressure was applied, and that forces the fluid out. So we developed at that time some basic pumps and changed the portion of the pump that handled the material so that it could handle the abrasiveness of paint. But this was a very small step and a very small start, and we were into an area where the pumps could wear out pretty fast.

I was just reading a little bit of In Search of Excellence yesterday where it talks about, “Don’t try to develop the perfect product. Develop a piece of it, and get it out inProject the field and test it. Let the customer use it.” That’s exactly what we were doing at that time, getting it out and letting some key customers try it, and find out what needed to be done. About this time Chuck Murphy came into the engineering department as engineering manager—first as an engineer, and then finally as engineering manager—in the development of these industrial products thatSociety would withstand the abrasiveness of the materials that were being pumped. Today, as you look at Graco, the lube business is still there, amazingly, but the preponderance of business is all in the industrial field, in many different facets of the industrial market. History

JF: Was this move, do you think, the inspiration of someone in particular, or was it kind of a general acknowledgment that they had to do this to grow and survive? Oral LH: I think Leil Gray was, if you will, the strategic planner of the group, and I think he recognized that the lube business was becomingHistorical extremely competitive. The other companies had grown and were pushing harder and harder as competitors. I think he recognized that that market wasn’t going to let Inc.us grow, because of the competition and because of the size of the market. There was some indication, even in that early period, that the service stations weren’t going to continue to expand and build. There’d be some remodeling, but you could already see that there was a change in the oil industry and the marketing of it. So I think Leil Gray was the one that looked around and said: “What else can we do with our pumps?”

I think thatGraco Russell Gray was the one that said, “Well, I can build a pump that’ll do that. We can convert this pump toMinnesota do these things.” Along with Chuck Murphy and a man by the name of Bill Vork. I don’t know if you’ve interviewed him or not, but Bill was an engineer and more on the research side of it. So he and Chuck, along with Russell, were very instrumental in developing the materials and the seals that would withstand these industrial products. It was mainly paint to start out with, although it soon moved to mastics and other products. So this conversion was a gleam in somebody’s eye—Leil’s, I think—but it became a team effort. It was: Try something out, test it, take it to the customers. Sounds exactly like Tom Peters, again.

9 We learned a lot. Learned that we didn’t have a product that would stand up as long as the customer would think it ought to stand up. So by continuous testing and development, we finally were able to develop a number of different types of pumps that had the same basic power unit. But the lower end of it, where the material passed through, was changed, hardened, and different types of materials used so that it would withstand other uses. I’m sure that Chuck Murphy has given you background on this part of it. But that team of Bill Vork and Chuck Murphy, Harry Sr. and Russell, is what brought the necessary experience to develop this industrial line of pumps.

JF: Now this was in the 1950s.

LH: It started about 1956. That was when we first started to get into the industrial pump business. About that time, we brought a man in by the name of Earl Niederloh as sales manager to start developing the industrial distribution, and also put together the industrial representatives. We tried, sometimes successfully but sometimes not, to utilize the automotive representatives, who were somewhat in a declining market now, to move over into this industrial field. But it’s a different type of product, it’s a different industry, they buy differently,Project and it was not an easy transition for many of those people.

As a result, we brought in a large number of representatives who were new to Graco, recruited from the industrial field somewhere to sell the product. There was someSociety parallel in this thing, because our market development in the automotive business was with the oil companies. They were the ultimate users, really—their people, their lessees. As we moved over into the paint and the mastics, it was the chemical industry that couldHistory recommend these products for dispensing their materials. It became the same kind of a development project to know the chemical companies and the paint companies, and I think there the teamwork was the same people, the same engineers, along with Niederloh. Oral It was somewhere about that time that Harry Murphy, Jr., entered into the picture. I believe he became industrial sales manager, but I don’t rememberHistorical whether that was after Niederloh left or just what that timing was. But Harry Murphy, Jr., became industrial sales manager. Inc. At about that same time in 1958, Leil Gray died—the early part of 1958. He’d been ill from about a year ahead of that. As I said, he was the strategic planner. Through this period of time, I was still functioning as production control manager, but had also taken on the forecasting (which is really a marketing function) and the customer service function (which is usually a sales function). So we had kind of pulled a lot of things together to help us plan better and give direction toGraco our manufacturing operation. I was getting involved in sales and marketing functions such as forecasting Minnesotaand customer service, as well as the production control piece of it—still reporting to Rollie Gray on the production control side, but reporting to Leil Gray on the forecasting side. I was kind of splitting two ways.

