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CHAPTER 1
Joe Luter and Smithfield Foods
When gourmands think of the famously sought-after Smithfield Ham, they think of biscuits with salty slices of pink pork, sliced razor thin. Indeed, to bear the name Smithfield Ham, the cut of meat must be processed within the city limits of the quaint historical village of Smithfield in Virginia that dates back to the seventeenth century. But most of the hams produced by Smithfield — note the lowercase "h" here — come out of its sprawling slaughterhouse in Tar Heel, North Carolina, about 230 miles south of Smithfield Food's large, brick corporate headquarters on the banks of the Pagan River in the village of Smithfield.
From Smithfield, it's about a four-hour drive to Fayetteville down I-95, then onto Highway 87. There a steady stream of hog trucks pull into the silvery pipe-ridden industrial complex that looms up out of a sprawling, poverty-stricken flatland just northwest of the tiny town of Tar Heel. This is Smithfield Packing, long the dark underbelly of Smithfield Foods. There, starting in 1992, thousands of workers began to emerge from the bleak economic landscape of southeastern North Carolina to receive a starting hourly wage of $8.10 to $8.60, roughly twice the minimum wage of $4.25.
Today Bladen County, where the plant is located, still has one of the highest rates of unemployment in the state, at 6.9 percent, and more than one in four live below the poverty level (27.4 percent). Neighboring Robeson County, where many workers live, has a 32 percent poverty rate and unemployment of 7.9 percent. Every day in Tar Heel, in a 973,000-square-foot slaughterhouse, workers, mostly minorities — Latinos, blacks, Native Americans — gas, bleed, and disassemble up to 32,000 hogs a day. That's 16,000 hogs per eight-hour shift, 2,000 per hour, 33 hogs every minute, 1 every two seconds. It's punishing, mind-numbing work that leaves workers' muscles burning and hands cramped and tingling from thousands of cutting motions a day. It's bloody, smelly work with extremes in temperature as hogs are scalded and then chilled.
Meatpacking is the most dangerous manufacturing job in America today, with two and a half times the average injury and illness rate. Serious injuries requiring work restrictions or days off are more than three times higher than for U.S. industry as a whole. As many as 69 percent of injuries are never reported, according to the Bureau of Labor Statistics. Even in a unionized shop — where stewards monitor line speeds and attend to workers' needs and injuries — workers risk debilitating hand and repetitive-motion injuries, gashes, amputations, and even death.
But when it opened, Smithfield Packing — a subsidiary of Smithfield Foods — wasn't unionized. At the time, it was the only major Smithfield packinghouse that wasn't. And owner and CEO Joe Luter III clearly wanted to keep it that way. One big reason was to make sure there was no chance of a production shutdown. "If we had an extended strike in that plant," Luter said, "we would have hogs backing up throughout North Carolina or we would have to put hogs on trucks and ship them to the Midwest."
Smithfield Foods started in 1936 as a small family slaughterhouse in Smithfield, Virginia, then grew, through aggressive takeovers, to a Fortune 500 company with a record operating profit of near 20 percent gains in the first half of 2016 after earning $14.4 billion in 2015, selling its products through brands such as Armour, Morrell, Gwaltney, Nathan's, Farmland, and Ekrich. Most of its operations are based in the United States, with a few in Mexico, Romania, Poland, and the United Kingdom.
In 1992, the corporation spent $80 million to move the center of its slaughtering operations to Tar Heel, North Carolina. Today, Smithfield owns most of the hogs in a state that has more hogs than people, second only to Iowa. Altogether, nationwide, Smithfield runs nearly forty hog slaughterhouses and meat-packaging houses, mostly in the Midwest and southeastern United States. It runs nine in eastern Europe, eight of which are in Poland. Smithfield also dominates the national hog-raising arena, with company-owned farms primarily in North Carolina but also in Missouri, Utah, Colorado, Virginia, Oklahoma, Illinois, Texas, and South Carolina. It's difficult to fully assess its power and control because of individual contracts with untold numbers of independent farmers in North Carolina, South Dakota, Colorado, Iowa, Missouri, Oklahoma, Pennsylvania, and Virginia.
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Joseph "Joe" Williamson Luter III was born on July 17, 1939, three years after his father and grandfather — a meatpacker born in Ivor in Southampton County in 1879 — opened Luter Packing Company, later re-named Smithfield Packing Company, in Smithfield, Virginia. Like his father, Joe Luter III grew up in Smithfield, which sits on the winding Pagan River in Isle of Wight County, just south of Jamestown. As early as the 1700s, the town had become known for Isle of Wight Bacon and Smithfield Ham. The first extant record of the industry in America is an invoice dated April 30, 1779, from an early Smithfield packinghouse. By the 1800s, Smithfield residents who prospered from trade — including pork and peanuts — had built elaborate Victorian homes, "their ostentatious elegance visibly evident," with turrets, towers, stained-glass windows, and steamboat-style Gothic trimming around the original colonial cottages at the center of town. In 1926, it became illegal for any pork that had not been processed within city limits to bear the name "Smithfield Ham," sometimes called "the aristocrat of the Virginia table."
