Stanford GSB: Stanford Business June 1998

No Place to Hide

Some people can't find the right jobs; Robert "Steve" Miller Jr. can't get rid of them. In 1993 the longtime auto executive and investment banker, then 51, decided to retire. He packed his briefcase, decided to winnow his workload down to a few interesting corporate directorships, and moved from New York City to the sleepy central Oregon town of Sunriver. He and his wife, Maggie, started hatching plans to build an ambitious model railroad. As Miller wrote in this magazine in September 1993: "How do I feel? Great! I get plenty of exercise skiing and golfing. I love my new life!"
       That new life didn't last long. A little more than a year later, Miller, mba '68, was recruited to help salvage the deeply troubled construction firm Morrison Knudsen. It was an enormous, heroic, hellish job that took a year and a half to complete. Three days after he finished the restructuring of mk—all set to head back to Sunriver—he was elected interim ceo at Federal-Mogul, a big auto parts manufacturing company that had fallen on hard times. Miller put Federal-Mogul on the road to recovery and tried to retire again. But less than a year later the ceo of trash-hauling giant Waste Management walked out—and Miller stepped in. Miller, now 56, talked recently to Stanford Business from Waste Management's Oak Brook, Illinois, headquarters about his reputation as a corporate turnaround specialist, all the basket-case companies he's worked for, and why he just can't stay retired.
      Miller didn't set out to go into business. He majored in economics at Stanford and went on to Harvard Law School, planning to follow in the footsteps of his attorney father. He found law school intellectually challenging but didn't enjoy it—and flunked the Oregon bar exam. A family friend suggested he go to business school because it would make him a better lawyer. "I wasn't even going to finish the mba," says Miller, who enrolled at the gsb in 1966. "But I liked it, and I stayed."
      By the time he graduated, Miller knew he wasn't cut out for the law. "The most basic difference between a lawyer and a bus-inessman is that a lawyer is trained to figure out what can go wrong, and a businessman is trained to figure out what can go right," says Miller. "I'm a see-what-can-be-done type of person. I respect lawyers and I understand them, but I'm not fastidious enough to be a good lawyer."
      His first job was in the finance department at Ford Motor. Why Ford? "I interviewed with General Mills," says Miller. "But at the end of the day I met with a vice president and he had on his credenza a box of Wheaties and a box of Cheerios, and I said to myself: I can't devote my life to breakfast food. But Ford had just brought out the Mustang. It was a global company, and it was run by relatively young people; it was high energy, high intellect, and it just looked like a stimulating environment."
      In 1979 Chrysler ceo Lee Iacocca began trying to hire talented Ford employees to help save his dying company. Miller, then a vice president of finance for Ford Venezuela, was one of those he approached. Hired as assistant controller, Miller walked into a total mess. Chrysler was on its knees after years of poor leadership and a reputation for building shoddy vehicles. In order to qualify for federal loan guarantees—without which the company would shut down—Chrysler needed the unanimous approval of concessions from 400 furious banks. Persuading them to take less than they were owed was one of Miller's first assignments. "I was brand new to the situation, so I didn't have to apologize for how the company got into trouble. I said, 'We're in trouble together; let's talk about how we can keep this company alive, otherwise our company's dead and your loans are dead,'" Miller says. "I'd never met a banker until we got to this, and here was the world's biggest workout. Because I didn't know what was impossible, I tried all kinds of things and we set all kinds of records. I also learned early on that you've got to play it absolutely straight with people. Life's too complicated if you're trying to shade or hide the truth."
      After nine months of intense bargaining, Miller won over every single bank—and made his name as an extraordinary dealmaker with a cool head and a sense of humor. It was also clear to bankers that here was someone they could trust. "He's an honorable man. He has the courage of his convictions, and one admires working with people who aren't afraid to make the tough decisions," says Roderick Hills, former sec chairman and a friend of Miller's.
      The Chrysler story, of course, had a happy ending: It was one of the great turnarounds in business history. "Saving Chrysler and half a million American jobs was just unbelievable," says Miller. "That was more than just a corporate finance exercise. It had such an impact on our whole economy it was really worth doing." Miller spent 12 years at Chrysler, later as cfo and vice chairman. He decided to leave the company in 1992 and joined the investment banking firm of James D. Wolfensohn Inc. His first client: Olympia & York, the enormous, crumbling real estate empire of Toronto's Reichmann family. Like Chrysler, the company was struggling to get out from under a mountain of debt—in this case, a whopping $20 billion. "I didn't really want to do that again, but once you get famous for something it just keeps coming back," says Miller.
      This story didn't have a happy ending: It took a year to watch Olympia & York get taken apart, and by the end of it Miller was exhausted and dispirited. He also disliked New York ("too hot, too cold, too noisy, too dirty, too congested"), and he and Maggie moved to Oregon. "I went into retirement, fully intending to stay that way. I was not interested in work," he says. "I like being on boards: You go to a meeting, you give sage advice, and then you go fishing while the management does the work. That's my idea of a great life."
      So, as a director of u.s. Bancorp and with the intention of be-coming a board member at a few other companies, Miller settled in at Sunriver and turned his attention to building a model railroad. "I'd been fascinated by them ever since I was a little kid, and all my life I'd dreamed that someday when I retired I'd build a model railroad. Voilˆ, I retire a little sooner than I thought, and there we go." He even managed to get his wife involved: Maggie builds the miniature houses, while Miller focuses on staining and beating up tiny ties so they appear weathered. Then he drives in all the tiny spikes by hand: "100 spikes for every foot of track," says Miller, "which makes for a thrillingly realistic bit of track."
