Unmaking a Gunmaker, The fall of an American icon.

dZ

New member
http://newsweek.com/nw-srv/printed/us/so/a18469-2000apr9.htm

The company of cowboy legend and
wartime firepower is broke and nearly out
of business. The fall of an American icon.

By Matt Bai
Newsweek, April 17, 2000

Donald Zilkha never really planned to get into
the gun business. In 1993 he turned 42, and had
yet to make his own fortune. Success was
expected of him: his family built one of the
biggest banking empires in the Middle East
before conquering New York. He worried aloud
to friends that his father, a philanthropist and
banker, disapproved of him. Zilkha was looking
for a chance to prove himself, and suddenly
there it was. Colt's Manufacturing Co.—known
to the world as Colt—had fallen on hard times
and could be bought for next to nothing.

His family, Zilkha told others, was appalled. His
mother, a board member at the Metropolitan
Opera, thought it a dirty business. His
billionaire uncle refused to help. But Zilkha
defied them. He was a city kid enthralled by
cowboy legends. He was also a shrewd
businessman, and he thought he'd found a way
to make the guns profitable and "respectable."
Colt had helped America win two world wars; it
wasn't like owning some cheap handgun maker.
Zilkha would buy up Colt's competitors for
military weapons, Wall Street style. Later there
were other ideas: "smart guns" that would make the world safer, Western theme parks for kids. He
just might become a modern Samuel Colt.

Now here he was, in the summer of 1999, sitting in his office 46 floors above midtown Manhattan,
listening on the speaker phone as Colt executives told him the dream was dying. Colt was deep in
debt and paying more than $300,000 a month in legal fees. The bank wouldn't loan him any more
cash. With school shootings dominating the news, Zilkha's private investors wanted nothing more
to do with guns. And if he didn't come up with $4 million in a hurry, the nation's oldest gunmaker
would be forced to close its doors. So Zilkha did what he had to do. He and his partner, John Rigas,
secretly put up $1 million of their own money so that Colt could hastily build 1,100 modified
assault rifles for the civilian market. They knew those guns were in high demand—even though
they're banned in several states. The rifles gave Colt a cash infusion so it could pay its factory
workers. But it wasn't enough; the money ran out, and Colt soon announced it would have to stop
making most consumer handguns.

The fall of Colt—"the gun that won the West"—reflects a shift in the way Americans think about
guns. Once the symbol of heroic lawmen and soldiers in battle, guns are now the target of growing
public anger. Colt's journey from frontier legend to the brink of extinction is part of a larger story
of gunmakers that turned away from hunting rifles and military weapons in favor of handguns that,
in the public's view, too often fall into criminal hands.

Little is known about the inner world of the gun industry. But exclusive NEWSWEEK interviews
with Colt's owner and former and current executives tell the inside story of an industry in
trouble—and the desperate measures gunmakers will take to save themselves. Lawsuits from the
cities are draining the companies' cash. Politicians are pushing for new laws. Pro-gun crusaders are
threatening to punish any company that looks for compromise. Some gunmakers vow to fight on;
Smith & Wesson opted for a deal with the Feds to change its ways. Colt tried everything to save
itself—and ended up nearly broke.

Zilkha and the outsiders he brought to Colt thought they could teach other gunmakers a thing or
two about modern business. But they knew nothing about the people who buy guns, or the people
who hate them. They wanted to build safer guns but found themselves buried under lawsuits. They
tried negotiating with their enemies, only to infuriate their customers. And while they were able to
make the kind of handguns that sell on the street, they feared the image it conveyed. The
well-meaning men who ran Colt missed a hard truth of the trade: gunmakers don't push the latest in
pocket pistols and assault rifles because they think everyone should have one. They do it to survive.

Only a trickle of guns—military rifles and engraved collectibles—now flows from the troubled Colt
plant in West Hartford, Conn. But Colt was once so vibrant that the old plant and its grounds were
known as Coltsville, a town unto itself. Sam Colt invented his revolver in the 1830s; by the end of
World War II his pistol was in the holster of every American soldier and most cops, too. During
the Vietnam War, the company churned out as many as 50,000 M-16s a month.

