Carlson Cos.' 77-year-old CEO has mellowed with age, but is still a tough boss

THE BALTIMORE SUN

MINNETONKA, Minn. -- When Marilyn Nelson describes her father, Curtis L. Carlson, 77, the founder and sole stockholder of the Carlson Cos., she says this: "If Curt were riding a bicycle, he'd pedal downhill."

The remark helps explain why Mr. Carlson, who started at the height of the Depression what would grow into a hotel, travel and marketing company, became impatient last year when the recession seemed to be taking its toll.

Profits fell substantially. But Mr. Carlson wanted more from his company, even though the war in the Persian Gulf and the recession had sent the travel industry reeling.

"We had too much gloom and doom around here," Mr. Carlson explained in a recent interview in his office in this Minneapolis suburb. "People were waiting too long for things to turn around."

Mr. Carlson didn't say it, but it was clear that what he meant by "people" was largely Edwin C. "Skip" Gage, his son-in-law, who in 1989 became Carlson's chief executive and heir apparent.

So, with the suddenness of a South American coup, Mr. Gage was out last November. Mr. Gage says he quit, but the shift has all the earmarks of an ouster. And Mr. Carlson, who just 10 months before had quadruple coronary bypass surgery, was back running things day to day.

He now seems to be grooming his elder daughter, Marilyn, 52, for the top job. Mrs. Nelson, who is married to a surgeon, and her sister Barbara, 49, who is married to Mr. Gage, are in line to inherit the company.

Weathering the recession

Curtis Carlson's gloom and doom could easily be considered joyous boom times at many other companies. Systemwide revenues, including sales at Carlson's extensive franchise operations, rose nearly 15 percent last year, to $9.3 billion, from $8.1 billion in 1990.

And Carlson properties have continued to multiply at a breakneck pace. The company is adding almost 30 travel agencies a month to the 2,100 it already has. It is adding one hotel every six days to the 315 it operates under the Radisson and Colony names. And by 1996, it expects to more than double its chain of 200 TGI Friday's restaurants.

Indeed, despite all the bumps of the past year, Carlson still seems to be on a roll, cushioned from any really painful shocks by its global operations, its minimal debt load and Mr. Carlson's hold-their-feet-to-the-fire management style.

"With their global view and the way they have diversified, they are already major players, and well positioned for the future," said Paul E. Wise, director of the hotel and restaurant management program at the University of Delaware.

Carlson's hotel operation, added Edward Watkins, editor of Lodging Hospitality magazine, "kept its head on straight in the '80s, when everybody else was going overboard."

Many experts now think Carlson is well on its way to becoming the undisputed giant of the travel industry. With a network of 75 companies in 38 countries, Carlson has its hand in virtually every part of the business, posing a vigorous challenge to better-known competitors such as American Express and Thomas Cook.

Travelers need never leave the Carlson fold. They can book plane tickets through a Carlson travel agency, stay at a Radisson hotel, eat at any of several kinds of Carlson restaurants and pay for everything with Carlson traveler's checks or a Carlson credit card.

Beginning May 7, they will be able to book passage on the Radisson Diamond, a cruise ship.

To be sure, the lingering effects of the recession probably are still pinching profits, although the company will not disclose exact figures. The precise financial condition of Carlson is said to be known only to Carlson and a few close associates.

And then there is the matter of who will succeed Mr. Carlson. Though his daughters are in line to inherit the company when he dies, it's not clear whether he will turn over the reins before then.

Mrs. Nelson is vice chairman of Carlson Holdings Inc., parent of the Carlson Companies and the family's investment and real estate arms.

If Mr. Carlson should again have second thoughts about a successor, he could turn to either of his two chief operating lieutenants: Juergen Bartels, 51, the president of the hospitality group, who has been with the company since 1983, and Charles Schmid, 49, president of the marketing and travel groups.

Mr. Schmid, a former senior executive with the Miller Brewing Co., was brought in last summer to prevent any further erosion of profits.

For now, Mr. Carlson is being cagey. "I'm going to stay on for an indefinite period," he said. "I don't want to retire. My daughter is busy learning the business, and she has tremendous capacity. But time will tell where we are."

Taking the long view

Mr. Carlson has been taking the long view almost from the beginning. At the same time, Mr. Carlson, born in Minneapolis with what he describes as "restless Swedish genes," has never been one to wait for things to happen.

"Even now, the idea of coasting just hasn't occurred to him," Mrs. Nelson said about her father.