When Leil became ill, he pulled me in to work with him on developing an organization to be ongoing from that point, recognizing that at least it appeared as though he had terminal cancer, and that his time was limited. Again, in his strategic planning mode, we started developing various options for an organization structure, with the premise that Harry Murphy, Sr., would become the president. At that time, I guess I hadn’t mentioned that Wally Salovich was in the

10 Company, and Dave Koch was in the Company. They are the sons-in-law of the Leil Gray family; they married the Gray daughters. We had, in effect, four second-generation people to consider in planning this. Of that group, I was the only one that was a non-relative. Literally, I spent my whole life with family corporations, this being another one1.

So the planning took place, and I remember many times being out in Leil’s home when he was in bed, as a matter of fact, planning these various organizational structures. We had Dave Koch and Wally Salovich from the Gray second-generation; and we had Harry Murphy, Jr., and Chuck Murphy, of the Murphy second-generation. Russell had a son, John, but he was really not trying to make that much of a career (I don’t think he was) with the Company. He was in the sales function. So it was a matter of trying to fit together a survival plan, an expansion plan, and keep all of the second generation involved and, I won’t say happy, but at least reasonably satisfied that they were being given the right opportunities. The net result of that whole plan was that Wally Salovich was made marketing manager; Harry Murphy, Jr., was made sales manager; Chuck Murphy was made engineering manager—I think he had been, not much before that, but I think he was made engineering manager at that time—and John Gray was Projectkept in the sales department.

This began to be the basic organization structure. It was at that time that I was made assistant general manager, reporting to Leil Gray while he was alive. It was intended that when the change came and Murphy became president, I would then report to Murphy, whichSociety I did.

JF: What was David Koch’s position at that time? History LH: David came into the Company as a sales representative, working for Fred White, the local sales representative, in 1956—the latter part of 1956. As is always the case when a second generation comes in like that, it’s not always—but frequently—difficult to find a slot to fit into. Dave was looking to get into somethingOral else—he’d done his training in the sales function, and he was looking to get into some other function. Historical At that time—I guess I forgot to mention this—in 1958, I became responsible also for all of our sales distribution branches,Inc. so I was getting a fair number of sales-related functions along with the production-control function. I needed somebody to travel to these branches and supervise them, because I was getting too broad a scope of responsibility to be in the field as much as we needed. So Dave came in with me as branch coordinator or branch manager, and became responsible for the coordination of the branches. I think that was in 1958—1957 or 1958.

As we movedGraco through that first period following Leil’s death, Dave stayed in the branch coordination, and WallyMinnesota in marketing, Harry in sales, and Chuck in engineering. Then in 1961 Dave was elected executive vice president, and Mrs. Gray—Cris Gray, Leil’s widow—was still alive and still active, and was beginning to pick up the planning. The [Leil] Gray family owned fifty-four percent of the stock, so it, in effect, had the control. Dave was showing signs of good responsibility and progress. He was made executive vice president in 1961, and he was made president in 1962, at the age of thirty-two, I think.

1 Hitchcock Industries, to which Harness moved after leaving Graco.

11 At that time, Harry Murphy, Sr., who had been president, was moved to a position of international consultant. His objective was to develop international distribution. We had worked through an agent, a foreign agent, and now we wanted to get to direct distributors, selling to foreign countries. So he became a consultant to develop the distributors and also to develop those markets and get that transition from an agent to direct selling through distributors. He had an office downtown in the Cargill Building, I remember, and operated there and did a lot of travel to Japan, to Europe, to Hong Kong, and to other places where we wanted to begin to look at the distribution.

