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Chapter 18: Ayrshire Collieries Corporation - Dane Starbuck, The Goodriches: An American Family [2001]

Edition used:

The Goodriches: An American Family (Indianapolis: Liberty Fund, 2001).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Chapter 18

Ayrshire Collieries Corporation

Responsibilities of management in a country, the expressed policy of which is to maintain a free competitive economy, are weighty. We must constantly endeavor to produce coal at low prices to assure continuity of sales and to protect our markets from competitive sources of energy. . . . It is paramount that the coal industry adopt a progressive and enlightened policy in respect to wages and hours, safety, working conditions and other related problems. Finally, we must strive to obtain a fair return to our stockholders and thus make it possible to obtain capital for future needs of the industry.

robert p. koenig, foreword to “The Ayrshire Story”

In 1923, James Goodrich obtained a large interest in a small coal company named Patoka Coal in southwestern Indiana. Within twenty-five years, Pierre Goodrich went on to become chairman of the board of a company that merged with Patoka Coal, the Ayrshire Collieries Corporation. It became the Goodrich family’s largest business holding. Interestingly, two other extremely important entities spun off from the coal company: first, Meadowlark Farms, a subsidiary company dealing with land reclamation and ecology; and, second, Liberty Fund, Inc., whose primary endowment devolved from the personal proceeds Pierre Goodrich realized when he sold Ayrshire in 1969 (see chapter 29).

The coal mines that made up the Ayrshire Collieries Corporation are located in Illinois, southwestern Indiana, Kentucky, and Wyoming. They are now owned by the Cyprus-Amax Minerals Company, a large conglomerate. Pierre’s association with Ayrshire went all the way back to his father’s business dealings immediately after James Goodrich had served as governor.

James Goodrich became treasurer of the Patoka Coal Company in 1923 through association with Jesse Moorman of Winchester, Indiana, then president of Patoka Coal.1 Moorman and James Goodrich were longtime friends and business partners. (In 1912, for instance, James Goodrich had assisted Moorman in obtaining the contract for citywide garbage disposal in Indianapolis.)2 At the time, Patoka Coal was a small colliery that operated from a single strip mine in Pike County, Indiana.3 James Goodrich had gained considerable knowledge about the coal industry from attempting to manage a coal crisis during his time as governor.4

Pierre Goodrich became secretary and treasurer of Patoka Coal in 1929. In 1937, he was appointed executive vice-president. After this time, another coal company, the Electric Shovel Coal Corporation, had gone into receivership. At the public hearing in Chicago, Pierre Goodrich had become acquainted with Electric Shovel’s top management: Tommy Hitchcock, Jr., Robert P. Koenig, and James Melville. Subsequently, Patoka Coal Company transferred its operating properties to Patoka Coal Company of Delaware, which was then merged with Electric Shovel Coal Corporation in 1939. The original name of the resulting company was Ayrshire Patoka Collieries Corporation, later to become simply Ayrshire Collieries Corporation. The consolidated company had eight directors. Pierre and his law partner at the time, Albert M. Campbell, represented Patoka Coal’s interests on the board. Even after the merger, Patoka Coal continued to exist as a separate legal entity, as a holding company for stock in the Ayrshire Patoka Collieries Corporation.5

On the board of directors, Goodrich was outnumbered by the five Ayrshire directors, based in New York, who held all the major offices of the company.6 Over the next seven years, however, Goodrich managed to increase his family’s interest in the consolidated company so that by 1946 he was elected chairman of the board of directors. How did he do it? Apparently, the major cause was beyond Goodrich’s control—the onset of World War II. In the early 1940s, Hitchcock and Koenig were chairman of the board and president of Ayrshire, respectively. Hitchcock was also a partner in Lehman Brothers, an investment company in New York. He had married Margaret Mellon of the extremely wealthy Pittsburgh banking family. Koenig, a brilliant corporate strategist, was a mining engineer by training and had served as president of the Electric Shovel Coal Corporation before it merged with Ayrshire and Patoka. Both Hitchcock and Koenig served in World War II, leaving Ayrshire.7