Mr. Carlson's refusal to coast, for example, led him to give up his job as a top soap salesman for the Procter & Gamble Co. and take on the risks of entrepreneurship during the Depression. He was barely out of his teens in 1938 when he formed the Gold Bond Stamp Co., selling trading stamps to retail outlets.

Trading-stamp companies such as Gold Bond had swept the nation by the 1950s, inspiring consumer loyalty by offering appliances and other premiums to those who saved enough stamps. But by the mid-1960s, the stamp companies had reached the saturation point.

Mr. Carlson had seen the handwriting on the wall years earlier and began to diversify into real estate in Minneapolis' suburbs. In 1962, he bought the Radisson Hotel in Minneapolis. By 1973, the company had diversified enough to warrant dropping the Gold Bond name.

In 1975, the Carlson Companies bought the Dallas-based TGI Friday's. Three year later, it bought the Ask Mr. Foster travel agency.

"When we diversified into hotels," Mr. Carlson said, "I learned we had people with know-how in the restaurant business, so we went into Friday's. And the hotels are synergistic with our travel agencies."

By 1985, Mr. Carlson owned all or part of 22 hotels. "But we were only earning 5 percent on our money," he said, "and I knew we had to take another approach."

Today, the company owns only 10 Radisson hotels, just 3 percent of the total, and a little more than half of the 2,100 retail travel agencies that bear its name. The rest are franchises or are run by Carlson under management contracts.

Carlson is now divided into three operating groups. The biggest is travel, which had overall revenues, including sales at franchises, of $6.1 billion last year. The group, known as the Carlson Travel Network, was buoyed last year by the strong performance of its British chain, A.T. Mayes, Mr. Carlson said. But domestic agencies saw profits weaken. Morris Travel Express of Salt Lake City, which has 23 offices in Utah and Idaho, recently dropped its affiliation with Carlson to join the American Express travel network.

After pointing to the "record growth" of its travel franchise program in 1991, when it added 329 franchises for a total of 902, a spokesman for the Carlson Travel Network said of the Morris defection, "There will always be those who want to try new affiliations."

The hospitality group, with overall revenues of $2.3 billion, is the second biggest. It encompasses hotels and restaurants, including the Radisson chain.

"Radisson appears very well positioned for the '90s," said Mr. Watkins of Lodging Hospitality, citing its relative lack of debt and the business it gets from the Carlson Travel Network.

The smallest group is marketing, with sales of $900 million. Marketing manages the frequent-flier programs of Northwest, British Airways, SAS, KLM and Swissair.

It also puts together incentive programs that companies offer to employees. Sometimes those incentives are trips, which Carlson also puts together. In good times, the Big Three auto companies sponsor lots of incentive programs, but last year they cut back hard, and that sharply affected the marketing group's bottom line, Carlson said.

In all, Carlson directly employs 35,000 people, with an additional63,000 at affiliated and franchise operations. About 11 $6.1 billion, or roughly two-thirds of systemwide revenues, go directly to Carlson.

Looking to the future

At the company's annual sales meeting in February, Mr. Carlson said he had decided to abandon his practice of using five-year sales targets in favor of a three-year time frame.

"Three years is more realistic going into the '90s and the year 2000," he said. "We will simply examine our progress more often," reflecting his belief that the company needs greater flexibility as competition intensifies.

But while the words are different, Mr. Carlson has not changed his basic tune. Executives are on notice to increase business 15 percent this year, presumably including profits. He insists there is plenty of room for growth even in a weak economy.

Mr. Carlson has mellowed some with age, according to those who have known him for years, so that his public outbursts over what he considers managerial lapses are less frequent. But he remains a tough boss, they say.

"He can tolerate an occasional failure, but not repeated failure and not lack of effort," said Mr. Bartels of the hospitality group.

If Mr. Carlson should find his daughter's leadership abilities wanting, J.B., as Mr. Bartels is known, would clearly be a candidate for the top job. In the respectful tone of one workaholic speaking of another, Carlson said, "J.B. never flies into any city without having at least four appointments lined up."

For her part, Mrs. Nelson acknowledges that she has yet to master the nuts and bolts of the varied Carlson holdings. "I didn't come up through the business," she said, "so I don't know every single thing. But I feel that I'm continuing to learn." Current and former Carlson employees say she has the intelligence, acumen and drive for the top position.

Mrs. Nelson joined Carlson full time in December 1989. An economics major at Smith College, she has owned the Citizens State Bank of Waterville, Minn., with her sister since 1971. She is also on the board of three other companies, including the Exxon Corp.

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