This transition from 1958 through to 1962 was part of, if you will, a master plan that had been developed by Leil Gray, with myself participating in that development. When Dave became president, we abandoned the assistant general manager function—that was in about 1963. In 1964, another key event happened—Rollie Gray retired. He had been the factory manager. That was when Dave appointed me as the director of manufacturing. From 1964 through 1969, I was the director of manufacturing. That was really the point where the Company started to develop and grow. It had more resources, it had been doing well, and it beganProject to look at internationa l markets under Harry Sr.’s direction as well as Dave Koch’s direction. We began to develop an organization structure that went below the top level, and started to put some resources in place at levels down through the organization. Society I undertook to build a manufacturing organization. We did the same thing in the sales and the marketing and the financial. At that point in time, I still had customer service and I still had forecasting, and I also then took on the manufacturingHistory function. No longer assistant general manager. One objective that I strongly believed in—and it took a while to accomplish-was to get the forecasting function over into marketing (Wally Salovich was the marketing manager) and to get the customer service function over into the sales part of it—or into marketing, one or the other. I felt we were too big. It neededOral to be separated; it needed to be a marketing-sales function. That evolved and took place about 1966. Historical Now we had some strength in the second generation. I was in the manufacturing end of it, we had engineering with Chuck,Inc. we had manufacturing with Wally, and sales with Harry. So we began to build and add and build the organization behind it. Through that period of time the development and the growth of the Company was strictly in the industrial products. We began to split that off into automotive, which was the automotive manufacturing plants—the so-called MCM [motor-car manufacturers], and the smokestack trade, which would be a company like Graco that was an industrial company needing those products. That finally continued to develop into the finishingGraco industry, which was the painting of finished products like refrigerators, washing machines, Minnesotathat type of thing; and then the mastics that are used for assembly lines all across the whole industrial field.

This is when the product line broadened through development work with the chemical companies and the paint companies. I think it was in about that period of time that we developed a sales plan with Sherwin Williams to distribute the product. They’re one of the biggest paint companies in the world, and we worked out a plan with them to become a distributor and I sell through their stores and through their representatives. That relationship was dissolved some time ago—I’ve forgotten just when, but it has been since dissolved.

12 JF: Those products that you would have sold that way, were they target to painting contractors, or were they actually targeted to individual consumers?

LH: Mainly painting contractors. That was another evolution that took place in the late sixties and seventies. More and more small painting contractors were evolving, and that was getting closer and closer to the person that’s capable of doing things for himself—painting his house and so on. Some of the products got down in price and in size to where a homeowner could buy one if he really wanted to spend the money, and maybe do a few jobs for his friends. Then finally some of the products were developed that were aimed at the homeowner market, sold through distributors to the homeowners. That’s still an evolving market, however. Wagner is a major competitor that sells to the homeowner. Graco bought a company called Roto-Flow—the product was named Roto-Flow—aimed at the homeowner.

JF: You mentioned earlier, in the days when the lubrication equipment was the line of products, who your competitors were. Who were Graco’s major competitors as you moved into the industrial painting market and allied markets? Project

LH: It carried the same competitors as in the lube business. They were seeing the same opportunities, so they carried forward, or most of them did. Balcrank, as I remember, did not go very far with it, but Stewart-Warner did, and Lincoln did. The other majorSociety competitors were Binks Manufacturing—they are in Chicago—and De Vilbiss Manufacturing Company. These were the two major paint gun, spray gun manufacturers. As we began to push into this area, those were the two competitors that we began to push against.History Because of Graco’s experience and aggressiveness, that competition began to be felt, and caused those companies to become more aggressive in their development and sales plans. I believe that as of now Graco is probably the biggest company of those three. De Vilbiss has been bought out by Champion [Spark Plug Company]—I’m only talking about theOral De Vilbiss Division. To my recollection, and from fairly recent conversations, Graco is now almost as big as or maybe bigger than those competitors. Historical There was another facet of growth: as we looked at expanding overseas markets that we were attempting to get to, we wereInc. sometimes blocked because they wanted a local manufacturer. A typical thing that was happening was that American companies were setting up manufacturing or licensing arrangements in Europe or in Japan. At that time we literally did not have a planning function in the Company. After Leil Gray died-he was kind of the strategic planner, and Koch was new in the field—we literally did not have a central planning function. I made a recommendation that we set up some kind of a function for long-range planning, particularly for manufacturingGraco facilities, because it’s long lead time, it’s expensive, it’s high risk—and to tie that type of planning in Minnesotawith our market planning. In 1969, I think it was, I backed out of the manufacturing function and we created a function called operations planning and facilities, to look at the resources required, whether it be licenses or partnership or fully-owned facilities in the U.S. and overseas in Europe, Japan and Asia. In effect, this function would get those long-range plans completed and see if we had the resources to pay for that, or how we could go about doing it.