In addition to being a successful banker, Hitchcock may well have been the greatest polo player that the United States has ever produced. In April 1944, Hitchcock was killed in England while flying a training mission, ending what the New York Times called “one of the most gallant and one of the most spectacular careers in modern American life.”8 His death left his widow, Margaret, with large estate taxes. She decided to sell Hitchcock’s shares to help pay off the death taxes, and Goodrich bought a large percentage of the available stock.9

Koenig, who had been gone from Ayrshire for nearly three and a half years while serving in Europe, did not return to his position until October 1945.10 During that time, Goodrich had purchased enough stock so that by 1946 he had a controlling interest in the company. He subsequently replaced a sufficient number of directors to be elected chairman.11 By 1949, only two New York directors remained on the Ayrshire board, neither of whom was an original member.12

During the years of Goodrich’s management, Ayrshire’s growth, both in terms of coal production and in terms of sales, increased at an impressive rate. In 1940, Ayrshire’s sales had been $2.27 million; by 1968, the company’s sales had climbed to almost $60 million, some twenty-six times 1940 sales. Also, by 1968, income had increased to a lofty $5.45 per share from just 15¢ per share in 1940. Moreover, the number of Ayrshire employees had grown from 484 in 1940 to 1,064 in 1968. This increase had occurred in spite of advanced technology that had eliminated hundreds of positions.13

By the time Goodrich sought to sell Ayrshire in 1968, the company was the eleventh-largest producer of bituminous coal in the country. Ayrshire had some of its strongest years just before Goodrich sought a merger with potential purchasers. At the age of seventy-four, however, Goodrich recognized that his own mortality would not allow him and the company’s other aging managers (Ayrshire’s president, Norman Kelb, was seventy-five years old) to continue Ayrshire’s growth without the infusion of new management and additional capital.

Goodrich was forced to either bring in younger management or sell Ayrshire outright. In the company’s 1968 Annual Report, Goodrich reported that Lovett C. Peters had been hired “as agent of the company, looking toward the sale of the company’s assets or merger into another company.”14 Pierre had first become acquainted with Peters in 1955 when they both served on the board of the Foundation for Economic Education in Irvington-on-Hudson, New York. In 1968, Peters had left top-level management at the Continental Oil Company, and Goodrich offered him the position of president at Ayrshire. Although Peters turned down the position, he did suggest to Goodrich that an added incentive made the timing right for the sale of Ayrshire.15

Peters and others in the oil and coal industries had successfully lobbied Congress to adopt legislation that had the net effect of increasing the worth of oil and coal companies by as much as 50 percent. The legislation, known as Reserve Production Payment, allowed a purchasing company to borrow money on the basis of the value of the reserves of an oil or coal company and then pay off the loan with pretax, instead of aftertax, dollars.16

Goodrich took Peters’s advice and invited five companies to discuss the possibility of a sale or merger.17 The two leading contenders were the Ashland Oil and Refining Company of Ashland, Kentucky, and American Metal Climax (AMAX) of Greenwich, Connecticut. A deal was struck between Ashland and Ayrshire in January 1969. At that time, Goodrich and the president of Ashland made a joint announcement that both boards of directors had approved the purchase of Ayrshire. In a complex financial arrangement, Ayrshire stockholders were to receive approximately $125 million.18

The deal between Ayrshire and Ashland fell through in early April 1969, however, because of an escape clause in the agreement of which Ashland was able to take advantage.19 The winter of 1968 had been particularly harsh in the Midwest. The amount of coal that was mined was subsequently reduced, and Ayrshire’s profits plummeted. This prompted Ashland’s management to exercise its escape clause.20 Kerr-McGee, an oil exploration company out of Oklahoma, tried to take over Ayrshire by offering less than half what Ashland did. Goodrich became extremely upset with Kerr-McGee’s proposed takeover plan and immediately contacted AMAX to arrange a sale.21