But then, in the 1970s, revolvers gave way to semiautomatic pistols. As gun sales sagged in an
increasingly urban country, gunmakers came to rely on the only market with any growth: small and
powerful self-defense handguns, many of which ended up on the street. Beginning in 1968,
gun-control advocates fought several fierce battles with the gun lobby in an effort to curb handguns.
But the gun companies themselves were never targeted; the public seemed not to notice them. Colt,
meanwhile, had missed the modern trend entirely. Its outdated handguns weren't cool or affordable,
and by 1993—after a prolonged labor strike—the company was bankrupt.

That's when Donald Zilkha stepped into the gun world, wearing pin-striped suits and polished
leather shoes. To run the company he hired Ron Stewart, a former Chrysler executive. Stewart knew
even less about guns than Zilkha, but he saw why handguns were the lifeblood of the industry. He
could make a concealable Mustang pistol cheap and sell it for 40 percent more, and it would be a
sure source of monthly cash. At the plant one day in 1996, Stewart was introduced to Joe
Cartabona, an ex-cop who owned a small gun shop. Stewart asked Cartabona if he stocked Colts in
his store, and he said no. Why? "Because they suck," Cartabona replied. To test that theory, he and
Stewart took down a pile of assembled handguns and test-fired 20 of them. Eleven misfired.
Stewart hired Cartabona and charged him with revamping the handgun line.

Cartabona had been buying and shooting handguns his entire life. As a high-school football star, he
had been enlisted by school janitors to bring in his .22-caliber pistol and shoot the rats in the boiler
room. Cartabona and the Colt engineers produced nine light, inexpensive handguns, including a
9mm pocket pistol made to compete head-on with Smith & Wesson and Glock. He even developed
his own testing process: he and his friends would take each new model behind his shop, firing into
a sack of calf livers at close range to test the gun's reaction to "blowback" of blood and tissue. By
1998, as the political furor over guns was getting louder, Cartabona and a Texas-based company
were developing a survivalist gun called the Multi-Caliber, which would appeal to Y2K worriers
because it could fire any caliber of bullet. "I envisioned marketing that gun with gas masks and beef
jerky," Cartabona says.

In his trademark black uniform with the Colt insignia, Cartabona may seem like the perfect villain
for a dark industry. But in fact, like most gun executives, he is more complicated than that. He is
being earnest when he says that he refused to advertise his guns alongside tobacco ads. "The last
thing I want little Johnny to do is pick this up, see a Colt ad, then flip to the back and see this
cigarette ad," he says, grasping a magazine. Genial and frank, Cartabona says he would never sell
junk guns, and he favors licensing and registration. He has used some gun profits to buy paint for
the high school. The guns he was making at Colt, he says, "are designed to get you home at night,
which is your God-given right." Does Cartabona feel any responsibility for gun violence? "Not one
iota."

The meaner, cheaper Colt handguns hadn't been part of Zilkha's grand plan. He says he approved
them because they were designed just for cops. In fact, Colt was aggressively marketing them to the
buying public. But Zilkha had little choice; by 1998 he had won back military contracts for Colt, but
his bid to buy a major competitor had fallen apart, and in the wake of school shootings, mayors
were starting to talk about suing the gun industry—a new tactic that would be devastating to a
declining industry. Money was tight, and the new handguns were Colt's only promising new line.

Selling handguns takes a certain mentality. Manufacturers live by a general rule: you don't have to
be a "gun nut," but it doesn't hurt to pretend. As outsiders to the industry, Zilkha and Stewart didn't
get it. First Stewart, sensing that the gunmakers were headed for the same kind of regulation as car
companies, wrote an article saying the industry would be wise to accept some kind of registration.
Gun owners revolted, turning up evidence that Zilkha had contributed money to the New York
Senate campaign of gun foe Charles Schumer. The resulting grass-roots boycott cost Colt as much
as $10 million.

The bad publicity and the darkening political climate worried Colt's board members, none of whom
had any experience in the gun trade. They lived in the real world, not Charlton Heston's, and the
public's growing outrage over handguns made them uncomfortable. Defending themselves against
public lawsuits wasn't what board members had in mind when they agreed to serve. They made their
arguments to Zilkha in business terms, saying the modest profits from his sleek new handguns
weren't worth the potential liability, but in some cases their feelings were plainly more visceral. "The
guy, in my opinion, who was buying that gun was buying it for the wrong reason," says Bill Keys, a
retired Marine general who sat on the board and now runs the company. "I don't want to make a
gun where some guy shoots some guy, and the ATF comes back here asking questions." As for its
intended use for self-defense, Keys says with military disdain, "The pocket gun is a ladies' gun."