As part of that whole function—I certainly didn’t cause all of it, but worked with the group of top management people—in 1969 we acquired the Fogautolube Company, a major manufacturer

13 in France. A little bit before that, we became a partner with Tokico, in Japan, in a sales distribution company, with Tokico being the manufacturer and supplying the product to that joint venture.

Taking that operations and planning and facility function and looking at what needed to be done, we made some progress but finally it really needed some attention at the scene of action, which would be Europe or Japan. From 1972 forward I spent a great deal of my time in Europe—in France—working with that company we acquired, plus our own distribution. In effect, I was what you would call an internal consultant. I moved back from manufacturing operations planning, and then worked as a consultant to these companies and also spent time in Japan, in Tokyo, with the joint venture operation. My objective had been to be in business for myself by the time I was fifty-five. This opportunity of being an internal consultant was fitting right into that. So from that period of time until 1977 that’s what I was doing, working—in this country too, but primarily in Europe and Japan—planning the development of those resources, just making them more capable of doing what they were intended to do wherever it was possible to do it. Project

It just happens that Graco has now acquired a hundred percent of the joint venture in Japan, and FOG2 has been sold off. We didn’t succeed in making a workable relationship between the French way of doing business and the American way of doing business.Society It finally just looked like it was appropriate to divest ourselves of it.

That brings us up pretty much to where I concludedHistory my arrangement with Graco. I took a leave of absence, because I didn’t want to take my retirement benefits at that time for tax reasons (until I reached the age that it was appropriate to do that). I left Graco and went out into the consulting field and looked around for clients, and ended up with Hitchcock. As Tim Hitchcock and I looked at that it just became apparentOral that there were several years of work to be done, so instead of being an independent contractor, I became an employee of Hitchcock. That’s what I’m doing right now—divesting myself of that and gettingHistorical back into the independent contract areas. [Laughs] Somewhat delayed. Inc. JF: Why did Graco go overseas? Was it production costs? Was it to be closer to consumers?

LH: The primary reason for going overseas was market expansion. Following the war, of course, there was huge development taking place and we had been working with this export agent who did a certain amount of business in Asia and Europe, but it was just a minimum amount. And this looked likeGraco a good opportunity. In fact, I think it was 1953 that Leil Gray made his first trips to Europe. I don’t thinkMinnesota he went to Japan, but he did to Europe, and he started to realize the potential that was there, and that’s when we started untangling ourselves from export agents and setting up our own sales people, our own representatives, and finally, our own distributors.

JF: Was there manufacturing in Europe, too, or was it just a—

LH: At that time, no. It was strictly a sales effort. Then, as Europe evolved following the war, they set up some roadblocks to American manufacturers. They wanted the product—or at least

2 Fogautolube S.A.

14 some of the product—manufactured locally. So, typically, companies would set up an assembly plant with local people, production people, and to some extent local management—although there was a lot of American management in there at that time. Then they’d ship the parts from the U.S. and assemble.

For instance, Graco put a plant in Dusseldorf, Germany, that was using American-made parts and assembling them there, and buying some parts in Germany, just for that same reason. To do business successfully with the government and get the permits to do it, you needed to have some local participation in the manufacturing process. The same thing was done in France with the FOG company. When Graco divested FOG, FOG continued to supply the product. It was a locally made product, so it satisfied those needs. It was strictly an expansion of the market, and we first tried to do it with shipping all the product from the U.S. Then duties began to get in the way. Even in Canada that was true. The answer was to do some of the work locally to satisfy the local government requirements, and take that as far as you could or wanted to, and continue to participate in the market. Project JF: How did or does Graco sell in foreign countries like in Italy and South America?