In less than three weeks from the time that the Ayrshire-Ashland deal fell through, Goodrich had reached a tentative agreement with American Metal Climax, subject to approval by the directors and stockholders of both companies.22 This agreement culminated with the sale of Ayrshire to American Metal Climax in October 1969. At the time, American Metal Climax owned no coal mines. Although it was a large minerals conglomerate, its primary business operations involved mining molybdenum, lead, and copper in the upper Midwest.23

Goodrich and his family were by far the largest owners of Ayrshire, controlling 334,000 of the total 790,891 shares in the company, or about 44 percent. The second-largest owner of Ayrshire stock was Henry Crown of Chicago, who held a 17.7 percent interest. Crown was also the major stockholder in General Dynamics, one of the largest military defense companies in the world. For some reason, Goodrich would not talk to Crown. As a result, Lovett Peters had to serve as the negotiator between the two men, shuttling back and forth between Indianapolis and Chicago in an attempt to strike a deal that was acceptable to both men. Finally, in October 1969, Crown was satisfied that Goodrich had obtained what was believed at the time to be top dollar for the coal company.24 The sale of Ayrshire was reported in the Wall Street Journal to be valued in excess of $100 million.25 The actual amount of Goodrich’s personal interest in the sale is purported to have been between $25 and $30 million.26 Lovett Peters received a handsome fee for negotiating the deal, purportedly $750,000.27

Much of the constant profitability of Ayrshire under Goodrich’s control can be attributed to his ability to capitalize on emerging markets and to hire extremely capable personnel. When it came to selling Ayrshire, however, Goodrich and Peters may well have underestimated the company’s true worth because of their inability to foresee the future desirability of low-sulfur coal, the growing political hostility toward nuclear generated power, and the Arab oil embargo of 1973.

During Pierre Goodrich’s forty years of association with the coal industry, a dramatic shift had occurred in markets. When James and Pierre first began with Patoka Coal in the 1920s, the demand for coal came primarily from railroads and domestic consumers. By the 1960s, most of Ayrshire’s sales were to electric utility companies and industrial customers. Ayrshire weathered the transitional period of the 1950s extremely well, whereas other coal companies underwent considerable retrenchment in both production and employment. Ayrshire accomplished this through the efforts of its sales subsidiary, Republic Coal and Coke Company. Goodrich had purchased the Chicago-based coal sales company in 1944. Republic Coal and Coke Company achieved growth for Ayrshire primarily by developing long-term contracts with utility companies.28

According to Richard H. Swallow, who worked for Ayrshire and its predecessors for thirty-seven years, Goodrich’s most important decision was to have Ayrshire obtain as many options for coal reserves as possible.29 Goodrich had as many as nine drill crews exploring potential coal reserves throughout a large portion of the country, including Tennessee, Pennsylvania, Kentucky, Alabama, and Wyoming. Through aggressive leasing practices, Ayrshire’s coal reserves had increased from 52 million tons in 1940 to 2.35 billion tons in 1968. At its peak, Ayrshire owned outright more than 165,000 acres, 50,000 of them in Wyoming alone.30

Therefore, when Ayrshire was purchased in 1969, the real benefit that the Indiana-based company offered was the ownership of huge coal reserves. It was estimated that Ayrshire (or its successor) had enough reserves to sustain production rates at its 1969 levels for two hundred years.31 With AMAX aggressively pumping in millions of dollars in new capital investment into the former Ayrshire holdings, Ayrshire was able to increase production and market share dramatically. AMAX became the third-largest coal company in the United States by 1975 (Ayrshire was the eleventh-largest when Goodrich sold Ayrshire in 1969).

