Chapter 6, Part 1

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© Winston-Salem Journal

It was the spring of 1960, and the U.S. tobacco industry was again on a roll. The gloom and doom over cancer and mice experiments appeared to be over. Cigarette sales were climbing. The industry's executives were breathing a sigh of relief.

Reynolds' Whitaker Park factory, with 14 acres of floor space, opened in October 1961, just north of the city. From the air you could see an invitation: Come Down and Visit Us.

Nowhere did the future appear brighter than in Winston-Salem. The popularity of R.J. Reynolds Tobacco Co.'s top brands had pushed RJR to the top of the heap. It had a seemingly unbeatable lineup. Camel was the leading regular. Winston was the best-selling filter. Salem was the top menthol.

One of every five workers in the city was a Reynolds employee, and many of them worked double shifts in acres of squat, brick factories downtown to churn out 419 million cigarettes a day. More than $120 million in tobacco mellowed in warehouses on the north side of town.

Near the warehouses, in an area known as Tiretown, Reynolds was building a $30 million factory with 14 acres of floor space. To be called Whitaker Park, after former chairman John C. Whitaker, it was the house that Winston built, and it underscored the company's surging dominance. In the past six years, RJR had become a powerhouse, increasing its market share from about 25 percent to more than 33 percent.

The poster boy for this era of easy prosperity was RJR's freckle-faced chairman, Bowman Gray Jr. In April, Gray landed on the cover of Time magazine. He was in good company: Other cover stories that year featured Lyndon B. Johnson and Arnold Palmer.

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

As the magazine pointed out in its cover article ''The Controversial Princess,'' Reynolds was the leader of an industry that had weathered the tough times, turned the smoking-and-health debate into a marketing advantage, and was again enjoying boom times. (Time footnote)

''By stimulating, anticipating and satisfying the public taste, R.J. Reynolds has built itself into the biggest, and, according to Wall Street, the best-managed company in the U.S. tobacco industry,'' the article said.

As remarkable as these achievements were, Reynolds did it all while adhering to methods that were considered as old-fashioned as felt fedoras. One executive who joined the company in the 1960s said he felt like an archeologist who had stumbled upon a civilization undisturbed by time.

''Reynolds is an anachronism,'' a rival tobacco executive had told Fortune magazine a few years earlier. ''In an age of modern business, it runs a feudal barony. While everyone else talks about new marketing concepts and scientific management, Reynolds goes sailing on in the same old way -- and gets along fine.'' (Fortune footnote)

Reynolds executives bristled at the comparison to some ancient kingdom, but they conceded that they did things differently than their competitors. ''We're unorthodox, but our way seems to work,'' Gray had told Fortune.

The Reynolds Way was equal parts loyalty, integrity, hard work and frugality. It was a system of management, but it was also a state of mind and culture. Long hair was out. So was divorce. To work at Reynolds required commitment and high moral fiber. In return, an employee had a job for life.

No one embodied the Reynolds Way more than Gray. He had grown up in the tobacco business and his family had built the company he now ran. He had the privilege of birthright, but he worked his way up from the streets, where he sold cigarettes door to door. That, too, was the Reynolds Way.

Men in Hats

As his taxi approached downtown Winston-Salem on a misty, humid day in March 1953, Rodney Austin, caught the sweet aroma of tobacco. Armed with a recent master's degree in personnel administration from George Washington University, he was on his way to a job interview at Reynolds. He had applied after seeing a Camel advertisement on the back of a magazine in a barbershop.

The cab stopped in front of the 22-story Reynolds Building, which dominated the city's skyline, and Austin took an elevator to the ninth-floor office of Charlie Wade, the personnel manager. It was hot, and Wade was in his shirtsleeves. The building wouldn't be air-conditioned for 10 more years.

Wade asked Austin about the type of job he wanted.

''I'm looking for a man from whom I can learn,'' Austin replied.