LH: Through distributors. Generally, because of the nature of the geography, they will have bigger distributors that sell in a single country, rather than a whole seriesSociety of smaller distributors as we do in this country. Of course, distributors like to have an exclusive. That’s just a word of law, I guess, or rule of law. In this country we found that we had to get more distributors competing with one another in smaller territories Historyin order to get our fair share of the business. That was harder to do in Europe, because there the big distributors were powerful and successful. But there was some need to do that there as well, because they would be satisfied with a certain chunk of the business, and not push on and try to get an increased market share. Oral JF: Would they carry almost all of a product line, or would they carry only parts of it? Historical LH: Yes, most of those distributors were very good at carrying inventory. They had the strength to do that because they wereInc. big and they carried many lines. In a few cases, they carried competitive lines. If you wanted to do business with them, that’s the way it was.

JF: One use of some of the equipment that I found fascinating, although it doesn’t seem to have ever been a very large part of the business, is the use of the pumping equipment and the fluid carrying equipment for various food products, and also for pill coatings and things like that. Can you talk aGraco little bit about that, how it came about? Minnesota LH: This was another split-off from the industrial markets and trying to segment those markets. We would be selling pumps in a plant for industrial use—maybe paint—for which our standard product would work. But these people would then see that product, or our people would see other applications within that company. It might be a food company, and the Food and Drug Administration governs this with very tight controls on types of equipment. The use of stainless steel is very, very prominent in handling food products. So here was a product that needed to be moved, and it was a food product, so the need was to make a pump similar to one that handles

15 paint, only now to make it out of stainless steel—at least the parts that come in contact with the food.

This was another development: the identification of a market segment, the development of an engineering type to make a product that would satisfy the Food and Drug Administration and also do the job that the customer wanted in moving the product. The pill dispenser was another version of that, and requires stainless steel to handle the pills as well, and a special method of moving those pills so that they would fill a container automatically. It was partly automation, partly food-handling requirements. So it developed into, and still is, a big chunk of what I would call the total industrial market. At this point, I don’t have any idea of the sales dollars that are occurring, but it’s a big chunk of the market.

JF: Seems like an interesting industry.

LH: Yes. Stainless steel presented real challenges, because it’s hard to cast it and it’s hard to machine it. It took a lot of development work to get to where we couldProject make that product successfully, to do its job and also make it at a cost that was within reason, because it is very expensive. Stainless steel is very expensive, and the machining processes are very expensive. I think it’s been very successful for Graco. Society That goes all the way back with Leil and Russell Gray finding out what that customer needed and responding to it, and tailoring the product to what the customer needs. That’s been a big piece of the success of the Company. And that continuesHistory today, finding that Graco can serve the customer better by forming a division, a finishing division or a painting, decorating and contractor division, to better serve that customer. The Company has an extremely broad product line for the size of the company. For the total sales dollars, it has an extremely broad product line. Oral

JF: I would like to talk about some of the peopleHistorical that you worked with, because some of them— and you’ve mentioned this very effectively as you’ve gone along—were key people in the beginning of Graco. What Inc.about Russell Gray? What was it like to work with him? How would you characterize him?

LH: Russell and I had an unusual arrangement, because my whole thrust in the Company was either planning or organizing or setting objectives to be achieved. You can see that all the way through the things I’ve been telling you here. Russell’s whole mode of operation was to capture an idea, andGraco maybe he’d think of it driving on the way to work that morning, and he would come in and direct his peopleMinnesota down in the shop—I’m trying to think of the names; Mike Rusnick was his machinist, and Merlin Ensley was another one that could do this type of thing. Russell would come in with that idea and have these people working on it that afternoon, trying it out. Get something, try it out, and then take it out to a customer and see if it would work.

His whole being was: capture an idea and go try to make that work, take it out to a customer, and as soon as that got to a point that it wasn’t exciting to him any more, it had no interest to him at all. So our paths were almost totally different. As a result, where I would be trying to bring controls and plans and costs together to make a profit, Russell didn’t really have much interest in

16 that part of it. Yes, he had interest in the Company being profitable, but as far as recording anything or keeping track of it or planning it, it just didn’t appeal to him at all.

He was a genius at this type of thing, and I don’t know if we can ever identify truly how many things he brought to the Company with those ideas. As is usually the case, some of them worked and some didn’t. Probably many more of them didn’t than did, but enough things came out of that to feed into the Company and finally develop people like Chuck Murphy and Bill Vork, who could take some of his ideas and develop them in a more orderly way into a finished product.