Goodrich and his advisers may have miscalculated in selling Ayrshire by underestimating the worth of the coal-lease reserves Ayrshire had obtained in the Gillette, Wyoming, area (later the Belle Ayr mine). Before the sale to AMAX, Ayrshire put a very low value on these reserves of low-sulfur coal, but they alone are probably worth in excess of $1 billion.32 Coal output from the Belle Ayr mine went from 900,000 tons in 1973 to well over 7 million tons by 1976. By the early 1980s, the combined capacity of the Belle Ayr and Eagle Butte mines (Eagle Butte is north of Belle Ayr in Wyoming) exceeded 30 million tons annually.33

In addition to the size of the Wyoming mines was an additional attraction—they contained low-sulfur coal. Although burning low-sulfur coal produces less energy than does high-sulfur coal, it also produces less air pollution. With the added attention that acid rain and other pollution problems received in the 1970s and 1980s, low-sulfur coal became increasingly more valuable. Therefore, the worth of the Wyoming mines substantially increased.

“There was a lot of doubt whether the western mines were going to amount to much,” said George Martin, retired manager of Ayrshire’s Sun Spot Mine in Illinois. “But these mines became a major factor and carried AMAX coal economically through the late seventies and early eighties.”34

The reasons Goodrich was not more aggressive in the 1950s and 1960s in having Ayrshire exploit its vast coal reserves appear to be twofold: first, to have exercised the coal-field options would have required a considerable infusion of capital. Goodrich was not interested in having the company go into any further debt in order to achieve this large and immediate expansion. At the time of the merger in October 1969, American Metal Climax assumed $40 million of Ayrshire debt as part of the $100 million transaction.35

Goodrich also purportedly thought that atomic energy was eventually going to put the coal industry out of business. Thus, Goodrich’s overestimation of the technical capability and political acceptance of nuclear energy may have prompted him to believe that he had received top dollar for Ayrshire’s holdings.36 Apparently, Goodrich even believed that the use of nuclear “fusion” (as opposed to nuclear “fission”) might become feasible in the near future, so that there would be an overabundance of cheap energy.37

Goodrich’s concern about the widespread use of atomic energy was not unique. Many in the coal industry had been led to believe that atomic energy might produce up to 50 percent of the electric-utility market by the end of the twentieth century.38 Finally, Goodrich and Peters could not have foreseen the 1973 Arab oil crisis and how that would increase the value of energy companies, especially domestic ones.

Goodrich was extremely pleased when a Chicago financial analyst told him, unaware of his Ayrshire connections, that he (the analyst) believed that American Metal Climax (AMAX) had paid too much for Ayrshire in 1969.39 With the benefit of more than twenty-five years of hindsight, it is clear that AMAX received the better end of the deal.40

[1. ]The first annual report of the Patoka Coal Company, filed with the secretary of state on October 1, 1920, showed an Indianapolis address and listed only two officers, one being J. T. Moorman of Winchester. James Goodrich had apparently become associated with the Patoka Coal Company through a friendship and business affiliation with Moorman. Moorman, like James Goodrich, was one of Winchester’s wealthiest citizens. James Goodrich continued as secretary and treasurer until 1929 and as a director until his death in 1940. From 1937 to 1940, James Goodrich was president of Patoka Coal. See William H. Andrews, “Ayrshire Collieries Corporation—Profit with Ecology” (research paper, Indiana University, n.d.), pp. 5–6. Andrews based most of his paper on an interview with Albert Campbell in the late 1970s or early 1980s.

[2. ]Ronald Medler, interview, April 28, 1993. See also “Moorman Forms Company,” Winchester (Ind.) Democrat, January 11, 1912, p. 1, col. 2. (The article refers to Moorman’s obtaining the garbage collection contract. With capitalization of $200,000, Moorman also formed a reduction company to turn the garbage into fertilizer and tankage.) Marie Moorman, Jesse’s daughter, accompanied James and Cora Goodrich as a companion to Mrs. Goodrich on the Goodriches’ ARA trip to the Soviet Union in 1922.