Joe Luter grew up in the heart of this southern charm. He and his sisters lived at the top of the hill, about three hundred yards from where company headquarters sits today on the banks of the Pagan River. Life was quiet and conservative, he said. "My father never left the house unless he had a hat on, along with a jacket and tie. My mother never left the house without wearing short heels and a dress."
His father and grandfather both learned the trade at meatpacker P. D. Gwaltney, Jr. & Co. until they decided to go out on their own, providing the sweat equity in a new company, Smithfield Packing Company. In 1936 — the same year P. D. Gwaltney Jr. died — they began curing Smithfield hams and selling them to mom-and-pop stores in nearby towns. Ten years later, they built a slaughterhouse on Highway 10, expanding until they were slaughtering about 3,500 hogs a day. By 1959, they employed 650 workers. Luter Jr. was also secretary-treasurer of Luter Packing Company in Laurinburg, North Carolina, less than fifty miles from Tar Heel.
Luter Jr. — who had gone to work part-time in a Smithfield slaughterhouse at the age of 12 — was a workaholic, his son said. "He was in the office six days a week and five nights a week." In May of 1946, when Joe was about 7, the family must have watched closely as the United Packinghouse Workers of America (CIO) attempted to unionize competitor P. D. Gwaltney's 80 percent black workforce of about 114 workers. The union had scheduled an NLRB secret-ballot election on May 29. About half the town's 1,300 citizens were black and, according to the NLRB, it was the first attempt to organize a packinghouse in the town.
If Gwaltney was opposed, it let others do the dirty work. The publisher of the Smithfield Times ran anti-union ads, formed an anti-union committee, sent anti-union postcards to Gwaltney employees, and put together a petition opposing the CIO. The publisher called a meeting for May 27, attended, according to the NLRB, by three to four hundred people, the largest gathering ever held in the community. Attendees were equally white and black and included many Gwaltney employees. The principal speaker was Remmie L. Arnold, president of the Southern States Industrial Council, an association that opposed New Deal policies. Arnold warned of communism, of another "Reconstruction," and included threats, veiled as recounted incidents of Ku Klux Klan terrorism where "hooded figures galloped through the night striking terror to the hearts of Negroes. ... Today occasional flaming crosses again light Southern skies as CIO and A.F. of L. move in. ... Gentlemen, a current drive by the Communist supported CIO-PAC may raise the cry: 'The Klan Rides Again.' May God forbid this."
In the days before the union vote, the county sheriff threatened to drive a union representative "out of town." And the police chief offered to give the representative "a salt water bath" and told the representative the city was "way behind in lynching around here. We haven't had a lynching in about 20 years." On May 29, both the sheriff and the police chief positioned themselves prominently in front of the entrance of the warehouse where the vote was held. The union lost the vote 85 to 27.
The union filed an objection with the NLRB, and a four-day hearing was held that December in Smithfield. Two women testified they overheard conversations about "getting rid" of union representatives. The NLRB determined "that threats of violence were uttered" and set aside the results after determining that "a hostile and threatening" atmosphere including mentions of "flaming crosses" and the "Ku Klux Klan" may have made the employer's black employees think they might suffer physical violence if they voted for the union.
There was no reported evidence that Gwaltney owners or managers had been in collusion with the anti-union movement; nonetheless, the NLRB set aside the election because the atmosphere prohibited a free election. Less than ten years later, on March 3, 1955, by a vote of 289 to 176, apparently without incident, workers at Smithfield Packing voted to unionize.
Joe Luter was 14, and if he was not already working at his father's plant, he soon would be. He has apparently never spoken publicly about the unionization of the meatpacking industry that dominated his small hometown of Smithfield, but he must have been aware of worker sentiments as he moved from one job to the next inside the plant. As he told the NLRB, "I've loaded trucks. I've worked on the kill floor. I've worked in sliced bacon. I've worked all through the plant when I was in high school and college."
But unlike most slaughterhouse workers, this young man had the opportunity to move on to less strenuous and dangerous work. He graduated from Wake Forest University with a degree in business administration, and when his father died unexpectedly in 1962 — he had diabetes and a heart condition and smoked three packs of cigarettes a day — Luter III stepped in. He bought out nonfamily owners and, at only 26, became president of the company. His son, Joseph W. Luter IV, was born on February 26, 1965, joining older sister Laura. The youngest, Leigh, was born a year or two later. He wanted to be a family man, not a workaholic like his father; he said, "I'm not like that. I have other interests."
At the time he took over, the plant was slaughtering about three thousand hogs a day; by the time he left in 1969, it was up to five thousand. In July of that year, he sold the controlling stakes of the company to a Washington, DC–based conglomerate, Liberty Equities, for $20 million in cash and debt notes. By January he had been fired. The now very wealthy young man left hog slaughtering behind to start up a Shenandoah ski resort, Bryce Mountain, selling unbuilt lots from 1970 to 1975. "I had a beard and was wearing blue jeans and running a ski resort. I was perfectly happy," he said. Luter sold 2,500 lots and built a golf course, a lake, a clubhouse, tennis courts, stables, condominiums, and townhouses. But he was restless.