Russell was an idea person; he was an inventor; and besides, that, just a great person. He could enjoy things more than most people could. He could make fun out of it. He was impatient, as most people of that stripe are; but a very, very big force in the Company.

Leil Gray, his brother, was pretty much the opposite and more my stripe, I think. He was the strategic planner, keeping his eye on the future, keeping the costs and the revenues matched up to where you could keep the Company profitable and growing; more ofProject a total, big-picture type of person. While I admired Russell, and have always admired him, he was a different type of person than I am, and consequently we just kind of went our separate paths. I was much more like his brother, and—as you can see from what I’ve said—related to his concepts and his strategic planning, and essentially grew my career around that man. Society

Harry Murphy, Sr., was probably a little bit in between those two extremes. He was an idea man, he was an excellent salesman, a pretty good strategicHistory planner, but he was more interested in exploiting an opportunity than he was in looking at the total picture. I think as he got into those jobs, he became more the total planner and the strategic planner, of necessity. But he was an opportunist and a salesman and a marketer. That was his bent. He came, as you know, out of the grain business, which fits that description.Oral

JF: What about Rollie Gray? Historical

LH: Rollie Gray was a typicalInc. foreman, production-manager type. He was not very interested in the business as a total, as a whole. He was interested in running his shop and directing his people; did a good job of it. He did not seem to, at least, be interested in becoming part of the management group that did the planning. He was on the board of directors, but that didn’t seem to be his interest. He was interested in running his day-to-day shop operations and enjoying life his own way, and that was his game. Graco I think I missed oneMinnesota thing in the earlier evolution of things, and it is kind of an interesting piece of it. In 1964, I became director of manufacturing, and in 1965 I was elected to the board and stayed on the board for seven years. I was the only non-owner, non-family person on the board, and I know from personal experience that there were some discomforts with it. [Both laugh] The second-generation people were not put on the board. There was no doubt, when something like that occurs, that it causes strong feelings. Dave Koch made a decision (and he’s made many of them and good ones) when he felt that, with the stage the Company was at and for the foreseeable future, we should have outside directors. I was the only inside director, other than

17 Russell, and Harry Murphy—those two who were the owners of it. I was the only inside non-owner person.

At the time that we made the decision that I came off of the board, I was working in Europe and Japan and I was missing board meetings. Dave told me of his plan and I said, “Dave, I agree with you, fully. Under the circumstances, I’ll resign from the board, and you go ahead with your plan.” And that plan is still intact today, and that was in 1972, I think. All the directors are outside directors, and have had a good influence on the Company. I’m not saying that I was totally pleased to come off the board, but I understood the situation, and I certainly understood the tensions that were built up as a result of my being on the board. It was a good experience.

JF: How would you characterize Graco’s development? You’ve given a considerably greater emphasis—which I think is interesting, and obviously comes from your background—to planning than any of the other people I’ve interviewed. How would you characterize Graco’s development? Has it been an orderly sort of development? Has it been the finding of market niches? How would you put it? Project

LH: I think you have to divide that up into very early times and in-between times and then more recent times. Earlier on, of course, when the Company was started, it was a product idea, an application idea that very quickly was converted to a product, and that wasSociety done by Russell. That carried forward all through Russell’s career. But, as I think I’ve mentioned, in the beginning and even in the forties, through the war and on from there, Leil Gray was the strategic planner and the long-range planner, and he had a very good senseHistory for markets. He could look and see where we were growing and where we weren’t growing, look at the market potential; without much resource back of him. He just had the knack for sensing those markets, and then looking at what product might fill a market segment. Oral I would say segmentizing the market was one of his very, very strong attributes. That would then sometimes lead to the development of a productHistorical from Russell. Sometimes Russell would just come up with something: “Here’s a pump.” As I remember, he came up with one that we called the Shotgun pump, which wasInc. a one -to-one ratio pump for pumping fluids rather rapidly. It fit right in, and it’s been one of the strongest continuing pumps in the industrial line. I’ve forgotten which was the chicken and which was the egg there, but probably some of each. There was some conversation about, “We need to be able to empty these drums fast,” and Russell was working on a pump, and the two just came together. I think the strength is in serving the customer, when you’ve got him. When you know the customer you can identify market niches and segments that you can branchGraco off into, and then reorganize the Company to serve those markets. Because if you don’t, you tend to getMinnesota stalled and you just can’t compete effectively. By reorganizing into divisions or new product groups, you tend to be able to come in and serve that customer, equal to or better than the competition. So that, I think, is central: a good quality product, being sure that the product is high quality and as good or better than the competition, identifying the market niches, and then being a good manufacturer, being able to compete cost-wise, manufacturing-wise. With the breadth of the product line and the number of markets served, it takes a lot of planning and management to pull all that together, because it really is a diverse function. For the size of the Company, at a hundred and twenty-five, a hundred and forty million, it’s a lot of segments to manage.