[3. ]Patoka Coal was located near Winslow. It had been organized in 1918 to take over a partly equipped mine that had belonged to the Globe Coal Mining Company. See “Early History of Ayrshire,” in “Handbook” (Ayshire Coal Company), pt. 1, p. 4 (in Cyprus-AMAX Coal Archives).

[4. ]James P. Goodrich, Autobiography, pp. 131–33.

[5. ]Andrews, “Ayrshire Collieries Corporation—Profit with Ecology,” pp. 6–7. Beyond Andrews’s paper on Ayrshire, several histories of the Ayrshire Coal Company have been written, including Clayton G. Ball, “The Ayrshire Story,” Mechanization, March 1947, pp. 57–66; “Early History of Ayrshire,” pt. 1 (in Cyprus-AMAX Coal Company Archives); and “The Ayrshire Story,” Mechanization, July 1959. See also “Amax Today: How It Came to Be,” Engineering and Mining Journal, September 1972, and letter from Pierre F. Goodrich to E. Victor Willetts, Jr., December 27, 1972 (in the possession of Liberty Fund, Inc.).

[6. ]The five New York board members were Thomas Hitchcock, chairman of the board; Robert P. Koenig, president; William P. McCool, a New York lawyer, secretary; Howard E. Lowman, treasurer and assistant secretary; and Charles Greeff, a Wall Street stockbroker. See Andrews, “Ayrshire Collieries Corporation—Profit with Ecology,” p. 10. According to Pierre Goodrich’s longtime administrative assistant, Helen (Schultz) Fletcher, Goodrich had spent considerable time with Greeff and his wife Adele in the 1930s at their home on Long Island, New York. In fact, Greeff had counseled Goodrich on many of Pierre’s successful investments during this time. Letter from Helen Fletcher to author, June 18, 1996.

[7. ]In addition to being president of Ayrshire, Koenig was president of Fairview Collieries Corporation and Delta Collieries Corporation at the time he left in April 1942 to serve in Europe. Koenig returned from World War II, resumed his former positions, and later became Meadowlark Farms’ first president. Both Delta Collieries and Meadowlark Farms were subsidiaries of Ayrshire Collieries. See Ball, “The Ayrshire Story,” Mechanization, March 1947, p. 63.

[8. ]“Hitchcock Killed in Crash in Britain,” New York Times, April 20, 1944, p. 1, col. 3. According to the obituary, in addition to being a successful banker, Hitchcock, an alumnus of Harvard and Oxford universities, was a colorful military hero (a flyer in both wars).

[9. ]Richard H. Swallow, telephone interview, December 20, 1992. Swallow was chief engineer of Ayrshire (he later became vice-president and chief engineer) at the time Goodrich bought the additional stock from Mrs. Hitchcock and was able to replace the board with his own people. He claimed intimate knowledge of the details. In fact, he stated that he and a group of Ayrshire management personnel had discussed trying to buy the shares themselves in order to take control of the company. According to William Nordhorn, a longtime Ayrshire employee, Goodrich had, in fact, encouraged five or six other investors to purchase some of Hitchcock’s shares. William Nordhorn, telephone interview, January 16, 1993.

[10. ]See Ball, “The Ayrshire Story,” p. 63.

[11. ]Robert Koenig, who had been president of Ayrshire, went on leave from 1942 to 1945 and served on the staff of General Dwight D. Eisenhower in Europe. During that time, Goodrich placed his law partner Albert Campbell in the position of executive vice-president of Ayrshire. After Koenig returned in 1945, he remained with Ayrshire for only five years. According to Richard Swallow, Koenig eventually left because he was disappointed that Goodrich did not want to make the changes necessary to make Ayrshire grow even faster than it did. Koenig moved in 1950 to the presidency of the Cerro de Pasco Copper Corporation, later the Cerro Corporation. There, he had a successful career as an industrialist and financier. Richard H. Swallow, telephone interview, December 20, 1992. See also Charles J. Endicott, Historical Information and Data: Ayrshire Coal Corporation, Now Amax Coal Company, Division of Amax Inc., p. 5; Andrews, “The Ayrshire Collieries Corporation,” p. 32.