Liberty Equities, owned by the flamboyant C. Wyatt Dickerson Jr., who would become part of Washington's glitterati, was accused by the Securities and Exchange Commission (SEC) of falsifying earnings reports to pump up the price of its shares. The SEC halted trading on the stock, the chairman resigned, and new management ran Smithfield Packing into the ground in just a few years. In 1973, it lost $3.6 million, and another $8 million in 1974, when it had exhausted cash reserves and had debt payments due. The conglomerate sold off most subsidiaries and changed its name to Smithfield Foods.
In 1975, Luter returned from the mountains to salvage what he could of what was left of the two remaining units: Smithfield Packing and the Family Fish House chain. Taking advantage of the hog price cycle to acquire stock when the price of Smithfield shares was depressed because of high commodity prices, Luter bought the company back for ten cents on the dollar, and in one year turned the $8 million loss into a $393,000 profit. In April of 1975, he became president and CEO, later joking about Liberty's inability to sell Christmas hams: "For a company like this to lose money in December, it's like Budweiser losing money in July." Luter began a six-year business reorganization with $17 million in long-term debt, a net worth of less than $1 million, and stock valued at 50 cents a share. He slashed costs. In 1978, Luter sold the Family Fish House chain for $7.75 million, using the cash to purchase troubled meat-processing plants for less money than he would have needed to build new ones. "I really didn't want to see the company that my father and my grandfather spent their lives in fail," Luter said. In 1981, the company became the dominant meatpacking force on the East Coast when Luter bought out Gwaltney of Smithfield, its fiercest competitor. "We were talking one night, and Joseph was going on and on about Gwaltney," said Barbera Thornhill Luter, who was married to Luter in the late 1980s. "Finally, I said, 'If you can't beat 'em, why don't you buy 'em?'"
The purchase, for $32.5 million, doubled the company's sales to $600 million a year, but the purchase caused "some assimilation problems because we had been major competitors for so many years." The bitter rivalry, which perhaps started when his father and grandfather left Gwaltney years before, never died. To manage animosity, Luter created separate subsidiaries with separate management, sales, and production staffs.
The major recession in the Nixon-Ford era, which essentially ended the long post–World War II economic boom, created the perfect opportunity for a man like Luter. Luter had an aggressive (enemies say ruthless) character. He admits that he's "combative by nature," and has been described as uncompromising, opinionated, and vindictive. It has been said that he can't stand taking orders from the government and savors fighting back. He likes to hunt grouse and waterfowl and has a taste for Ferraris — at one point owning a Ferrari Testarossa — and BMWs. He has had estates in Smithfield, Washington, DC, and Manhattan. There was a reason Luter became known as "boss hog."
By 1982, Luter was divorced from the mother of his three children and had married Barbera Thornhill, a native of Raleigh and longtime resident of Washington, DC, where the couple lived and where she ran Impact Design, an interior design firm with multimillion dollar jobs with clients including the royal family of Saudi Arabia. He had three main hobbies, she said: "hunting, hunting and hunting." She also said he was ultracompetitive at cards and backgammon. "If you play either of those games for fun, don't play with him."
Despite his ability to run his company far from his factories or headquarters, as well as his determination to avoid his father's long hours, his diversions were an illusion, he admitted. "My mind never leaves the business. I wake up every morning thinking about it, and I usually go to bed at night thinking about it, and I guess 90 percent of my conversation outside the office is centered around business." A visionary strategist and entrepreneur who did not like to get involved in minutiae or micromanaging, he always liked building a company better than running it. And the 1980s were a good time to be reimagining meatpacking.
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Meatpacking began to transform itself in the 1960s, looking for efficiency and higher profit margins. By shutting down old plants and building new ones in rural areas near cattle feedlots and swine-raising production sites, companies could make inroads both in labor costs, by busting old unions and preventing unionization at new plants, where organizing was difficult, and in transportation costs, by switching from rail to trucking.
The number of packinghouse workers in urban areas fell by more than 50,000 between 1963 and 1984, while the rural workforce doubled from 25 to 50 percent of the national meatpackers. Although companies did reduce transport costs by moving closer to the animals, the most significant gain came from reduced labor costs. In 1952, one man-hour of labor produced 51.4 pounds of dressed meat; by 1977, that had tripled to 154.6 pounds.
By the late 1980s, the big meatpackers had virtually broken the back of organized labor. In a few decades, slaughterhouse workers went from being some of the highest paid to some of the lowest. As union protection faltered, workplace injuries soared. It was a bitter defeat, coming just decades after slaughterhouse workers successfully fought for their rights.
(Continues…)
Excerpted from "Hog Wild"
by .
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