Austin got his job and found his man in Edgar E. Bumgardner, the assistant personnel manager. Short, slight and neatly dressed, Bumgardner always wore a hat with a feather in it. He reminded Austin of Harry Truman. As Austin's first boss, Bumgardner would induct the recruit into the Reynolds Way.

''One of the great strengths of the company was that . . . you passed the accumulated experience on in each field,'' Austin said.

The education of newcomers kept company employees from repeating mistakes while instilling in them the values of the Reynolds Way. ''And that was a thing that was lost,'' Austin said. ''The chain was broken at a certain period of time by the chain of events.''

Bumgardner started Austin on a yearlong orientation in which he visited all departments. Soon after the orientation started, he found himself on the floor of Factory No. 12. In the factories, managers wore hats - straw hats in the summer, felt in the winter. Some of the highest managers wore Stetsons. At Reynolds there was no mistaking the overseers for the underlings.

A fellow with a hat strode over to Austin one day. He knew who Austin was, but Austin had no idea who he was. "Hi, I'm Colin Stokes," the man said as he held out his hand. ''I want to welcome you to the company.''

At the time, Stokes was vice president of manufacturing, among the highest-ranking officers in the company. That type of courtesy was part of the Reynolds culture. During his career, Austin would rise through the ranks as a personnel officer and become a confidant of Stokes and the other men who ran the company. He would also become the last keeper of the Reynolds Way.

The Reynolds culture took years to develop. The company's attention to penny-pinching and cost-cutting dated back to R.J. Reynolds himself. But Whitaker had cemented the rules -- first as manufacturing director in the 1940s and later as company chairman from 1952 to 1959. Like Gray, he came from good blood. He was a nephew, by marriage, of Will Reynolds, the brother of R.J.

RJR and Whitaker had been severely tested in the 1940s, when the company fought a prolonged and nasty battle with black employees over organizing a union. Reynolds won and broke the union, but not before workers struck RJR in 1947. Whitaker's post-union strategy was simple: Treat employees so well that they didn't need a union.

The Reynolds Way had many lofty elements, but it was based on one overriding principle: making sure that the people in control of the company kept control of the company.

''We almost lost the kingdom,'' Whitaker said after the union was defeated. ''We must see that this never happens again.''

Despite its growth, Reynolds was rooted to the South. Many consumer-product companies, like Philip Morris, were already based in New York City. Reynolds executives didn't feel at ease there. All of the company's top officials worked in Winston-Salem, where Reynolds employed 14,000 people. Like Gray and Whitaker, many were second- and third-generation employees, and they tended to stay at the company for life. That made Reynolds ''culturally closer to southern plantation society and business-wise closer to the 1940s and '50s,'' wrote John M. Fisher, a former Reynolds lawyer who has studied the company's history. (Fisher footnote)

Such sameness bred a provincialism that one former executive said gave company leaders a ''pre-Copernicus view of the world,'' referring to the 16th-century astronomer who revealed that the Earth was not the center of the universe. If an outsider was hired, a boss would ask, ''Who's he like in the company?'' RJR was the boss's only frame of reference.

Department heads ran their divisions as personal fiefdoms. Employees at all levels showed fealty to their departments, then fealty to the head office. Leaders treated subordinates fairly and avoided ostentatious displays of wealth. They valued fidelity and eschewed divorce. Murray Senkus, a former research director, said he counseled employees who were having a rough time in their marriages not to split up if they expected to be promoted.

There was a streak of self-righteousness running through the Reynolds Way. The company's executives considered outsiders who threatened them to be less than moral. Philip Morris had to be operating in a less than honorable way, they whispered among themselves; the anti-smoking people were fanatics out to crucify the company.

The world on the other side of the moat was fraught with danger. And so executives checked the fortifications and kept a wary, disdainful eye on their enemies.

• Coming Friday: The world of Bowman Gray Jr. revolved around his family, selling cigarettes and his beloved Brookberry Farm.