[12. ]Ayrshire “Handbook,” pt. 2, p. 1 (directory of personnel, March 1, 1949).

[13. ]See Andrews, “The Ayrshire Collieries Corporation,” p. 11, table 2.

[14. ]Ibid., pp. 23–24 and note 17. Peters had previously been executive vice-president of the Cabot Corporation, a large Boston concern in chemicals, oil, and gas, and before that financial vice-president and treasurer of Continental Oil Company. Peters is now president of the Pioneer Institute for Public Policy in Boston, Massachusetts.

[15. ]Lovett C. Peters, telephone interview, June 25, 1994.

[16. ]Ibid.

[17. ]According to William Stimart, who was a personal assistant to Ayrshire president Norman Kelb and intimately involved in the negotiations for the sale of Ayrshire, the five companies invited to bid for Ayrshire were Ashland Oil and Refining Company of Ashland, Kentucky; American Metal Climax (AMAX) of Greenwich, Connecticut; Kerr-McGee of Oklahoma City, Oklahoma; Sun Oil of Philadelphia, Pennsylvania, and Dallas, Texas; and FMC of Chicago (telephone interview, January 21, 1993).

[18. ]The Wall Street Journal quoted from a joint announcement between Goodrich and the president of the Ashland Oil Company to the effect that both boards of directors had approved the purchase of Ayrshire by Ashland. See “Ashland Oil Plans to Buy or Lease Ayrshire Assets,” Wall Street Journal, January 22, 1969, p. 34, col. 1. The deal with Ashland was apparently as complete as possible. Peter M. Garson, who later became president of Amax Coal Sales but who at the time worked for Ayrshire’s subsidiary, Republic Coal and Coke Company in Chicago, remembers that Ashland had purchased draglines and trucks from Ayrshire in anticipation that the deal would be completed. Moreover, the Ayrshire employees had a party to celebrate the company’s new Ashland ownership (telephone interview, December 30, 1992). The announcement of the proposed sale in Forbes magazine made Goodrich extremely upset. See “Going, Going, . . . Gone,” Forbes, February 15, 1969, p. 55, col. 1.

[19. ]According to William Stimart, Ashland placed several escape clauses in the original agreement between Ayrshire and Ashland. Stimart said that Ashland was known in the industry to do this in other merger situations in order to escape from bad deals (telephone interview, January 21, 1993).

[20. ]Ibid.

[21. ]William Stimart said that Ayrshire’s stock got as high as $135 per share when it began to search for a buyer and that Ashland and Ayrshire had agreed on $125 a share in reaching terms on January 22, 1969. When the deal between Ayrshire and Ashland fell through on April 3, however, Kerr-McGee attempted to take Ayrshire over by offering only approximately $50 a share (telephone interview, January 21, 1993).

[22. ]According to William Stimart and Peter M. Garson, the deal between Ayrshire and Ashland fell through because of tax uncertainty about the way Ashland proposed to finance the merger. Also, in the first quarter of 1969, Ayrshire showed a loss for the first time in its history (William Stimart, telephone interview, January 21, 1993; Peter M. Garson, telephone interview, December 30, 1992). William H. Andrews’s assessment is essentially the same. See also Andrews, “The Ayrshire Collieries Corporation,” p. 26. For an announcement of the deal, see “Ayrshire Has Merger Offer,” Indianapolis News, April 24, 1969, p. 43, col. 6. AMAX subsequently merged with Cyprus Minerals on November 15, 1993, and the surviving corporation became known as Cyprus-Amax Minerals Company.