Zilkha's partner, Rigas, told other board members that handguns were a dead-end business. With
Stewart preparing to leave in 1998, Rigas stepped in and hired a new CEO: Steven Sliwa, a former
NASA rocket scientist and college president who barely knew a gun from a grenade. The idea was
for Sliwa to hurry along the "smart gun," a high-tech weapon that could be fired only by its owner.
The National Rifle Association had at first warned Colt away from the idea, but now it had softened
its stance. Sliwa says that as a businessman he was determined not to let his political views on guns
affect the bottom line, but employees had little doubt about where he stood. Sliwa's wife cried when
he took the job, but he said of the smart gun: "If somebody doesn't get in there and do this, who
will?"

Sliwa's style, a mix of academia and New Age, seemed almost comical in a gun factory. His first
move was to send his executives to a New York shrink he called "Uncle Morty," for $8,000 a pop.
The psychiatrist asked them, among other things, what their religious views were and how they got
along with their in-laws. Sliwa gave Cartabona a new title: "Colt Fellow." No one knew what that
meant. One executive's wife teased him about the new corporate culture, saying he had to go to the
gun plant and "feel the love." Some managers thought Sliwa seemed afraid to handle the guns they
put in his hand.

Sliwa arrived with a host of ideas for selling Colt's image: videogames, theme restaurants, kids'
books. He traveled to Las Vegas to meet with developers about a Colt casino and kiddie ranch. In
the gun business, no one introduces a product that may not sell instantly, because the cash flow is
too precarious; Sliwa planned to roll out a new innovation every quarter. He was obsessed with the
smart gun. In his desperation to find the right parts, he spent weeks in South Africa unsuccessfully
negotiating to buy Vector—a gunmaker that was selling guns to outlaw nations like Libya.

Unknown to the rest of the industry, Stewart and other Colt officials had been meeting secretly with
anti-gun activists to develop a strategy for introducing the smart gun. Sliwa continued the process
and went a step further, appearing at an anti-gun conference. He was so concerned about Colt's
image that on the day of the Columbine High School shootings last April, he wanted to make some
gesture to the families. His New York media consultant talked him out of it, saying it would seem
empty.

While Sliwa was busy being a "change agent," Colt was sinking. Growing legal bills and a delay on
a foreign rifle deal had the company in a bind. Zilkha had managed to buy a smaller competitor,
taking on additional debt. But if the pocket guns could help pay the bills, Sliwa wasn't interested.
They weren't the future. He would phase them out, along with the profitable assault-style rifles,
leaving only the socially acceptable, high-priced collectible guns. Cartabona's new 9mm pistol and
his Y2K gun had locked up more than 12,000 orders at the industry's annual Shot Show, but neither
would ever come to market. There were no parts.

Sliwa had even more worries. By summer it was obvious that employees had been lying about the
inventory of completed rifles in order to mislead the bank and keep the loans flowing in. Sliwa had
evidence that employees were stealing guns and products from the plant. On the verge of losing his
beloved smart gun to bankruptcy, Sliwa agreed to leave his job and spin off a separate company that
would raise money for the project. Nobody wanted to invest.

On an unseasonably warm day in December, just before Christmas, everyone responsible for
selling new handguns arrived at the plant to find he had been furloughed without pay. Joe
Cartabona left Colt with his Pony Pocket Lite pistol still in his front pocket, among the last the
company would ever make. The people who ran Colt had used up their time and money looking for
another way to survive—something that wouldn't make them social pariahs. "I just don't think there
was an affinity with the final customer," a board member says. "I don't believe we were the kind of
ownership or board that was capable of running a gun company."

Donald Zilkha is still trying. He's now negotiating to buy yet another foreign competitor. His
family wishes he would dump Colt once and for all, but with the industry in crisis he doesn't have
that option. "I'd love to," Zilkha says. "But the fact is, who wants to buy a piece of cancer?" He is
eating french toast at Manhattan's Four Seasons Hotel, reflecting on what went wrong. He blames
the lawsuits for Colt's demise. He expects that sooner or later the American gun industry will be
reduced to nothing.

Do he and other gunmakers bear any of the blame for gun violence? "People don't take
responsibility for things anymore," Zilkha says in frustration. Then he relates a painful story from
when he was 8 years old. He and some friends were at a birthday party, playing like swashbucklers
with kitchen knives, when one kid stabbed another in the liver and accidentally killed him. The
problem, he explains, was with the kids, not the knife. "It is tragic. It is a great lesson, in a sense.
One has to have a certain amount of discipline. One needs to take responsibility." It is an argument
he makes a lot these days. Donald Zilkha is all grown up now, and being a cowboy isn't nearly what
it seemed.
 