18 JF: It sounds, too, as though fieldwork would be tremendously important. You need a constant, ongoing awareness, almost through osmosis, of what was needed; that’s inherent in what you’re saying.

LH: That’s right. Knowing what the customer wants, and being able to get that customer to tell you, and to bring products to him to try out, to decide whether that will do his job. That is very, very important.

JF: Did people bring products to Graco? Obviously, they must have sold products that Russell Gray did not invent or weren’t even invented in the Company. At least, it seems to me they used to.

LH: Yes, there were people that came in and offered us products, and we bought them. The Roto-Flow pump was an example of that. There was another acquisition. In fact, it’s one of the few times when I have had the experience of heading up an acquisition team, and then later heading up a divestiture team, for the same product. It was a meteringProject valve for putting on machines to measure the amount of lubricant that feeds into the machine. Right now, the name is not coming to me. It was a line of product manufactured in Wisconsin. They were not going anywhere with it, and really wanted to sell it. They came to Graco and we bought it and successfully marketed it, but finally decided it was not really what we wereSociety interested in. We sold it to another company. There were people that offered us products, but really, for the most part, it’s been internal development. There’s been very little acquisition of total products that we’ve brought in. Being able to take the ideas theHistory market needs and convert those into products has been a big part of it. The Company really hasn’t developed totally new products, foreign to its general business, which is moving and pumping fluids. It’s normally been in that broad segment of the market; maybe a few attempts to go into other areas, but not many. Oral JF: Sort of refinements and evolutions on basics. Historical LH: Right, very much so. The whole industrial thing evolved from the lubrication—a very, very substantial evolution. Inc.

JF: You have an interesting perspective, and I’d like now to turn to a couple of related questions. Business planning, it seems, is something that’s more talked about now than it was twenty-five years ago. Although it may have gone on twenty-five years ago, it doesn’t seem as though market analysis and such things were as well developed, or at least as consciously talked about as they areGraco today. Would you agree with that? Minnesota LH: Very definitely.

JF: How has it changed? Do you think it has just become formalized, or do you think there’s actually more method to it?

LH: It’s become more formalized. It’s become standard practice, taught in schools. The American Management Association has been one of the leaders in it. The universities and the colleges didn’t pick it up as soon as they should have or could have. They didn’t realize that

19 industry out here had a need for some of these things. Now they are, but really, I think the American Management Association was the leader in this. Now, of course, it’s being taught in all different types of institutions.

In colleges, strategic planning is the magic word now. I’ve spent probably eighty percent of my time this last year on strategic planning for this company. So it’s becoming a well-defined science or art. It’s being taught all over the country, in many different places, and companies are teaching more and more of their people how to do this kind of planning. At least in my version of it—and I think this is what’s being taught—is that it’s driven by market planning. You need to know who that customer is, where he is, how you get there, and then build your strategic plan around that. If you do it the other way around, it usually doesn’t succeed very well.

JF: It must be an interesting evolution for you, since the fact is that long before the phrases were coined, you were doing it.

LH: It has been, and as you commented, I’ve been on the planning endProject of the business for a long time, and think that way. That’s just the way I am, the way I’ve trained myself and have been trained. As I’ve found in a number of cases, I was sometimes before my time, like the Chrysler airflow was before its time. It hadn’t become popular yet. [Both laugh] It just wasn’t widespread, and wasn’t that well accepted at that point, but it certainly is now. Society

JF: You’ve spent your life in American business, and one hears an awful lot about American business today. From one side one hears that its allHistory just fine and happy, and it’s really not as bad off as it sounds; and other people saying that it’s not competitive and it’s not tough enough, and it’s not this and it’s not that. What do you think about American business, generally?