[23. ]Final stockholder approval for the merger between Ayrshire and American Metal Climax came on October 31, 1969. In addition to the Ayrshire Coal Company, the sale included two subsidiaries: Republic Carbon Products, a marketing company; and Dayton Fly Ash, an Ohio-based firm that collected and sold fly ash to the cement industry. See “Amax Today: How It Came to Be,” Engineering and Mining Journal, September 1972. On July 18, 1969, the Indianapolis Star initially reported that the deal between Ayrshire and AMAX was to have a value of approximately $63 million, less than 60 percent of the original Ashland offer (“Ayrshire, AMAX Boards Approve Merger Terms,” p. 32, col. 1). Only two months later, however, the Wall Street Journal estimated the deal to be worth more than $100 million (“Ayrshire Metal Climax and Ayrshire Collieries Tie Backed by Holders,” September 22, 1969, p. 14, col. 2).

[24. ]Lovett C. Peters, telephone interview, June 25, 1994. Peters explained that there were approximately three hundred stockholders of Ayrshire stock. The stock was sold openly on the American Stock Exchange.

[25. ]“American Metal Climax and Ayrshire Collieries Tie Backed by Holders,” Wall Street Journal, September 22, 1969, p. 14, col. 2. See also “Stockholders OK Ayrshire, Amax Merger,” Indianapolis Star, September 20, 1969, p. 30, col. 7; “Amax-Ayrshire Merger Completed,” Black Diamond (coal publication), November 1969, p. 6, col. 1.

[26. ]Andrews, “The Ayrshire Collieries Corporation,” p. 28; see also Byron K. Trippet, “Pierre F. Goodrich,” Wabash on My Mind, pp. 182–83 (Trippet wrote that Goodrich’s personal gain from the sale was in the range of $40 million).

[27. ]Andrews, “The Ayrshire Collieries Corporation,” p. 27. According to Andrews, Peters received $250,000 from Ayrshire and an additional $500,000 payable by AMAX subject to the completion of the merger for a total of $750,000.

[28. ]Ibid., p. 23. Andrews also attributes Ayrshire’s ability to succeed during the difficulties of the 1950s to the increase in industrial and electrical power production in the Midwest and the technological progress of strip mining, which increased productivity at the same time that it was able to cut costs. Goodrich himself makes essentially these same observations in a letter to Dr. Solomon Fabricant, Department of Economics, New York University, January 3, 1972, Pierre F. Goodrich Collection, Archives, Wabash College, Crawfordsville, Indiana.

[29. ]Richard H. Swallow, telephone interview, December 20, 1992. Swallow was vice-president and chief engineer when he retired in 1965. Swallow said that after Robert Koenig returned to Ayrshire from World War II, he wanted Ayrshire to be more aggressive in terms of seeking growth opportunities than Goodrich did. Swallow said that Koenig convinced Goodrich of the importance of expanding coal reserve options and that Goodrich was willing to spend a large amount in research and development to accomplish this end (hiring numerous geologists, land agents, attorneys, and so forth). Goodrich refused, however, to take the steps necessary to make Ayrshire expand faster, which frustrated Koenig, prompting him to leave in 1950. Much of what Swallow remembers is substantiated by Joseph Andrews’s paper on Ayrshire. Andrews also reported that as much as $85 million of the $125 million that Ashland Oil offered Ayrshire in January 1969 was in exchange for coal-reserve leases that Ayrshire owned. See also Andrews, “The Ayrshire Collieries Corporation,” p. 25.

[30. ]Irwin H. Reiss, interview, January 11, 1994.

[31. ]See “Going, Going, . . . Gone,” Forbes, February 15, 1969, p. 55, col. 1.

[32. ]William Stimart, telephone interview, January 21, 1993.

[33. ]See “Welcome to the Mother Lode of Western Energy” (brochure published by AMAX Coal), located at the Indianapolis–Marion County Public Library, Business and Technology Department, Indiana Businesses File, AMAX Company.

[34. ]George Martin, telephone interview, April 27, 1993.