Typical hack journalism. What happened to Colt was the same thing that happened to Winchester--'management' by disinterested and incompetent MBAs with no long term views. Colt was on the skids when Bill Ruger shipped out his first gun. The rest was just details.

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The older I get, the less that I understand.
This guy thinks that he is going to buy H&K?
What with? Funny money?

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BOYCOTT SLICK & WESSON

"To be wronged is nothing unless you continue to remember it."
Confucius
 
If he could prove the numbers, Silka could take a small loan from his family & buy H&K then buy FN.

Its all about leverage

dZ
 
Even without the "Pointy-haired MBA's", Colt has been on a downward spiral for decades. As a Cowboy shooter, I would like to have a 'real' Colt, but for the same money I can have four Rugers. Easy choice. Why Colt didn't 'fix' the little problems with the 1911 series ala Kimber and lock up the market is unbelievable.

They have (arguably) the most famous name in firearms, and rubbed it in the dirt.

Sigh.

Ruger's 10 round mag thing aside, a firearms company run by a firearms enthusiast seems a no-brainer. Too bad no one else in the business sees it that way.


Alex
 
This Newsweek story is BS. Granted, Colt has its problems, but don't count Colt out.

If you want a better analysis of Colt's business issues, consult some back issues of American Handgunner magazine.
 
If it wasn't for the caveats mentioned I might of bought this version whole.

However, it still isn't much of a jump to ask how these idiots got enough money to purchase the company.

Anyone know if Colt is public? How about an IPO? I guess with the legal fees it all depends on the price, but I hazard to guess that many people on this board could do a better job of managing and marketing the company.
 
Fascinating...its like a bad movie of the week...Armand Assante as Zilkha and Richard Chamberlain as Sliwa. Too bad a woman wasn't involved...a gimme role for Kate Jackson or Jane Seymore.

All of which, it appears, couldn't have done any worse than Zilkha and Sliwa.

This not be exactly the truth, but as was pointed out...there is a better chance of success with a real firearms enthusiast at the helm.

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"Quis custodiet ipsos custodes" RKBA!
 
I guess we all know by now, there are people who can screw up Coca-Cola. They are rich too, with all the advantages in life.
 
I just read the article in Newsweek, and I truly appalled at the "journalism" in this rag. The whole article smacks of anti-gun undertones! This is a horrible excuse for reporting. The smug writers are just loving the "good guy" who "doesn't know the difference between a gun and a grenade". Every paragraph has something detrimental to guns, gun owners, or gun businesses!

I participate in bandying "the media" as a pejorative, but now I truly know how much against me the media really is! 2 pages later is a 2 page quickie on Columbine, and even in describing how one man doesn't blame guns, Newsweek slants it as if he should, or will soon!

This is a shocking epiphany! Those guys are out to end my lifestyle!

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Treason doth never prosper. What's the reason? For if it doth prosper, none dare call it treason." - John Barrington
 
Oh yea! There is a retired senior Marine officer bad mouthing the pocket pistol as a "ladies gun". Seeing as women are the fastest growing segement of the handgun market that makes good sense. HooRah! The stupidity and arrogance of the man. I wonder if he would think it was a ladie's pistol if he were to be shot by a pocket 9 or a kahr 40 or anyone of the potent .380 loads out there. Notice the ex-policeman carried a pocketlite pony out the door with him? Me thinks Darwin is at work here. These people are to stupid to be in any business, let alone the gun business. I hope Cartabona lands on his feet. He sounds like he is the only one with any common sense.
 
"...the gun that won the west."

"...by the end of WWII his guns were in the holster of every US soldier and most cops, too..."

PLEASE!!!!

As I recall the Winchester '73 is the legendary, "Gun that won the west." Although, the scattergun was probably more in deserving of the title.

Very few soldiers are issued sidearms and last I knew S&W just about owned the LE market until about 15 years ago. The common soldier does not carry a sidearm. It's weight reduces the amount of ammo he can carry and thus reduces the number of enemy he can maim of kill. The sidearm is primarily for defense situations at close quarters (there are exceptions).