LH: Well, I think American businessOral became complacent. To use the term, “having the world by the tail,” we sort of did that, in having products developed and markets developed, and delivering those products to countries all over the world. AsHistorical often happens, you get pretty comfortable with that and don’t read the signs. It’s really amazing, what’s happened to us. You don’t read the signs that somebody is doingInc. it better, and that somebody else has been Japan particularly, and Europe in some cases.

The difficulty with the manufacturing industry, especially, is that it’s so capital intensive, and so structured. The risk of spending that money is great. Once you get that done and you’re going down a trail, it takes a tremendous amount of energy to change. Some people feel that they can continue toGraco do what they’re doing and maybe make some minor adjustments and that they’ll catch up and be ableMinnesota to compete with some products. It just doesn’t happen. It’s taken industries being totally eaten up, totally unable to compete—like the steel industries—to learn that lesson. It’s taken a revolution, almost, to wake up the country to what’s happening to us.

Now, every company is out trying to convert themselves, if they have any intention of succeeding at all, to be competitive and to adapt and adopt some of these things that the Japanese are doing. The ironic part of it is that we taught the Japanese most of what they’re doing. We’re heavily involved here at Hitchcock—as are many, many companies in the world—with

20 improvement of quality, and if you improve quality it reduces costs. This was taught to the Japanese by people like Deming and Juran twenty-five years ago.

The automotive industry is probably the most rigid in terms of capital investment and capital intensity, trying to change the models every year. And the Japanese have just beaten us at our own game, and it’s taken a long time to begin to turn that around. In fact, we as a country just got lucky that the economy turned around and created a demand, or we would be in much deeper trouble than we are now. Of course, many of the Japanese techniques are being built into the American automobile manufacturers, and the cars are being imported from Japan. Lots of them by the American manufacturers. They’ve got joint ventures that bring these cars in. But it’s a fast-moving world, with competition not only from Japan but from Korea. Korea seems to be the one now that’s competing with Japan in steel and automobiles and many, many other products. Having that antenna and radar out there and knowing what’s going on and being able to react to it soon enough and re-direct the company is kind of the name of the game right now. Call it strategic planning if you will, but it’s strategic planning with eyes and ears tuned on twenty-four hours a day. Project

JF: It seems that in the countries you mentioned—specifically, Korea and Japan—the relationship of government and industry is much different. What do you think about the relationship of American government with American industry? Society LH: Well, American government really hasn’t been supportive of American industry. They’ve been partners, but not involved partners, and that’sHistory not true in Korea and Japan and others, although there are some misconceptions, I think. You hear about Japan Incorporated, in which all companies are protected by the government and subsidized by the government. That’s not true. Certain companies are. The government will decide to protect certain industries, and they will subsidize and they will protect and theyOral will make money available. But there are many, many others, and the majority of the companies are not protected that way. Historical Japan as a country decides that they want to get into certain markets for their own survival, and they’ll protect certain companies,Inc. but not all of them. That’s a pretty common misconception, I find, in the people that I hear talking about it and that deal with it every day. I think this country has been awakened, and certainly managements have recognized that their survival is at stake, and they’d better take the steps, better know what’s going on, or they won’t be in business.

JF: Do you think American government needs to change its views of American industry, to be more supportiveGraco of industry? Minnesota LH: I think there has to be a partnership that evolves to solve some American problems. Part of that may be some import restrictions or some better balance of that part of it, although that’s not a real good solution. But I think the government has to take a look at what this country is, and the tax or the deficit problem is probably the biggest chunk of it. If we don’t learn how to manage that, we’ll be like some of the companies in the country. How we manage that with our Congress and our president is a real contest for this country, and I sure don’t have the answer to it.

JF: Those are interesting comments. Are there any comments that you’d like to make, or any questions that I haven’t asked that you think I should have? [Both laugh]

21 LH: No, I can’t really think of any more at the moment. I probably will after another day or two here, and I guess I’ll have that opportunity after you give me the script.

JF: Yes, indeed. Thank you very much, Mr. Harness.

Project Society History

Oral Historical Inc.

Graco Minnesota

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