[35. ]Richard H. Swallow, telephone interview, December 20, 1992. When the deal between Ayrshire and Ashland was struck in January 1969, an article in Coal Age reported that with the proceeds from the $125 million sale Ayrshire was going to liquidate approximately $20 million in debt. See Coal Age 75 (February 1969), p. 28. It is believed, however, that a more accurate debt figure is $40 million, as reported in the Wall Street Journal. See “American Metal Climax and Ayrshire Collieries Tie Backed by Holders,” Wall Street Journal, September 22, 1969, p. 14, col. 2.

[36. ]Richard Swallow provided this information and assessment; namely, that Goodrich believed that nuclear energy was going to become much more widely accepted and that the days of burning coal as a primary energy source were numbered. Richard Swallow, telephone interview, December 20, 1992. William Stimart refuted that assessment. He said that Goodrich did not believe that. Stimart said that he was intimately involved in the negotiations, and he would have had better knowledge than Swallow, who had retired four years earlier (in 1965), regarding what Goodrich thought. William Stimart, telephone interview, January 21, 1993. Swallow said, however, that he had had conversations with Goodrich later that led him to believe that Goodrich thought that the coal industry would eventually be harmed by the ready availability of nuclear energy. Apparently, others also thought nuclear energy was a threat to the coal industry. See Brice O’Brien, “Coal Industry: Atomic Power,” Vital Speeches 35 (April 1, 1969): 379–84. While nuclear power is not popular in the United States, its use has increased tremendously worldwide. Today, nuclear power generates more electricity than the world used from all sources of power in 1958. It is estimated that nuclear energy provides 17 percent of the world’s electricity. See “Earth Diary,” The Rotarian, December 1996, p. 14, col. 3.

[37. ]Swallow said that after he retired in 1965 from Ayrshire, Goodrich wrote to him and asked him how soon he (Swallow) thought it would be until nuclear fusion became a reality. Swallow wrote Goodrich and said that he had no idea, but he enclosed an article about fusion from one of the energy magazines he had subscribed to (telephone interview, December 20, 1992).

[38. ]See Brice O’Brien, “Coal Industry: Atomic Power,” pp. 379–84. O’Brien was general counsel of the National Coal Association when he delivered this speech to the San Diego chapter of the American Nuclear Society. O’Brien mentions several times in his address the “oversell” and “propaganda” of atomic energy that has “scared our people to death.” It is interesting that only once in a speech of approximately eight thousand words did O’Brien mention the safety concerns that have subsequently plagued the nuclear energy industry. He believed that coal had a much brighter future than most energy experts forecast. That was true, O’Brien asserted, not because of the political and safety problems that atomic energy would subsequently experience, but because experts concluded that there would not be enough uranium to fuel the large nuclear power plants. O’Brien’s speech says much about man’s ability to forecast the future accurately.

[39. ]Fred Young, interview, September 30, 1992. Young said that Goodrich had visited Harris Bank shortly after selling the Ayrshire Coal Company to American Metal Climax. According to Young, “Pierre Goodrich asked Fred Wightman (a financial analyst working for Harris Bank at the time), ‘What do you think of American Metal Climax?’ Wightman responded, ‘Well, we have a lot of that stock here in the bank and we think a lot of it. But we think they paid too high a price for the coal mines, Ayrshire Collieries.’” Goodrich smiled and was obviously very pleased with what he had heard, said Young.

[40. ]William Stimart admits that AMAX probably got the better of the deal, although he believed that that was solely because of Ayrshire’s undervaluation of the worth of the Belle Ayr mine in Gillette, Wyoming. It was not, according to Stimart, because Goodrich believed that the coal industry’s days were numbered because of the increasing use of nuclear energy (telephone interview, January 21, 1993). It seems to the author that another reason that AMAX may have been able to make a good purchase was that Goodrich was in a hurry to make a deal to keep Kerr-McGee of Oklahoma from achieving a hostile takeover.