      Then one afternoon in 1995, while Miller and his wife were tinkering with their railroad, the phone rang and Stephen Hanks, the general counsel of Morrison Knudsen in Boise, Idaho, was on the line. He wondered if Miller would be interested in helping solve some of the huge problems facing the once-great engineering and construction firm. "I said 'no' and went back in the other room, and Maggie said, 'Who was that?'" recalls Miller. "I said it was Morrison Knudsen, that place where Agee just got fired. I told them to go bag it. She said, 'That would be interesting. You could do that. You go call them back.' And I said: 'Yes, dear.'"
      Miller has often said that his wife sent him to work at mk because she was tired of making him lunch. "Well, it's a cute quote," says Maggie Miller. But it wasn't the real reason. "I did encourage him to do it," she says, "because it was a unique situation, an ancient company, they were in a crisis, and this is what he's best at." If she'd known the extent of the company's problems, she might have hesitated. A job they both expected to last a couple of months stretched on for almost two years. William Agee, mk's imperious former chairman, had tried to run the company from his Pebble Beach mansion, with executives flying in from Idaho for meetings. mk was contracted to build hundreds of rail cars at a loss of a million dollars apiece. The firm was about to report a huge loss and declare bankruptcy. The stock had plummeted, and employees were deeply demoralized.
      One week after the call from Hanks, Miller was named non-executive chairman. "I hadn't done any due diligence on the company. I hadn't looked at how bad it was," says Miller. "All I knew was they were 10 days from running out of cash to meet payroll, and there was no time to think about it. It was either do it or don't. I signed up, flew home, and when I got there it was 2 a.m. and Maggie had left out these magazine articles about how awful mk was. I thought, what have I done to myself? Here is this wonderful life. I'm relaxed, I'm in better physical shape, and now I'm going into what I know will be months of sheer hell. And it was. I was in a conference room or airplane around the clock. Looking back on it, I'm very proud I did it. But if someone had told me it was going to mean 18 months of agony, I might have said no."
      And MK might have collapsed entirely. "The most important decision we made was the decision to hire Steve Miller," says Hanks. "His role initially was to help us communicate with our bankers. He's disarmingly honest, and he's good at keeping people at the table, keeping them talking, compromising when appropriate and standing firm when appropriate. But later he turned out to be the central figure in the whole restructuring."
      "It was important in terms of the employees," adds Robert Tinstman, Morrison Knudsen's ceo. "They were very nervous, and because of Steve's ability to communicate, he was a tremendously calming influence."
      Miller also helped refocus the company on what it was really good at and ultimately negotiated a plan that canceled all mk's debt for new stock. mk merged with another firm, and today the new company is going strong. "I've had lots of offers to get involved in tough situations and routinely turned them down. Occasionally one comes along that's worth doing," says Miller. "mk is a shadow of its former self, but it would have been a tragedy to see it lost. It was worth suiting up."
      Three days after putting together the deal that got mk back on track in late 1996, Miller attended a board meeting of Federal-Mogul, the big Detroit auto parts company. Unhappy with the firm's recent performance, the board fired the ceo. As a director with loads of experience and no pressing obligations, Miller agreed to suit up again. But he stayed only long enough to steer Federal-Mogul through the rough couple of months until a successor was found. "The company has been on a tear ever since," says Miller. Sales have jumped from $2 billion to $6 billion, and the stock has more than tripled.
      By January of 1997 Miller was back in Sunriver, and he de-cided to add another board to his roster: Waste Management, the foundering $10 billion-a-year trash and environmental services firm. He and Maggie sat down to their model railroad once again. This time they managed to work at it for a full nine months.
      But in October 1997 the ceo of Waste Management walked out. Within hours, Miller was drafted into the job and confronted with yet another mess. After achieving great success in the 1980s, Waste Management had diversified into unprofitable areas like lawn care and asbestos removal. The stock was languishing, and investors, most notably George Soros, were angry.
      "When things at Waste Management imploded and I read in the Wall Street Journal that Steve had taken over, I immediately went out and bought stock for myself and my kids," says Jack Pope, former coo of United Airlines, whom Miller subsequently recruited onto Waste Management's board. "He's been through so much he knows this stuff cold. And Steve is such a nonthreatening individual, he's able to go in and get people to do things that are tough because of his touch. He's not a slash-and-burn type; he doesn't come in screaming and yelling. He has a very low-key, calm sort of personality, which is exactly what you need when you go into a company that has gone through a major trauma. You watch him in these very tense meetings and he's very soft-spoken and strong, but always with a touch of humor."
      After Chrysler and mk, Waste Management is, in Miller's opinion, a breeze: "We're investment grade and we're flowing cash. We're underperforming, but the fundamentals are very strong." In March he helped broker a merger between Waste Management and usa Waste Services, a fast-growing competitor. When the deal is completed this fall, Waste Management shareholders will hold a majority of the merged company's stock, but the top executives of usa Waste will run the company, with Miller serving in the very part-time position of nonexecutive chairman.
      Which means that Miller is once again out of a job. Which is exactly how he claims to like it. "I'm going to get on with my life. I'm looking to go work on my model trains," says Miller. "People are starting not to believe that, but it's true."

"I learned early on that you've got to play it absolutely straight with people. Life's too complicated if you're trying to shade or hide the truth."