It really burns me when a writer thinks he can write about anything just because he is a "writer." The author of the Newsweek piece indicated that the CEO of Colt had problems, because the CEO was a "businsessman" and approached gun manufacturing as just another business. Due to this attitude Zilka found himself in over his head in the gun world. The author made the same mistake. He did not do his homework.

Newsweek should have recruited a firearms knowledgable writer for this article. Some, who post on this forum, could easily surpass the Newsweek's author's efforts.

Anytime I find errors in a piece that are evident to me I wonder what other errors are also in the piece. I lose faith in the author at this point. Kudos to the forum members for informed and intelligent writing and reporting.
 
"Anytime I find errors in a piece that are evident to me I wonder what other errors are also in the piece. I lose faith in the author at this point. "

William, I think that is a problem with the media on all fronts. Many people, and not just gun owners, don't believe what they read
because they know it's slanted or flawed. That's why shows like Limbaugh's, and internet news sites are becoming more and more popular. The big media are digging their own graves. If they were smart, they'd go back to truly objective reporting.

Dick
 
<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by William R. Wilburn:
Newsweek should have recruited a firearms knowledgable writer for this article. Some, who post on this forum, could easily surpass the Newsweek's author's efforts.[/quote]

No, they would have done that only if they had been interested in writing an objective article on the subject. Since the goal was to propagandize readers on a subject about which Newsweek's corporate masters have already made their ruling, then Newsweek did precisely what it usually does. Anyone surprised?

[This message has been edited by David Roberson (edited April 18, 2000).]
 
The article was biased against firearms but it did us a favor in exposing the lunacy of the company.

Old UMSC General Pig did not ask for a retraction of his biased against women and selfdefense guns. So did the article get that right?
 
Funny, most companies sell their products, but the correct verb for firearms is, you "push" them. How subtle, I guess you push them after you push some heroine. Is it any wonder the needle is approaching red?
 
Might as well post the text of Colt's response.

-----------

Colt's Response to Newsweek Article (April 17, 2000)

To the Editor of Newsweek:

Errors and factual misrepresentations in your story on Colt, "Unmaking a Gunmaker," (SOCIETY, April 17) do the Company, its employees and your readers a grave disservice. Your writer Mr. Matt Bai, during his visit to Colt, was treated with hospitality and given frank and open answers to his questions, believing that he would tell an unbiased story about the Company. Clearly, he was not up to the task at hand.

Illustrative of the many errors contained in your story are the following egregious examples. First, he alleges that last summer the Company's owners: "secretly put up $1 million to hastily build 1,100 modified assault rifles for the civilian market…even though they're banned in several states." In fact, the rifles, Match Target® models, are straight from Colt's commercial catalogue. They are designed and built to fully comply with all applicable laws. They are legally manufactured and legally sold to federally licensed distributors who further sell them in full compliance with the applicable laws.

Second, calling up images of cheap weapons flooding the streets, you charge that in the late 1990s Colt "produced nine light, inexpensive handguns" that you later call the "meaner, cheaper Colt handguns." In fact all of these handguns, are now discontinued. Seven of them had been in standard production for many years and mostly were used by law enforcement. Only two were the newer, smaller models. All carried price tags of $500 to over $800. Eight were Colt's highest-priced handguns. All are high-end, high quality models priced well above and entirely different from the $100 (or less) "Saturday Night Specials" or street guns that you insinuated we made.

Third, and perhaps most importantly, Mr. Bai neglected to say that Colt today is the only U.S.-owned manufacturer of the current U.S. military rifle carried by thousands of our servicemen throughout the world and that 85 percent of our current production is for the U. S. Government military or law enforcement. You further neglected to say that our planned handgun production is limited to two "classics" both replicas of guns over 100 years old.

With Colt still expending precious resources in defense against a mountain of unwarranted litigation, the Company, its management and employees deserve - and need - fair treatment in the press. So do the American people as the national debate over firearms continues.

It matters a great deal to us whether or not we get fair treatment from Newsweek. However, regardless, we are committed to completing the turnaround of Colt and to continuing its 164-year mission of providing high quality firearms for America's armed forces and for law enforcement agencies, sportsmen and collectors everywhere. And we will continue to defend Colt's integrity - here, on our www.colt.com Web site, whenever and however we are challenged.
Sincerely,

LTGEN WM. M. KEYS, USMC(RET)

President and CEO



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Protect your Right to Keep and Bear Arms!
 
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